2015 (1) TMI 590 - HC - VAT and Sales Tax

Maintainability of the writ petition Held that - Revenue contended that the petitioner has got an effective alternative remedy of appeal and without exhausting the same, the petitioner cannot maintain the writ petition - it is the settled legal principle that, in all cases, where an alternate remedy is provided for, would not automatically oust the jurisdiction of the Court, under Article 226 of the Constitution of India - Each case has to be decided on facts and there can be no straight jacket formula - the notice, dated 20.07.2012, was issued solely on the premise that the petitioners vendors either have not paid taxes or they are non-assessess or unregistered dealers - it is evidently clear that the respondent failed to apply his mind to the submissions made by the petitioner and the documents produced - the order, apart from being a non-speaking order, is vitiated on account of non-application of mind and an order devoid of reasons - the petitioner need not be compelled to avail the alternate remedy under the Act - the preliminary objection raised by the Additional Government Pleader with regard to maintainability is rejected. Reversal of Input Tax Credit u/s 19(13) of the VAT Act - Defects noted by Revenue on verification of returns filed Held that - In Althaf Shoes (P) Ltd. Versus Assistant Commissioner (CT), Valluvarkottam Assessment Circle, Chennai-6 2011 (10) TMI 567 - Madras High Court it has been held that the circular issued by the Commissioner clearly states that so long as the vendor is found to be a registered dealer on the files of the Revenue, the claim of the assessee for refund could not be rejected nor delayed - so long as the purchasing dealer has complied with the requirements as given under Rule 10(2), the claim of the purchasing dealer cannot, by any length of reasoning, be denied by the Revenue thus, the ITC availed by the petitioner could not have been proposed to be reversed or reversed on the grounds stated by the respondent, i.e., the selling dealer has not filed returns or not paid taxes or they were unregistered dealers or their registrations were retrospectively cancelled - the exercise of the jurisdiction by the respondent itself is ex-facie arbitrary and the proceedings are not only vitiated by serious procedural infirmities, but are arbitrary and unreasonable and without jurisdiction and held to be illegal thus, the order is set aside Decided in favour of petitioner.

Issues Involved:
1. Maintainability of the writ petition.
2. Reversal of Input Tax Credit (ITC) based on the respondent's allegations.
3. Procedural fairness and application of mind by the assessing authority.
4. Legal principles regarding ITC claims under the Tamil Nadu Value Added Tax Act, 2006.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The respondent raised a preliminary objection regarding the maintainability of the writ petition, arguing that the petitioner should have filed an appeal before the Appellate Authority as per Section 51 of the VAT Act. The petitioner countered that the assessment order was a result of non-application of mind, lack of reasonable opportunity, and arbitrary refusal to assist in reconciliation/verification of vendor details. The court clarified that the availability of an alternative remedy does not automatically oust its jurisdiction under Article 226 of the Constitution of India. Given the circumstances and procedural lapses, the court rejected the preliminary objection, allowing the writ petition to proceed.

2. Reversal of Input Tax Credit (ITC):
The respondent alleged discrepancies in the petitioner's tax returns, including short reporting of turnover, non-filing of returns by vendors, non-payment of tax by vendors, and purchases from unregistered dealers. Based on these allegations, the respondent proposed to reverse the ITC of Rs. 3,73,69,631/- availed by the petitioner. The petitioner contended that it had valid tax invoices and that Section 19 (13) of the Act did not apply as the credit was taken on the basis of valid tax invoices. The petitioner also submitted confirmations from vendors for a substantial portion of the disputed amount and requested assistance from the department for reconciliation.

3. Procedural Fairness and Application of Mind:
The court found that the respondent failed to apply his mind to the submissions and documents provided by the petitioner. Despite the petitioner furnishing substantial evidence and repeatedly requesting specific transaction details for reconciliation, the respondent issued a non-speaking order, stating that no documentary evidence was provided by the petitioner. The court noted that the show cause notice was vague and the assessment order was arbitrary, lacking proper reasoning and consideration of the petitioner's submissions.

4. Legal Principles Regarding ITC Claims:
The court referred to previous judgments, including Althaf Shoes (P) Ltd. v. Assistant Commissioner (CT) and Sri Vinayaga Agencies v. Assistant Commissioner (CT), which established that ITC claims cannot be denied if the purchasing dealer has complied with the requirements under Rule 10 (2) of the Tamil Nadu VAT Rules, 2007. The court emphasized that the liability for non-payment of tax should be on the selling dealer, not the purchasing dealer who has shown proof of tax payment. The petitioner's case fell under these principles, and the ITC could not be reversed based on the grounds stated by the respondent.

Conclusion:
The court concluded that the respondent's actions were arbitrary, procedurally flawed, and without jurisdiction. The impugned assessment order dated 25.02.2013 was set aside, and the writ petition was allowed, with no costs. The connected miscellaneous petitions were also closed.

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