2015 (7) TMI 1037 - HC - VAT and Sales Tax

Demand of interest and penalty - Assessee paid excess Input Tax Credit - Held that - while declaring / holding that the appellant is entitled to adjustment of admissible Input Tax Credit towards its output tax liability of the current year under consideration, the learned Tribunal has rightly observed and held that the assessee is liable to pay interest only on the dues rising on assessment after adjusting the admissible Input Tax Credit towards its output tax liability - Decision in the case of State of Gujarat V. Cosmos International Ltd. 2015 (4) TMI 779 - GUJARAT HIGH COURT followed - The present case is having similar question of law involved, which is already been decided by the Division Bench of this Court. Hence, the appeal is meritless - Decided against Revenue.

Summary

Issues:
Challenge to judgment and order on interest and penalty payment for excess Input Tax Credit.

Analysis:
The Commissioner of Commercial Tax challenged a tribunal's order that the respondent assessee should not pay interest and penalty on tax levied due to excess Input Tax Credit. The respondent, a trading business, had paid tax, but the Assessing Officer disallowed Input Tax Credit on purchases from M/s. Nova Shipping Pvt. Ltd. The Deputy Commissioner and Tribunal upheld this decision. The Tribunal's view was based on a previous case, Cosmos International Ltd. v. State of Gujarat. The State challenged this view in Tax Appeal No. 857 of 2013, which was decided by a Division Bench agreeing with the Tribunal's interpretation.

The Division Bench highlighted that under the VAT Act and Rules, a dealer can adjust output tax liability against admissible Input Tax Credit after assessment. If there's any excess credit, it can be adjusted against central sales tax liability or carried forward. Claiming more credit than admissible initially does not bar adjusting the correct credit after assessment. Denying this adjustment would contradict the law. Only if admissible credit is less than output tax liability, interest is payable on the balance. The present case aligns with this legal principle, and the appeal was dismissed accordingly.

In conclusion, the Division Bench's interpretation of the VAT Act and Rules regarding Input Tax Credit adjustment after assessment was upheld. The appeal challenging the interest and penalty on excess Input Tax Credit payment was deemed meritless and dismissed.