2016 (8) TMI 398 - HC - VAT and Sales Tax

Input Tax Credit - Tribunal rejecting the claim of Input Tax Credit merely on the grounds of technicalities - Held that - In the case in hand, the selling dealer is a manufacturing unit covered under the provisions of the 1944 Act. For sale of the goods to the appellant, it had issued Invoice-cum-Excise Gate Pass. This is so provided under the Central Excise Rules, 1944. It contains all material particulars, such as name, address and registration number of the selling and buying dealer, printed invoice number, date, description, quantity and rate of goods, excise duty charged, sale tax charged along with rate thereof, the date and time of removal of goods from the factory, as is specifically required under the 1944 Act and the Rules. The only discrepancy, on the basis of which input tax credit is sought to be denied to the appellant is that the invoice did not contain the words Input Tax Credit is available to a person against this copy . The opinion expressed by the authorities is that it is a mandatory condition, which cannot be ignored. Mere non-mentioning thereof is fatal. In our view, the opinion expressed is contrary to the law laid down by this court as these type of technical defects in the invoices cannot be fatal for grant of input tax credit to the claimant. The claim of the appellant had been rejected only on the ground that the invoice did not contain the words Input Tax Credit is available to a person against this copy . The input tax credit available to a person and the genuineness of the transaction otherwise had not been examined by the authorities to record a finding that the tax, credit of which was being sought by the appellant, had in fact been paid by him to the selling dealer at the time of purchase of goods. Accordingly, question is answered in negative while holding that the Tribunal was not justified in rejecting the claim of input tax credit merely on technicalities, when the dealer was able to show that the tax had been paid to the selling dealer and duly deposited with the State. Provisions of Rule 54 of the Rules are not mandatory, in case the claimant/dealer is able to prove from other evidence that the transaction and the claim is genuine.

Summary

Issues Involved:
1. Justification of the Tribunal in rejecting the claim of Input Tax Credit on technical grounds.
2. Interpretation of the mandatory nature of Rule 54 of the Punjab Value Added Tax Rules, 2005.

Detailed Analysis:

1. Justification of the Tribunal in rejecting the claim of Input Tax Credit on technical grounds:

The appellant's claim for input tax credit was denied by the Assessing Authority, Deputy Excise and Taxation Commissioner (Appeals), and the Tribunal, primarily on the basis that the original VAT invoice did not contain the words “Input Tax Credit is available to a person against this copy.”

The appellant argued that all necessary information as per the Punjab Value Added Tax Rules, 2005 was present in the invoices and that the claim should not be rejected on such a technicality. The appellant further contended that the selling dealer had duly deposited the tax collected from the appellant with the department, and hence, the substance of the transaction should be considered over the form.

The court referred to previous judgments, including those in Commissioner of Central Excise, Ludhiana v. Ralson India Ltd., and Commissioner of C. Ex., Delhi-III, Gurgaon v. Myron Electricals Private Limited, which emphasized that minor discrepancies in documentation should not obstruct the grant of credit if the transaction is genuine and the tax has been paid. The court concluded that the Tribunal was not justified in rejecting the claim merely on technical grounds when the appellant demonstrated that the tax had been paid to the selling dealer and deposited with the State.

2. Interpretation of the mandatory nature of Rule 54 of the Punjab Value Added Tax Rules, 2005:

The State argued that the provisions of Rule 54, which require the VAT invoice to state “Input Tax Credit is available to a person against this copy,” are mandatory. They contended that the word “shall” in the rule indicates a mandatory requirement, and non-compliance would render the claim inadmissible.

The court analyzed Section 13 of the Punjab Value Added Tax Act, 2005, and Rules 18, 21, and 54 of the Punjab Value Added Tax Rules, 2005. It noted that while the rules prescribe specific conditions for claiming input tax credit, including the requirement under Rule 54, the primary objective is to ensure the genuineness of the transaction and the payment of tax.

The court referred to similar cases under the Haryana Value Added Tax Act, 2003, and the Central Excise Act, 1944, where it was held that procedural requirements should not override the substantive right to claim credit if the transaction is genuine. The court concluded that the provisions of Rule 54 are not mandatory if the claimant can prove the genuineness of the transaction and the payment of tax through other evidence.

Conclusion:

The court held that the Tribunal was not justified in rejecting the claim of input tax credit on technical grounds and that the provisions of Rule 54 are not mandatory if the claimant can substantiate the genuineness of the transaction through other evidence. The matter was remitted back to the Assessing Authority to examine the genuineness of the transaction and the appellant's claim.