Home Case Index All Cases VAT and Sales Tax VAT and Sales Tax + HC VAT and Sales Tax - 2017 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (3) TMI 536 - HC - VAT and Sales TaxReversal of ITC - the assessment are sought to be re-opened and the ITC availed by the dealers are directed to be reversed, when a mismatch occurs, when either the purchaser or the seller fails to report the transaction in their annexure I or II returns respectively. Therefore, the first aspect to be looked into is, how this process of verification could be done by the Assessing Officer - The revenue objects to the maintainability of the Writ Petitions on the ground that the Act provides for an effective and efficacious alternate remedy and they seek for a direction upon the dealers to avail the alternate remedy and dismiss the Writ Petitions as not maintainable. Held that - The Commissioner took note of the fact that mismatch reports have been generated by the Business Intelligent Unit, Interstate Investigation Cell, Enforcement Division and also by the Assessing Officers in the circles as a part of returns scrutiny or revision of assessment and that while such mismatch reports have been communicated in the form of notice to the dealer, the dealer wise mismatch projections alone are being enclosed and no detailed information provided. It was further observed that unless invoice wise data of mismatches are provided for each dealer, the dealer under analysis will not be able to come to a conclusion as to specific transactions for which, the tax is being demanded. Not providing invoice wise data of mismatch would tantamount to violation of principles of natural justice rendering the notices to be struck down by Appellate Forums and the High Courts. The problems on account of the mismatch is a Pan India problem and to my mind, the procedure adopted under the Delhi VAT Act regime and the circulars issued under the said Act, appear to be a more transparent system and assessee friendly. This can be borne in mind by the Revenue for necessary follow up action. In the instant case, there is no challenge to the statutory provisions and the complaint of all the dealer is largely on the procedure adopted by the respective Assessing Officers. The Principal Secretary and Commissioner of Commercial Taxes was conscious of the problems faced by the dealers as complaints were received which had lead to issuance of a circular as early as on 01.04.2015. The directions contained in the said circular are very pointed direction, but it is sad to note that the circular remains only on paper and seldom Assessing Officers follow the circular resulting in several assessments being set aside by the Court and remanded for denova consideration. Thus, this Court is fully convinced that the procedure adopted by the respondent, Assessing Officers in all these cases are half baked attempts, which have not yielded results and these cases are before this Court or before the Appellate Authorities and all that the Assessing Officers can record is that they have issued show cause notices or passed orders reversing the Input Tax Credit with no appreciable impact on the revenue collection. Matters are remanded to the respective Assessing Officers, to undertake a fresh exercise by conducting a thorough enquiry in consultation with the Assessing Officers of the other end dealer - petition allowed by way of remand.
Issues Involved:
1. Reversal of Input Tax Credit (ITC) under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) and the Central Sales Tax Act, 1956 (CST Act). 2. Procedural aspects and statutory compliance in reversing ITC. 3. Jurisdiction and fairness of the procedure adopted by Assessing Officers. 4. Impact of statutory amendments and the requirement of establishing tax payment by the selling dealer. 5. Maintainability of writ petitions challenging the procedural aspects of ITC reversal. Detailed Analysis: 1. Reversal of Input Tax Credit (ITC): The core issue pertains to the reversal of ITC by Assessing Officers based on mismatches between the returns filed by purchasing and selling dealers. The mismatch cases, often referred to as "mismatch/web report batch of cases," involve discrepancies identified through data verification by the Commercial Tax Department. 2. Procedural Aspects and Statutory Compliance: The court examined various provisions of the TNVAT Act, including Sections 19, 21, 22, 25, and 27, which outline the requirements for claiming ITC and the procedures for assessment and reassessment. The court emphasized that the statutory provisions mandate an enquiry before reversing ITC, and this includes verifying the correctness of returns and conducting a thorough investigation. 3. Jurisdiction and Fairness of the Procedure Adopted by Assessing Officers: The court noted that the Assessing Officers have been reversing ITC based solely on data mismatches without conducting proper enquiries or providing detailed information to the dealers. The court highlighted the importance of adhering to the principles of natural justice, which require providing dealers with invoice-wise data of mismatches and ensuring a fair hearing. 4. Impact of Statutory Amendments and Requirement of Establishing Tax Payment by the Selling Dealer: The court discussed the amendment to Section 19(1) of the TNVAT Act, which substituted "tax paid or payable" with "tax paid," effective from 29.01.2016. The court clarified that this amendment does not significantly alter the requirement for dealers to establish that tax has been paid to claim ITC. The court also referenced similar provisions in other states, such as Maharashtra, Gujarat, and Delhi, and noted that the entitlement to ITC is a concession granted by the statute, subject to strict compliance with statutory conditions. 5. Maintainability of Writ Petitions: The court rejected the revenue's objection regarding the maintainability of the writ petitions, stating that the existence of an alternate remedy does not automatically oust the jurisdiction of the court under Article 226 of the Constitution of India. The court held that the writ petitions are maintainable as they challenge the procedural aspects adopted by the Assessing Officers, which are alleged to be in violation of statutory requirements and principles of natural justice. Conclusion: The court allowed the writ petitions, set aside the impugned orders/notices, and remanded the matters to the respective Assessing Officers for fresh consideration. The court directed the Assessing Officers to conduct thorough enquiries in consultation with the Assessing Officers of the other end dealer and to follow a fair and reasonable procedure. The court also emphasized the need for the Commissioner of Commercial Taxes to evolve a centralized mechanism to handle mismatch cases and recommended considering the procedures adopted in other states. The court directed that no plea of limitation would be entertained by the petitioners/dealers when fresh show cause notices are issued.
|