2018 (11) TMI 63 - HC - VAT and Sales Tax

Input tax credit - consignment sale of the bye product - Tribunal did not deal with the question of reversal of input tax credit - rule 22(2) of U.P. VAT Rules - Held that - No useful purpose would be served in examining this issue any further on merits. The Tribunal was obliged in law to decide such ground of appeal as was contained in the memo of appeal and had been pressed before it, during oral hearing. Failure to decide a ground of appeal after noticing the same in its order renders the order of the Tribunal contrary to law, on that issue - decided in favor of assessee. Imposition of tax both on the undisclosed purchases and undisclosed sales being made by the applicant, without giving the benefit of input tax credit - Held that - The finding of the Tribunal depriving the assessee benefit of input tax on undisclosed purchase of mustard seed is against the law and it cannot be sustained - decided in favor of assessee. Revision allowed.

Summary

Issues:
1. Reversal of input tax credit on intra-state purchase of mustard seed.
2. Imposition of tax on undisclosed purchases and sales without giving the benefit of input tax credit.

Analysis:
1. The assessee, engaged in the manufacture and trade of mustard oil, filed a revision for the assessment year 2012-13 under the U.P. VAT Act, 2008. The main issues raised were the justification of the Tribunal's order regarding the reversal of input tax credit and the imposition of tax on undisclosed purchases and sales. The Tribunal had not addressed the question of reversal of input tax credit on consignment sale of the bye product. The assessee contended that the input tax credit on intra-state purchase of mustard seed was wrongly reversed by the Assessing Officer, as separate accounts were maintained for purchases made inside and outside U.P. The Tribunal failed to adjudicate this issue, leading to the revision succeeding on this ground and remitting the matter back to the Tribunal for a fresh order.

2. The second issue involved the imposition of tax on undisclosed purchases and sales without allowing the benefit of input tax credit for the undisclosed purchases. The assessee argued that the benefit of enhanced turnover due to undisclosed raw material purchases should offset the tax demand on manufactured goods. Citing Section 13(12) of the Act and a previous court decision, the assessee's stance was supported. The Standing Counsel acknowledged the validity of this principle, leading to a decision in favor of the assessee on this issue as well. Consequently, both questions were answered in the negative, favoring the assessee and necessitating the revision to succeed, with the matter being remitted for a fresh finding regarding the reversal of input tax credit.

In conclusion, the judgment addressed the issues of reversal of input tax credit and imposition of tax on undisclosed purchases and sales under the U.P. VAT Act, 2008 for the assessment year 2012-13. The Tribunal's failure to decide on certain grounds of appeal led to the revision succeeding on those grounds. The principles of input tax credit and tax imposition on undisclosed purchases were analyzed, resulting in a decision in favor of the assessee on both issues.