2019 (2) TMI 1447 - HC - VAT and Sales Tax

Reversal of Input tax credit - difference in purchase turnover to tax - audit reveals that the sellers have not reported the corresponding purchases in their returns filed for the period in question - TNVAT Act - Held that - The statutory requirement for claim of ITC is production of proof of purchases by way of original invoices from the selling dealer - In the present case, the Department, does not dispute the position that the purchasers have duly produced the original invoices from the seller. In such a circumstance, no reversal is liable to be made, in the absence of any further condition imposed upon the dealer in this regard. A learned Single Judge of this Court in the case of JKM Graphics Solutions Private Limited Vs. Commercial Tax Officer, Vepery Assessment Circle, Chennai, 2017 (3) TMI 536 - MADRAS HIGH COURT , has considered an identical challenge raised by several dealers, wherein their claim for Input Tax Credit was reversed on an alleged mis-match between their returns and the returns filed by the sellers, where 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. The impugned order of assessment is set aside - The assessment will be re-done as indicated in the order in the case of JKM Graphics pursuant to fresh show case notice to be issued by the Assessing Authority - petition allowed by way of remand.

Summary

Issues:
Challenge to State Tax Officer's proceedings regarding Input Tax Credit (ITC) reversal based on Annual Scrutiny Website Report for the period 2013-14.

Analysis:
The writ petitions challenged the proceedings of the State Tax Officer regarding the reversal of Input Tax Credit (ITC) claimed by the assessee for the period 2013-14. The Assessing Officer reversed the ITC claim based on an Annual Scrutiny Website Report that indicated the sellers had not reported corresponding purchases in their returns for the period in question. The challenge was made under section 19(10)(a) of the Tamil Nadu Value Added Tax Act, 2006, which states that a registered dealer cannot claim ITC until they receive an original Tax Invoice from the selling dealer. However, it was acknowledged that the purchasers had produced the original invoices, meeting the statutory requirement for ITC claim.

The court noted that in the absence of any additional conditions imposed on the dealer, no reversal of ITC was warranted when original invoices were produced. Referring to a previous judgment, the court highlighted the procedural issues faced by dealers in ITC reversals due to mismatches between their returns and those of the sellers. The court emphasized the need for a centralized mechanism to address discrepancies effectively, similar to procedures followed in other states like Maharashtra, Gujarat, and Delhi. The judgment called for a fair and reasonable procedure to allow dealers to present their case and establish their entitlement to ITC.

As a result, the court allowed the writ petitions, setting aside the impugned orders and remanding the matters to the respective assessing officers for a fresh examination. The Principal Commissioner of Commercial Taxes was directed to empower assessing officers to seek information from other circles and to establish a centralized mechanism to handle cases of mismatch. The judgment emphasized the importance of a holistic approach to ensure defaulting dealers are held accountable.

In conclusion, the writ petitions were allowed, and the impugned orders were set aside, directing a fresh assessment following the principles outlined in a previous judgment. The petitioners were instructed not to raise a plea of limitation when fresh show cause notices were issued, allowing them to submit explanations for adjudication by the assessing officers. The court ordered a re-assessment in line with the procedural fairness and centralized mechanisms recommended in the judgment.