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2020 (1) TMI 414 - HC - VAT and Sales TaxRejection of Input tax credit claim - imposition of penalty and interest - seller did not file the return - HELD THAT - The petitioner firm had acted absolutely in a bona fide manner, as is also apparent from the impugned order dated 20.11.2017, as contained in Annexure-5 to the writ application, and had discharged its tax liability by paying the VAT amount to the selling dealer and had filed its return within time, claiming the applicable ITC, but it was solely due to the laches on the part of the selling dealer, that the return had not been filed by the selling dealer, and the tax amount was not deposited in the Government Treasury. As such, it is apparent that the amount of tax and interest has been saddled upon the petitioner firm and has also been realised by way of garnishee order, which have been challenged in the other writ application, for no fault on part of the petitioner, but solely due to the fault of the selling dealer. We are satisfied that the petitioner had discharged its liability under the VAT Act, and there being no mechanism under the JVAT Act, by which, the petitioner could compel the seller also to discharge their duty, it was not within the competency of the petitioner to compel the selling dealer to file the return within the stipulated time, and deposit the tax collected from the petitioner in the Government Treasury - We do not intend to enter into the challenge to the vires of Section 18(8) sub-clause (xvii) brought by way of amendment, or into the questions of limitation, or defect in the notice, if any, as we are satisfied that due to the bona fides on part of the petitioner, no punitive action was required to be taken, or warranted against the petitioner. Application allowed.
Issues Involved:
1. Rejection of Input Tax Credit (ITC) and imposition of interest under Section 30 of the Jharkhand Value Added Tax Act, 2005 (JVAT Act). 2. Challenge to the garnishee orders issued by the Sales Tax Officer. 3. Challenge to the vires of Section 18(8)(xvii) of the JVAT Act. 4. Allegation of procedural lapses in issuing the scrutiny notice and imposing interest. Issue-Wise Detailed Analysis: 1. Rejection of Input Tax Credit (ITC) and Imposition of Interest: The petitioner firm was aggrieved by an order dated 20.11.2017, rejecting its claim for ITC and imposing interest, as per Section 30 of the JVAT Act. The firm had purchased goods from M/s Sanatan Enterprises and paid VAT, which was claimed as ITC. However, the return filed by the selling dealer did not reflect the tax paid, leading to the disallowance of ITC. The Assessing Authority concluded that the petitioner had paid VAT to the selling dealer, who failed to deposit it in the Government Treasury. Consequently, the ITC claim was disallowed, and interest was imposed. 2. Challenge to the Garnishee Orders: The petitioner challenged the garnishee orders issued by the Sales Tax Officer, directing banks to recover ?20,21,801/- from the petitioner's account and deposit it in the Government Treasury. The State Bank of India confirmed that the amount had already been withdrawn and deposited, rendering the writ application infructuous. 3. Challenge to the Vires of Section 18(8)(xvii) of the JVAT Act: The petitioner challenged the vires of Section 18(8)(xvii) of the JVAT Act, arguing that it was discriminatory and violated Article 14 of the Constitution of India. The provision disallows ITC if the tax on the purchased goods is not actually paid into the Government Treasury. The petitioner contended that there was no mechanism in the JVAT Act to ensure that the selling dealer deposits the tax collected from the purchaser. 4. Allegation of Procedural Lapses: The petitioner argued that the scrutiny notice issued under Section 33 of the JVAT Act was barred by limitation, as it was issued beyond the prescribed 30-day period. Additionally, the petitioner claimed that interest was imposed without issuing a proper notice under Section 30 of the JVAT Act. However, the order-sheet indicated that such notice was given during the hearing. Court's Findings and Judgment: The court found that the petitioner acted in a bona fide manner by paying VAT to the selling dealer and filing the return on time. The disallowance of ITC and imposition of interest were solely due to the default of the selling dealer, who failed to file the return and deposit the tax in the Government Treasury. The court noted that there was no mechanism under the JVAT Act for the petitioner to compel the seller to comply with its tax obligations. The court decided not to delve into the challenge to the vires of Section 18(8)(xvii), limitation issues, or defects in the notice, given the bona fides of the petitioner. The court emphasized that punitive action should only be taken against the defaulting dealer, not against a bona fide dealer. The court also criticized the lack of timely action against the selling dealer under Section 40(2) of the JVAT Act. Order: The court quashed the order dated 20.11.2017, denying ITC and imposing interest, and the related demand notice. It directed the refund of ?20,21,801/- to the petitioner within three months. The respondents were given liberty to realize the tax with interest/penalty from the selling dealer, who expressed willingness to pay if the portal was reopened. Disposition: W.P.(T) No. 773 of 2018 was allowed with specific directions, while W.P.(T) No. 5978 of 2018 was disposed of as infructuous. Pending interlocutory applications were also disposed of.
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