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2020 (9) TMI 640 - HC - VAT and Sales TaxRestriction on Input Tax Credit (ITC) - Form W - June to September 2014 - Prior sufferance of Taxes - ITC on reversal on wastage - Ineligible claim of ITC on goods. Restriction of the amount for prior sufferance of taxes - Assessing Officer was of the view that some of the sellers from whom the petitioner had purchased the goods had not paid tax to the Government - HELD THAT - This issue has been dealt with in the case of ASSISTANT COMMISSIONER (CT) , PRESENTLY THIRUVERKADU ASSESSMENT CIRCLE, KOLATHUR, CHENNAI VERSUS INFINITI WHOLESALE LTD. 2016 (9) TMI 1431 - MADRAS HIGH COURT wherein it has held that Input Tax Credit cannot be disallowed on the ground that the seller has not paid tax to the Government, when the purchaser is able to prove that the seller has collected tax and issued invoices to the purchaser. As such, restriction of the amount of Input Tax Credit on this ground, cannot be sustained and requires re-consideration. ITC on reversal on wastage - HELD THAT - This Court in the case of M/S. SHRI RANGANATHAR VALVES PRIVATE LIMITED VERSUS THE ASSISTANT COMMISSIONER (CT) 2016 (12) TMI 510 - MADRAS HIGH COURT it is open to the Assessing Officer to issue a show cause notice to the petitioner calling for his objections with regard to Input Tax Credit on reversal on wastage and Ineligible claim of ITC on goods are concerned. The impugned orders are set aside and the issue with regard to restriction of the amount of Input Tax Credit for prior sufferance of taxes is remanded back to the Assessing Officer for fresh consideration - Assessing Officer shall, before taking a final decision, extend due opportunity of personal hearing to the petitioner and endeavour to complete the proceedings, atleast within a period of twelve weeks from the date of receipt of a copy of this order. Petition allowed by way of remand.
Issues:
Restriction of Input Tax Credit (ITC) claimed in Form W for the months of June to September 2014 on grounds of prior sufferance of taxes, ITC on reversal on wastage, and ineligible claim of ITC on goods. Analysis: 1. Restriction of ITC for Prior Sufferance of Taxes: The Assessing Officer restricted the ITC amount based on the premise that some sellers had not paid taxes to the Government. However, a precedent case established that ITC cannot be disallowed solely because the seller did not pay taxes if the purchaser can prove that the seller collected taxes and issued invoices. Therefore, the restriction on this ground was deemed unsustainable and required re-evaluation. 2. Restriction of ITC Claim on Wastages: In the case of M/s. Shri Ranganathar Valves Private Limited, the court addressed the reversal of ITC claim on wastage. It emphasized that the Assessing Officer should not adopt a uniform percentage for invisible and visible loss but should conduct a fact-finding exercise to determine the actual loss of goods purchased. The court set aside notices and orders that reversed ITC based on uniform percentages, emphasizing the need for a detailed examination rather than a blanket approach. 3. Ineligible Claim of ITC on Goods: The same case highlighted the rejection of ITC claim on goods not exported, asserting that the products were used in manufacturing goods for export, making them eligible for ITC. The petitioner was not given an opportunity to present objections on this issue. Following the precedent, it was deemed appropriate to allow the petitioners to provide objections in such cases for a fair consideration. 4. Judgment and Directions: The High Court set aside the impugned orders, remanding the issue of prior sufferance of taxes back to the Assessing Officer for reconsideration. The court directed the Assessing Officer to provide a personal hearing to the petitioner and complete the proceedings within twelve weeks. Additionally, the Assessing Officer was permitted to issue a show cause notice regarding ITC on wastage and ineligible ITC claims, allowing the petitioners to present their objections. The Writ Petition was disposed of without costs. This detailed analysis of the judgment from the Madras High Court underscores the nuanced legal considerations surrounding the restriction of Input Tax Credit and the necessity for a thorough examination of specific grounds for such restrictions, ensuring fairness and compliance with legal principles.
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