2022 (2) TMI 301 - HC - VAT and Sales Tax

Input tax credit - false/forged VAT invoices issued by a dealer who has not deposited the tax and its registration was cancelled u/s 16(4) (g) of the Act - amount not deposited by the selling dealer - double jeopardy to the State - violation of provisions of section 18(2) of the RVAT Act or not - deletion of penalty u/s 61(2)(a) of the Act - HELD THAT - A Division Bench of this Court in the case of R.S. INFRA-TRANSMISSION LTD. VERSUS STATE OF RAJASTHAN THROUGH ITS SECRETARY, DEPARTMENT OF COMMERCIAL TAXES, DEPARTMENT OF COMMERCIAL TAXES, DEPARTMENT OF COMMERCIAL TAXES, TANTIA ENTERPRISES 2018 (4) TMI 1800 - RAJASTHAN HIGH COURT relying upon the decision rendered by the other High Courts and considering views taken by different High Courts held that it will be impossible for the petitioner to prove that the selling dealer has paid tax or not as while making the payment, the invoice including tax paid or not he has to prove the same and the petitioner has already put a summary on record which clearly establish the amount which has been paid to the selling dealer including the purchase amount as well as tax amount. In that view of the matter, we are of the opinion that Rule 18 if it is accepted, then the respondents will to take undue advantage and cause harassment. In taking this view, this Court relied upon the judgment of the High Court of Delhi in the case of ON QUEST MERCHANDISING INDIA PVT. LTD., SUVASINI CHARITABLE TRUST, ARISE INDIA LIMITED, VINAYAK TREXIM, K.R. ANAND, APARICI CERAMICA, ARUN JAIN (HUF) , DAMSON TECHNOLOGIES PVT. LTD., SOLVOCHEM, M/S. MEENU TRADING CO., MAHAN POLYMERS VERSUS GOVERNMENT OF NCT OF DELHI ORS. COMMISSIONER OF TRADE TAXES, DELHI AND ORS. 2017 (10) TMI 1020 - DELHI HIGH COURT where it was held that retrospective cancellation of registration of purchasing dealer does not affect the right of selling dealer for deduction. The issue raised in this petition has already been settled by this Court in more than one decision - no substantial question of law arises for consideration in this petition. Revision petition dismissed.

Summary

Issues:
1. Justification of Rajasthan Tax Board in setting aside tax, interest, and penalty.
2. Validity of Input Tax Credit claimed based on false/forged VAT invoices.
3. Responsibility of the respondent for the amount not deposited by the selling dealer.
4. Compliance with provisions of section 18(2) of the RVAT Act.
5. Deletion of penalty under section 61(2)(a) despite claiming Input Tax Credit on false/forged invoices.

Analysis:

1. The revision petition raised questions on the justification of the Rajasthan Tax Board in setting aside tax, interest, and penalty. The argument presented was that recovery could be made from the buyer if the registered seller obtained a forged registration and did not pay taxes. The contention was that not only tax but also interest and penalty should be levied in such cases.

2. The issue of claiming Input Tax Credit based on false/forged VAT invoices was discussed. It was highlighted that the petitioner's claim was found to be based on invoices from a dealer whose registration was canceled for non-payment of tax. The submission emphasized that Input Tax Credit should not have been allowed in such circumstances.

3. The responsibility of the respondent for the amount not deposited by the selling dealer was a crucial point. The Rajasthan Tax Board's decision to absolve the respondent from liability and allow Input Tax Credit, potentially leading to double jeopardy for the State, was questioned.

4. Compliance with the provisions of section 18(2) of the RVAT Act was a significant aspect of the judgment. The court referred to previous decisions and rulings to establish that certain conditions must be met for Input Tax Credit to be allowed, especially concerning the verification of tax payment by the selling dealer.

5. Lastly, the deletion of penalty under section 61(2)(a) despite the respondent's claim of Input Tax Credit on false/forged VAT invoices was examined. The court considered previous judgments and reiterated that the issue had already been settled in favor of the respondent in similar cases, concluding that no substantial question of law arose for consideration in the petition.

In conclusion, the Rajasthan High Court dismissed the revision petition at the admission stage, citing the precedent set by previous decisions and the absence of conflicting views from the Apex Court on the issues raised. The judgment emphasized the importance of verifying tax payments by selling dealers for the allowance of Input Tax Credit and highlighted the legal principles governing such cases.