2022 (3) TMI 1054 - HC - VAT and Sales Tax

Refund of excess Input Tax Credit - purchases from dealers covered by the Deferment Scheme, 2005 notified under section 62 of HP VAT Act - presumptive taxation - HELD THAT - Sub section 7(c)(iii) of section 11 of the Act specifically bars the claim of ITC by a purchasing dealer who has purchased goods in the State from a registered dealer who either opted to pay lump-sum amount in lieu of tax by way of composition under section 16(2) or presumptive tax under section 7, therefore, glance at provisions of section 7 and section 16(2) of the Act becomes necessary to assess the applicability of said provisions in the facts of the case - In the facts of the case in hand, there is nothing to suggest that the selling dealer i.e. M/S Samana Industries had opted to pay presumptive tax or had ever paid it. Applicability of section 16(2) - HELD THAT - From the conjoint reading of Section 7 and Section 16(2) of the Act and Rule 45 of the rules, it is clear that a registered dealer under the Act has option to pay presumptive lump-sum tax under Section 7 or by way of composition under Section 16(2) in the manner as prescribed in Chapter VI of the Rules. Importantly, by virtue of Rule 45(6), the dealer opting to pay the lump-sum is not liable to issue tax invoices under Section 30 - It is not understandable as to under what assumption, learned Tribunal has upheld the order of the Commissioner by placing reliance upon Section 16(2) of the Act. Again, there is nothing on record to suggest even remotely that the selling dealer M/s Samana Industries Ltd. had opted to pay lump-sum tax for the year 2010-11. The findings recorded by learned Tribunal in this behalf can easily be termed to be non- speaking being bereft of any reasoning. The lump-sum payment of composite tax under Section 16(2) of the Act in no way can be equated with the powers of State under Section 62(5) of the Act as both have separate and distinct fields of operation. There cannot be any overlapping between the two provisions, therefore, disallowance of ₹ 17,06,715/- payable from ITC to the petitioner by invoking the provisions either of Section 7 or Section 16(2) of the Act is wholly illegal and against the mandate of law - It is held that the payment of presumptive tax under Section 7 or lump-sum tax by way of composition under Section 16(2) of the Act read with Rules 45 to 50 of the rules have their application in the specific field expressly contemplated in the Act and cannot be expanded to include deferment of tax notified under Section 62(5) of the Act. There is no dispute on facts that the selling dealer i.e. M/s Samana Industries Limited had initially availed the benefit of deferred payment subsequently converted to upfront payment of 65% of the payable amount by virtue of provisions of notification dated 26.07.2005 - deficit, if any, of 35% in receipt of tax suffered by the State was its voluntary Act under a scheme formulated by it. Such deficit to the State coffers cannot be made basis for penalizing the petitioner who was not at fault. The petitioner was entitled to refund of entire amount of ITC to the tune of ₹ 82,15,821/-. Dis-allowance of ₹ 17,06,715/- from payable amount of ITC to the petitioner as ordered by learned Commissioner vide order dated 28.05.2012 and upheld by learned Tribunal vide order dated 29.08.2015 is held to be wrong, illegal and against the provisions of VAT Act and rules framed thereunder - the instant revision petition is allowed.

Summary

Issues Involved:
1. Entitlement to Input Tax Credit (ITC) under the Himachal Pradesh Value Added Tax Act, 2005.
2. Applicability of Section 11(7)(c)(iii) of the VAT Act in the context of purchases from dealers under the Deferment Scheme.
3. Legality of the denial of ITC amounting to ?17,06,715/-.

Issue-wise Detailed Analysis:

1. Entitlement to Input Tax Credit (ITC) under the Himachal Pradesh Value Added Tax Act, 2005:
The petitioner, a registered dealer under the VAT Act, was assessed for the year 2010-11. The assessment order recognized an excess ITC of ?1,31,43,515/-, with ?49,27,694/- applied towards Central Sales Tax and ?82,15,821/- carried forward. The petitioner sought a refund of the excess ITC, which was partially disallowed by the Commissioner, reducing the refundable amount by ?17,06,715/-. The Tribunal upheld this disallowance, leading to the present revision petition.

2. Applicability of Section 11(7)(c)(iii) of the VAT Act in the context of purchases from dealers under the Deferment Scheme:
Section 11(7)(c)(iii) bars ITC claims for purchases from dealers who opted to pay a lump-sum amount or presumptive tax. The Tribunal's reliance on this section to uphold the disallowance was scrutinized. It was found that the selling dealer, M/s Samana Industries Ltd., did not opt for lump-sum or presumptive tax but availed a deferment scheme under a different notification. The Tribunal's application of Section 16(2) of the Act was misplaced, as it pertains to a different tax payment scheme than the deferment scheme under Section 62(5).

3. Legality of the denial of ITC amounting to ?17,06,715/-:
The petitioner argued that the deferment scheme allowed M/s Samana Industries Ltd. to defer tax payments, which should not affect the petitioner's ITC refund claim. The Court found that the disallowance of ?17,06,715/- based on the deferment scheme was incorrect. The deferment scheme's deficit (35% of tax liability) was a voluntary act by the State and should not penalize the petitioner. The Court held that the petitioner was entitled to the full refund of ?82,15,821/- and that the disallowance was illegal and against the VAT Act and rules.

Conclusion:
The revision petition was allowed, setting aside the Tribunal's order. The petitioner was entitled to the full refund of ?82,15,821/-, including the previously disallowed ?17,06,715/-. Additionally, the petitioner was granted interest at 6% per annum on the disallowed amount from the due date until actual payment. The judgment clarified the distinction between deferment schemes and lump-sum tax payment schemes, ensuring that the petitioner was not unjustly penalized for the selling dealer's tax deferment.