2022 (12) TMI 265 - HC - VAT and Sales Tax

Input Tax Credit - Works Contract - claim for the credit only for the tax period to which such purchases pertain based on the date indicated on the tax invoices - HELD THAT - The fact that by mutual inter se arrangement the appellant was required to reimburse the tax component to the selling dealer at a point in time much which was later than when the tax invoices were raised, would not enable the appellant to take credit of the input tax paid on such purchases. The Tribunal has reached the right conclusion, although there is only reference to Section 9(3) of the 2004 Act. Rule 4(c) of the 2005 Rules, provides clarity as to how the expression arising in the tax period is required to be understood, for claiming credit of the input tax. The question of law, as framed, is decided in favour of the respondents/revenue and against the appellant/assessee - Appeal disposed off.

Issues:
1. Interpretation of provisions of the DVAT Act, 2004 regarding Input Tax Credit claim based on tax period indicated on tax invoices.

Analysis:
The appeal in this case was against an order passed by the Delhi Value Added Tax Appellate Tribunal regarding the interpretation of the provisions of the DVAT Act, 2004 related to the claim of Input Tax Credit. The main question of law raised was whether the DVAT Act allows for a claim of Input Tax Credit only for the tax period to which such purchases pertain based on the date indicated on the tax invoices. The appellant argued that the tax credit should not be dependent on the date of the invoice issuance. The court admitted the appeal and considered the arguments presented by both parties regarding this question of law. The appellant received materials for a works contract and withheld the tax component while paying the vendor for the materials. The vendor requested reimbursement of VAT paid, which was later certified by a Chartered Accountant. The appellant contended that the provisions of the DVAT Act and Rules do not restrict the claim of tax credit based on the date of the invoice issuance.

The court analyzed the relevant provisions of the DVAT Act, 2004 and the DVAT Rules, 2005 to determine the time at which turnover of purchases arises in the case of a works contract. Section 9(3) of the DVAT Act allows a dealer to claim tax credit in respect of the purchase of goods correlatable to the input tax arising in the tax period. Section 12(4) grants the government the authority to prescribe the time at which certain transactions arise, including turnover of purchases. Rule 4(c) of the DVAT Rules states that the turnover of purchases arising in the tax period for a works contract is the consideration received or receivable by the dealer during the relevant tax period. The court emphasized that the turnover arises when the consideration is receivable upon the transfer of property in goods, as indicated in the tax invoices.

The court agreed with the Tribunal's conclusion that the appellant could not claim tax credit for the previous tax periods as the consideration was receivable upon the transfer of property in goods when the tax invoices were generated. The court upheld the rejection of the tax credit claim by the Assessing Authority, stating that the appellant's failure to claim tax credit during the relevant tax period justified the rejection. The court highlighted that it was not the purchasing dealer's responsibility to ensure that the selling dealer had paid VAT before claiming tax credit. Ultimately, the court decided in favor of the respondents/revenue and against the appellant/assessee, disposing of the appeal accordingly.

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