2023 (3) TMI 831 - HC - VAT and Sales Tax

Disallowance of Input Tax Credit (ITC) arising out of the alleged mismatch between the returns filed by the petitioners when compared with the returns and annexures filed by the purchasing / selling third party dealers - reversal of ITC on the allegations that there has been no actual movement of goods qua the transactions in question. HELD THAT - A Bench of this Court in the case of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER 2017 (3) TMI 536 - MADRAS HIGH COURT had issued certain directions for conduct of verification and assessment in such matters. While some of these directions have been complied with in the present cases, learned counsel concur on the position that there are other conditions that have been set out under Circular No.5 of 2021 dated 24.02.2021 that yet remain to be complied. The second issue relating to movement of goods has been the subject-matter of detailed deliberations in a batch of cases in W.A.No.2607 of 2021, wherein orders have been reserved by the Tax Bench on 01.12.2022. In the interregnum, the Hon'ble Supreme Court has also had occasion to pronounce judgment in the case of THE STATE OF KARNATAKA VERSUS M/S ECOM GILL COFFEE TRADING PRIVATE LIMITED 2023 (3) TMI 533 - SUPREME COURT on the same issue, though in the context of the Karnataka Value Added Tax Act - thus, there is direction to the assessing authority to await decision in W.A.No.2607 of 2021 and complete the assessments thereafter in light of the judgment of the Hon'ble Supreme Court in Ecom Gill Coffee Trading Private Limited and the decision of the Division Bench within a period of 12 weeks from date of pronouncement of the decision in W.A.No.2607 of 2021. These writ petitions are disposed off.

Summary

Issues involved:
The issues involved in the judgment are (i) the disallowance of Input Tax Credit (ITC) due to mismatch between returns filed by petitioners and third-party dealers, and (ii) reversal of ITC based on alleged lack of actual movement of goods in the transactions.

First Issue - Input Tax Credit Disallowance:
The Court noted compliance with certain directions from a previous case but highlighted remaining conditions from Circular No.5 of 2021 that need to be followed for verification and assessment of mismatch cases. The Circular outlines procedures for the Original Assessing Authority to list pending mismatch cases, reconcile discrepancies, issue notices to dealers, seek details for verification, and grant opportunities for objections and hearings. It emphasizes the need for prompt action and completion of proceedings within 180 days.

Second Issue - Movement of Goods:
The Court referred to a pending batch of cases and a recent Supreme Court judgment in a related matter under the Karnataka Value Added Tax Act. It directed the assessing authority to await the decision in the pending case and complete assessments within 12 weeks of the decision. Consequently, the impugned assessments were set aside, and the writ petitions were disposed of without costs.

Separate Judgement by Judge:
No separate judgment was delivered by any specific judge in this case.