2023 (5) TMI 647 - HC - VAT and Sales Tax

Reversal of ITC - incentives / discounts received by the appellant from its vendors - attachment of bank accounts - HELD THAT - Out of the total disputed tax of Rs.1,02,05,505/- for the assessment years in question, a sum of Rs.46,81,461/- relates to the reversal of ITC on incentives, which is covered by the judgment of the Apex Court in M/s.Jayaram Co. case 2016 (9) TMI 408 - SUPREME COURT wherein, the assessment orders dated 29.10.2010, with respect to reversal of input tax on incentives / discounts received by the appellant from its vendors, were set aside - After deducting the said sum of Rs.46,81,461/-, the balance sum of Rs.55,24,044/- pertaining to other issues, to which, the appellant has also filed application under Section 84 of the TNVAT Act, 2006. Considering the total quantum covered under Section 19(20) of the Tamil Nadu Value Added Tax Act, 2006, amounts to Rs.46,81,461/-, which was set aside in the earlier round of litigation, but, the same was not taken into consideration by the learned Judge and that, if the amount so deleted, is deducted from the total disputed tax of Rs.1,02,05,505/- by way of subsequent assessment proceedings, the total outstanding amount would be around Rs.55,00,000/-, this court, to meet the ends of justice, is inclined to modify the order of the learned Judge, in the following terms i. The appellant shall pay a sum of Rs.25,00,000/- within a period of eight weeks from the date of receipt of a copy of the judgment; ii. On such payment, bank attachment, if any, shall be lifted forthwith; iii. On the failure of the appellant to comply with the direction (i) above, the interim order granted by the learned Judge shall stand vacated automatically without any reference to this court. Appeal disposed off.

Summary

Issues involved:
The judgment involves challenging a common order passed by the learned Judge in W.M.P.Nos.11197, 11202 & 11209 of 2023 in W.P.Nos.11314, 11317 & 11321 of 2023 regarding the reversal of input tax credit on incentives received by the appellant from its vendors, penalties imposed without prior notice, and the conditions imposed for grant of interim stay.

Reversal of Input Tax Credit on Incentives:
The appellant, a dealer in consumer durable goods, challenged the reversal of input tax credit (ITC) on incentives received from vendors for the assessment years 2006-07, 2007-08, and 2008-09. The first respondent proposed to reverse the ITC due to selling prices being below purchase prices after incentives, leading to the appellant being deemed ineligible for excess ITC. The appellant objected and filed WP.Nos.28335 to 28337 of 2010, which were disposed of, setting aside the reversal of ITC on incentives following a Supreme Court decision. Subsequently, fresh assessment orders were passed by the first respondent, disregarding objections filed by the appellant. The learned Judge granted an interim stay order, requiring the appellant to pay Rs.75,00,000 within four weeks, which the appellant found onerous.

Penalties Imposed Without Prior Notice:
The appellant contested the penalty amount of Rs.1,17,09,593 imposed for the first time in the assessment orders dated 18.04.2022, without prior proposal in the issued notices. The appellant argued that this levy violated principles of natural justice as there was no prior indication of the penalty, leading to unfair treatment.

Conditions for Grant of Interim Stay:
The learned Judge imposed a condition for granting interim stay, requiring the appellant to pay Rs.75,00,000, which the appellant deemed harsh and unfeasible. The appellant also highlighted that the first respondent chose to attach the appellant's bank account with a third-party bank without considering the application filed under Section 84 of the TNVAT Act, 2006. The appellant sought relief against the stringent conditions imposed for the interim stay.

Judgment Outcome:
In light of the submissions and circumstances, the court modified the order of the learned Judge. The appellant was directed to pay Rs.25,00,000 within eight weeks to lift any bank attachments. Failure to comply would automatically vacate the interim order without reference to the court. The writ appeals were disposed of with these terms, and no costs were awarded.