2024 (2) TMI 8 - HC - VAT and Sales Tax

Reversal of input tax credit - registration of the selling dealer was already cancelled - HELD THAT - A combined reading of Section 19(15) and Section 40 of the Act will clearly indicate that in order to avail Input Tax Credit, a registered dealer has to furnish the original tax invoice of the sale evidencing amount of Input Tax and in case where registration certificate of the selling dealer is cancelled by the appropriate authorities, the purchasing dealer who had availed by way of Input Tax Credit shall pay the amount availed on the date from which the order of cancellation of registration certificate tax effected. Apart from that, the purchasing dealer shall by liable to pay interest also. Section 40 prohibits an unregistered dealer from collection any amount by way of tax. In the present case, admittedly, the petitioner has not produced the original tax invoice from a registered dealer and therefore, he cannot complaining that the authorities are attempting to reverse the Input Tax Credit in his favour. In fact, the petitioner has effected purchase five months after cancellation of the registration of the selling dealer. Since the registration of the selling dealer had already been cancelled in April 2008, he would not have paid the tax. Therefore, the allegation of the petitioner that the notice issued by the respondent authorities for reversing the Input Tax Credit would amount to double taxation is not legally sustainable. Though the petitioner has challenged the constitutional validity of a fiscal legislation, neither the grounds nor the submissions made on the side of the writ petitioner point out violation of any constitutional provisions. The present writ petition has been filed only to drag on the proceedings initiated by the respondent authorities for reversal of the Input Tax Credit. There are no merit in the writ petition. The writ petition stands dismissed.

Summary

Issues involved:
Challenge to the constitutionality and enforceability of Section 19(15) of Tamil Nadu Value Added Tax Act, 2006.

Details of the Judgment:

Facts and Contentions:
The petitioner, a registered dealer, purchased Nokia Mobile Phones from a wholesale dealer in September 2008. The authorities proposed to reverse the Input Tax Credit claimed by the petitioner due to the cancellation of the selling dealer's registration. The petitioner argued that the provision violates Article 14 and 301 of the Constitution.

The Additional Government Pleader contended that the selling dealer's registration was cancelled before the purchase, and the audit notice issued did not amount to double taxation as the selling dealer had not paid any tax. The petitioner did not respond to the notice but challenged Section 19(15) through a writ petition.

Discussion and Decision:
Section 19(15) of the Act states that if a registered dealer avails Input Tax Credit from a dealer whose registration is cancelled, the credit must be repaid with interest. Section 40 prohibits unregistered dealers from collecting tax.

The Supreme Court judgments emphasized strict compliance with conditions for availing concessions under the Act. The petitioner failed to produce the original tax invoice from a registered dealer and purchased from a dealer whose registration was cancelled. The claim of double taxation was deemed legally unsustainable.

The court found no merit in the petition, dismissing it without costs. The petition was seen as an attempt to delay proceedings for reversing the Input Tax Credit.

In conclusion, the writ petition challenging Section 19(15) was dismissed, with no costs imposed.