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TMI Blog2013 (2) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court in agreement with the Tribunal’s opinion that insertion of clause (g) to Section 9(2) is clarificatory. As Section 9(2) is an exception to the general rule granting input tax credit to dealers who qualify for the benefit. The conditions for operation of the exception are well defined. The absence of any condition such as the one spelt out in clause (g) and its addition in 2010 rules out legislative intention of its being a mere clarification of the law which always existed. This Court is further of the opinion that the Bombay High Court judgment in M/S.Mahalaxmi Cotton Ginning [2012 (5) TMI 152 - BOMBAY HIGH COURT] is of no assistance to the revenue, because there, the Court had to deal with the Constitutionality of Section 48(5) of the local VAT law as in the present case, as noticed previously, the VAT Act is silent, Section 9(2) (g) was introduced only with effect from 1-4-2010. This Court is of the opinion that in the absence of any mechanism enabling a purchasing dealer to verify if the selling dealer deposited tax and in the absence of notification that can be ascertained by men in business that a dealer’s registration is cancelled (as has happened in this case) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, the VATO demanded tax, interest and penalty for the periods in question. Arguing that the VATO s orders were not justified in law, the appellant moved the Objection Hearing Authority (OHA) under Section 74. These appeals/objections were dismissed by order dated 29.01.2010. The OHA confirmed the VATO s order. 3. Appeals were consequently preferred the VAT Act to the Tribunal, which, by the impugned order, dismissed them, upholding the disallowance of the input credit and also upholding the penalties imposed. The Tribunal was of the view that Section 9(1) permits tax credit to a purchasing dealer to the extent the tax is actually deposited by the selling dealer. In doing so, the VAT Tribunal also took into consideration the amendment to Section 9(2) which was brought into force on 01.04.2010, i.e. after the appeals were preferred. That amendment inserted clause (g) to Section 9(2), clarifying that input tax credit is admissible to purchasing dealer only when tax is actually deposited by the selling dealer. 4. The appellant argued that the VAT authorities have misconstrued the relevant provisions and that the impugned order of the Tribunal upholding the objection hearing aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng dealers had deposited proportionately less tax in respect of the transactions which they reported. It was emphasized that the actual tax paid by M/s. Balaji Enterprises for the period May 2007 to December 2007 was just ₹ 25,000/- as against a gross total turn-over of ₹ 9.48 crores. The Registration Certificate of the said dealer, M/s. Balaji Enterprises was cancelled with effect from 12.02.2008. Consequently after that period since the concern was not a registered dealer it could not issue any tax invoices. Similarly in the case of M/s. R.S. Trading International, OHA s order reveal that for the period 01.07.2007 to 30.06.2008 as against gross turn-over of ₹ 9.6 crores, that concern had paid total tax of just about ₹ 24,000/-. The Registration Certificate in respect of this concern (M/s. R.S. Trading International) was cancelled with effect from 01.07.2008. It was argued that the OHA was justified in concluding, on the basis of these materials that the transactions shown were sham and only paper transactions and that the appellant was in collusion with the said dealers. 7. Learned counsel for the Revenue also submitted that the Tribunal cannot be fault ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) for the purchase of non-creditable goods; (c) for the purchase of goods which are to be incorporated into the structure of a building owned or occupied by the person; Explanation .- This sub-section does not prevent a tax credit arising for goods and building materials that are purchased either for the purpose of re-sale in an unmodified form, or for the performance of a works contract on a building owned or occupied by another; (d) for goods purchased from a dealer who has elected to pay tax under section 16 of this Act; (e) for goods purchased from a casual trader; (f) to the dealers or class of dealers specified in the Fifth Schedule except the entry no.1 of the said Schedule (g) to the dealers or class of dealers unless the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period. Concededly, clause (g) to Section 9(2) was introduced by an amendment, made effective, in 2010. It was not in existence when the dispute which is the subject matter of these appeals, arose. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the actual words used in a statute should be seen, and the courts must not add to or subtract from the phraseology used by the legislature. In Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal 2011 (1) SCC 236, while construing the correct approach in examining an exemption or concessional provision in a tax statute, the Supreme Court held that: The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarification of the law which always existed. This Court is further of the opinion that the Bombay High Court judgment in M/S.Mahalaxmi Cotton Ginning is of no assistance to the revenue, because there, the Court had to deal with the Constitutionality of Section 48(5) of the local VAT law. The Court applied the well-established principle of greater deference to policy makers and legislatures in economic and fiscal matters, and upheld the statute, which had said that set off (a provision similar to input credit under Section 9(1) of the Delhi VAT Act) would be permissible only to the extent of the amounts actually paid. The High Court held that: The words actually paid into the government treasury signify that a claim for set off cannot be in excess of the tax in respect of which the set off is claimed that has been deposited into the treasury. The plain and natural meaning of the expression actually paid into the treasury is that the tax on purchases of which a set off is claimed must actually and physically have been deposited into the treasury. A constructive or notional deposit would not fulfill the mandate of the provision. The State Legislature has used language of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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