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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 ..... le rates. The appellant received notices for assessment of tax and interest under Section 32 of the VAT Act and for penalty assessment under Section 33. These were for various periods between 2007 and 2008 and apparently premised on the audit of its accounts by the VAT Department for the period 01.04.2007 to 31.03.2008. The VAT Officer (VATO) by assessment orders disallowed the input claimed on account of purchases from two dealers - M/s. Balaji Enterprises and M/s. R.S. International (hereafter referred to as the "selling dealers"). The VATO was of the opinion that the selling dealers operated for short periods and their turn-over was high in comparison to the tax deposited by them. Consequently by the orders, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the purchasing dealer could not ascertain the selling dealers' registration certificates had been cancelled as they were not notified at the relevant time. In fact, the dates of the cancellation order were unknown. The appellant became aware of the cancellation only after the VATOs order, and could obtain information through applications made under the Right to Information Act. Counsel submitted that data confidentiality in such matters is mandated by virtue of Section 28 of the VAT Act, emphasizing that there was no mechanism for such information dissemination. 6. It was argued on behalf of the Revenue that the records scrutinized by the Audit Department in this case revealed that both the selling 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 Rs. 25,000/- as against a gross total turn-over of Rs. 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 cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of goods effected by him" as a registered dealer on any date from which he was required to be registered. Section 9 accrues tax credit to a registered dealer under the Act in respect of turn-over of purchases granted during the tax period when the purchase earned in the course of his activities as a dealer of the goods are to be used by him directly or indirectly "for making sales liable to tax under Section 3" or "for making sales or which are not liable to tax under Section 7." Section 9(2) lists situations when input tax credit cannot be allowed. It reads as follows: "(a) in the case of the purchase of goods for goods purchased from a person who is not a registered dealer; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration must be rejected. To accept it would be to notify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates." 10. Dealing with the rationale behind State tax legislation such as Sales tax law (a forerunner for tax on sale of goods), The Supreme Court had held in George Oakes (Private) Ltd. v. State of Madras, AIR 1962 SC 1037 that the law does not: "mean that in law the tax as imposed by government is a tax on the buyer making the dealer a mere collecting agency so that the tax must always remain outside the sale price" 11. There is authority for the rule 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by which the purchasing dealer can monitor the selling dealer's behavior, vis-à-vis the latter's VAT returns. Indeed, Section 28 stipulates confidentiality in such matters. Nor is this Court in agreement with the Tribunal's opinion that insertion of clause (g) to Section 9(2) is clarificatory. As observed earlier, 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 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 V ..... X X X X Extracts X X X X X X X X Extracts X X X X
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