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TMI Blog2010 (8) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... l dismissed. - Sales Tax Appeal No. 1 of 2010 - - - Dated:- 6-8-2010 - KUMAR N. AND NAGARATHNA B.V., JJ. For the Appellant D. Shashidharan For the Respondent : T.K. Vedamurthy, High Court Government Pleader, The judgment of the court was delivered by N. KUMAR J. This appeal is filed by the assessee, challenging the order passed by the revisional authority, which has reversed the finding recorded by the first appellate authority under section 72(2) of the Karnataka Value Added Tax Act, 2003. 2. The assessee is a registered dealer under the Karnataka Value Added Tax Act, 2003 (in short, hereinafter referred to as, KVAT Act ). He is a manufacturer and dealer in radio frequency components and telecom components. The place of his business was visited by the Assistant Commissioner of Commercial Taxes on 24th and 27th of September 2008 for inspection-cum-audit of books of accounts. On verification of purchase invoices, purchase register and ledger, it was noticed that he has accounted as local purchase of feeder clamp sets on the invoices which are in the names of following suppliers: (1) M/s. S.L.V. Enterprises. (2) M/s. T.D. and Company. (3) M/s. Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was set aside. Aggrieved by the said order, the assessee preferred an appeal. 3. In the meanwhile, the revisional authority exercised suo motu power of revision against that portion of the order of the first appellate authority, which set aside the penalty imposed on the ground that it was prejudical to the interest of the Revenue. After hearing the assessee, the revisional authority recorded a finding that the invoices produced were not genuine as the same were procured through a mediator that it was well within the knowledge of the assessee and therefore that it could not be said, the material on record did not indicate that the assessee knowingly produced bogus invoices and therefore, he set aside the portion of the order of the first appellate authority and levied penalty. Against the said order, the present appeal is filed by the assessee. 4. The learned counsel for the appellant assailing the impugned order contended that, when once it is admitted that the four dealers who sold articles to the assessee were all registered dealers and they had received payment by way of cheque from the assessee, which cheque has been duly encashed and if they had not paid tax and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciating the material on record, what had transpired before the assessing authority in particular, were regarding the allegations made by the Department, which remained unanswered in the course of enquiry. In those circumstances, the revisional authority had rightly interfered with the said order and on proper appreciation of the entire material on record, recorded a finding that the invoices, under which the goods were produced were not genuine. It was not supplied by the registered dealers, it was supplied by a mediator who had handed over those invoices to the assessee and therefore, the assessee had knowingly produced these tax invoices and consequently, he has to pay the penalty. In that view of the matter, we are satisfied that the plea of violation of principles of natural justice has no substance. In so far as imposition of penalty is concerned, section 70(2) of the KVAT Act, 2003, deals with the said subject, which reads as under: 70. (2) Where an attachment has been made under this part, any private transfer or delivery of the property attached or of any interest therein and any payment to the defaulter of any debt, dividend or other monies contrary to such attachment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i persons who are in the line of bill trading and by obtaining the same, the dealer has claimed input-tax credit which are not at all related to the goods he has purchased. In other words, the person who has supplied the goods has not issued the invoice and instead, in order to cover the purchases with invoice, the dealer has obtained invoices from bill traders and claimed the credit. So, the invoices produced by the dealer in relation to claiming of input-tax credit are not pertaining to the goods he has received. The goods are supplied by one person and the invoices are issued by some other person. In turn, the dealer has procured the goods from a person who has not issued the invoice and instead obtained a fictitious invoice to cover up the purchases and claimed the illegal credit and produced the same for verification. Therefore, as per section 70 of the Act, the dealer has committed an offence of producing false invoices in support of his claim of input-tax credit. Such being case, it was found appropriate to disallow inputtax credit claimed on fictitious invoices and levy penalty as per sections 70 and 72 and interest as per section 36 of the Act. Whereas, since the burden o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed by a 'purchase order' with 'specifications' and 'terms and conditions'. Whereas, you have failed to furnish the purchase orders and the documents related with the above transactions from the date of placing the order for supply of goods till the date of making payments. Such being the case, your claim of purchase does not amount to 'valid purchase' and the input-tax credit claimed on above purchase does not amount to 'valid input-tax credit'. It has to be construed that the goods on which you have availed of input-tax credit are not covered by 'valid tax invoices' and the invoices on which you have availed of input-tax credit are not pertaining to the goods you have received. That means to say, the suppliers on whose tax invoices, you have availed of input-tax credit, are not the actual suppliers and they are not the dealers of such goods. Hence, your claim of input-tax credit of ₹ 3,85,183 on the above 'invalid tax invoices' has to be disallowed as the VAT collected in the above invoices has not been received by the Department and you have not effect a 'valid purchase followed by valid tax invoices'. Me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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