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TMI Blog2016 (5) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... n payment of tax, the petitioner claimed input tax credit of tax paid on such purchases under section 11 of the GVAT Act. The input tax credit so claimed was adjusted against the output tax liability on sales made by the petitioner and the differential tax amount was paid by the petitioner into the Government treasury. 2.1 The petitioner's case was taken up for audit assessment for the year 2006-07 and the input tax credit claim of the petitioner was allowed after due verification of the tax invoices produced by the petitioner, which fact is even recorded in the assessment order passed under section 34(2) of the GVAT Act. As per the audit assessment order, there were nominal dues of Rs. 72/- against the petitioner. 2.2 On 8th November, 2012, the petitioner received a notice in Form 503 from the Deputy Commissioner of Commercial Tax, Circle 25, Gandhidham, proposing to revise the audit assessment order and disallow input tax credit on the ground that the registration certificate of M/s. Om Incorporation, who was one of the vendors of the petitioner, had been cancelled with retrospective effect. 2.3 The petitioner became aware about the fact that the registration certificate of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the petitioner that it was under a bonafide impression that the only controversy was whether the petitioner was entitled to input tax credit despite the fact that the registration certificate of the vendor namely, M/s. Om Incorporation had been cancelled with effect from 1st January, 2007 and that it was never alleged in the notice for revision in Form 503 that the genuineness of the purchases made from M/s. Om Incorporation was being doubted by the revisional authority. More so, because the input tax credit was sought to be disallowed only in respect of transactions with M/s. Om Incorporation after 1st January, 2007, that is, after the effective date of cancellation of registration certificate of that dealer. The input tax credit on purchases made from M/s. Om Incorporation prior to 1st January, 2007, but in the same year 2006-07, were not disputed and remained admissible even after passing of the revision order. Also, M/s. Om Incorporation had disclosed sales to the petitioner in the returns filed for the period from 1st January, 2007 to 31st March, 2007 and had accordingly been assessed to tax on such sales by the Jurisdictional Assessing Officer. Therefore, the reply g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the material on record. It was pointed out that the revising authority has clearly noted in the revision order that while the assessment order was passed on 14th February, 2011, the Commercial Tax Officer, Unit 5, Rajkot informed the Assessing Officer that the registration certificate of M/s. Om Incorporation had been cancelled and hence, the input tax credit on purchases made by the said dealer was required to be disallowed. It was based on such internal letter that the Jurisdictional Assessing Officer requested for revision of the assessment order and thereafter the Deputy Commissioner issued notice for revision. In support of such submission, the learned advocate placed reliance upon the decision of this court in the case of The State of Gujarat v. Chelabhai Bhanabhai Prajapati, (1974) 33 STC 147, for the proposition that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. Reliance was also placed upon the decision of the Madras High Court in the case of P. Narayanasamy v. State of Tamil Nadu, (1997) 104 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have travelled beyond such notice which would fall foul of requirement of rule 67 of the Gujarat Sales Tax Rules, 1970 providing reasonable opportunity to the dealer. 3.2 Alternatively, it was submitted that the Tribunal had erred in concluding that the purchases made by the petitioner from M/s. Om Incorporation were only billing transactions. It was submitted that the transactions were duly supported by tax invoices. The petitioner had also produced evidence of cheque payments made to the vendor M/s. Om Incorporation and M/s. Om Incorporation had disclosed sales made to the petitioner in the returns filed by it under the Value Added Tax Act and it had also been assessed to tax under the GVAT Act. It was submitted that these documents have been officially obtained by the petitioner by filing application under the RTI Act and hence, the conclusion arrived at by the Tribunal that the transactions were not genuine was perverse, contrary to facts, bad and illegal. 3.3 Next, it was contended that the purchases made by the petitioner from M/s. Om Incorporation were much prior to the date of the order cancelling its registration. Section 11(5) (mmmm) of the GVAT Act which provides f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered A.D. Post could not be served and those notices were returned with the postal remarks "not known". It was pointed out that in the facts and circumstances of this case, since the transactions are not genuine and the petitioner has merely received bills without actual delivery of goods, its claim for input tax credit is not allowable. It was, accordingly, submitted that the input tax credit has rightly been disallowed and the Tribunal was wholly justified in upholding the same and that there is no warrant for interference by this court. 5. In rejoinder, Mr. Uchit Sheth, learned advocate for the petitioner submitted that the purchase invoices were part of the assessment record and were even verified by the Assessing Officer before granting input tax credit which is specifically recorded in the assessment order. It was submitted that so far as weighment slips and incoming gate passes are concerned, no such documents were ever asked for in the revision notice or during the course of the revision proceedings. It was submitted that since the genuineness of the transactions were not doubted, the conclusion that there was no actual movement of goods is much beyond the scope of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct shows that the petitioner has been called upon to show cause as to why the input credit on the purchases made by it from M/s. Om Incorporation whose registration has been cancelled ab initio should not be disallowed for the period 1st April, 2006 to 31st March, 2007. The record of the case reveals that the registration certificate of M/s. Om Incorporation has been cancelled on 1st July, 2010 with effect from 1st January, 2007. In the present case, it is an admitted position that when the original assessment order came to be made, the order cancelling the registration certificate of M/s. Om Incorporation did not form part of the record of the Assessing Officer. Evidently therefore, the proceedings under section 75 of the GVAT Act have been initiated on the basis of the material which did not form part of the record of order passed by the subordinate officer. In State of Gujarat v. Chelabhai Bhanabhai Prajapati (supra), on which reliance has been placed by the learned advocate for the petitioner, this court, following the decision of the Supreme Court in State of Kerala v. K.M. Cheria Abdulla and Co., (1965) 16 STC 875 (SC), held that the Tribunal was justified in holding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Section 12(2) is no doubt wider in scope than Section 115 of the Code of Civil Procedure. Even so the revisional authority's jurisdiction is confined to the question of legality or propriety of the order of the regularity of the proceedings. The further limitation on that jurisdiction is that it can only exercise the same on the examination of the record of any order passed or proceedings taken by any authority. The section, therefore, not only limits the scope of its jurisdiction but also defines the material on the basis of which the said jurisdiction is exercised. The general expression that the authority "may pass such order as he thinks fit" must necessarily be confined to the scope of the jurisdiction. The revisional authority, therefore, cannot travel beyond the order passed or proceedings recorded by the inferior authority and make fresh enquiry and pass orders on merits on the basis of the said enquiry. If it is not construed in this manner, the distinction between appeal and revision would be effaced." Thus, it has been held in the above decision that the revisional authority cannot travel beyond the scope of the order or proceedings recorded by the inferior authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted registration under the Gujarat Value Added Tax Act, he would not be aware of the cancellation of his registration unless the same is duly published by the Commissioner under sub-section (11) of section 27 or section 97 of the Act. In the absence of any such publication, a dealer may not be aware of such cancellation and may bonafide purchase goods from such dealer. Therefore, with a view to ensure that a registered dealer who purchases goods from another registered dealer is not unduly prejudiced by the cancellation of the registration of the selling dealer, clause (mmmm) of sub-section (5) of section 11 of the GVAT Act provides that input tax credit shall not be allowed in respect of purchases made from a dealer after the name of the dealer is published under sub-section (11) of section 27 or section 97. In other words, ordinarily, input tax credit can be disallowed only after the name of the dealer is published in the manner prescribed in section 27(11) or section 97 of the Act. In the opinion of this court, in view of the provisions of section 11(5)(mmmm) of the GVAT Act, even if the cancellation of registration of such selling dealer is retrospective in effect or is canc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , findings of fact as regards the genuineness of transactions not having been established, have to be recorded. 12. In the facts of the present case, in the audit assessment order, no such finding regarding the transactions not being genuine have been recorded and the input tax credit has been allowed. The revisional proceedings are not only based on material which is extraneous to the record of the Assessing Officer, but the revisional authority without calling upon the petitioner to prove the genuineness of the purchases has recorded that documents like sale bills of M/s. Om Incorporation, L.R., weighbridge chits, entry gate pass etc. have not been produced and hence there does not appear to be any transfer of goods. The revisional authority has also observed that since the registration of M/s. Om Incorporation has been cancelled with effect from 1st January, 2007, the petitioner is not entitled to the tax credit in respect of purchases made thereafter. 13. It may be noted that the petitioner has purchased goods from M/s. Om Incorporation for the period prior to 1st January, 2007 also. However, the input tax credit has not been denied for such period but it is denied for the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than Rs. 17 crores were outstanding against the said party. It is very unfortunate and serious lapse on the part of the departmental authorities that at the relevant time, the registration certificates of the said party were cancelled w.e.f. 01/01/07 on the ground of non-filing of three consecutive returns, despite the fact that the very same officer has made proposal on 01/07/10 to cancel the registration certificate of M/s Om Incorporation ab initio. 13. The documents produced by Mr. Patel clearly indicated that the same are not genuine and they are subsequently created. This Tribunal has dealt with this issue in great detailed in Revision Application No. 58 of 2013 in the case of M/s. Arvind Export Solvent Oil Ind. Vs. State of Gujarat and ultimately come to the conclusion that the transaction entered in the Om Incorporation are not genuine and the applicant has merely obtained bills from M/s. Om Incorporation. This Tribunal has also observed that the applicant has used its name as the department could not trace out the said party and on spot visit, it was found that said dealer has closed its business for the last three years. 14. In the above view of the matter without d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner and M/s. Om Incorporation to be non-genuine is contrary to the settled legal norms. Each matter has to be decided on its own facts and the Tribunal while deciding the case of one party cannot place reliance upon the facts which have come to its knowledge only in another proceeding and apply them to a third party who has no connection with those proceedings. 15. As discussed hereinabove, input tax credit cannot be denied to a party in the absence of the Department having established that the transactions in question are not genuine or that they are bogus etc. In the facts of the present case as emerging from the record, no such material has been brought on record by the respondent. In the facts of the present case, the revisional authority had initiated the revision proceedings by calling upon the petitioner to show-cause as to why the input tax credit on the purchases made by it from M/s. Om Incorporation for the period after 1st January, 2007 should not be disallowed. The petitioner, at no point of time, was called upon to establish the genuineness of such transactions or to produce any documentary evidence in support of such transactions. The revisional authority, without c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has confirmed the order passed by the revisional authority to the extent of the additional tax liability. When legal propositions are canvassed on behalf of a party before the Tribunal, more so, a proposition regarding lack of jurisdiction on the part of the concerned authority, which goes to the root of the matter, the Tribunal is duty bound to deal with the same and record a finding in respect thereof. 18. In the light of the above discussion, this court is of the view that the very initiation of the revisional proceedings was itself without jurisdiction, inasmuch as, the same was based upon material extraneous to the record of order of the officer appointed under section 16 of the Act to assist the Commissioner. Moreover, even on merits, for the reasons recorded hereinabove, the court is of the view that the impugned order passed by the Tribunal cannot be sustained. 19. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned order dated 15th July, 2015 passed by the Gujarat Value Added Tax Tribunal, Ahmedabad in Revision Application No.67 of 2013 to the extent the same confirms the additional tax liability raised by the revisional authority a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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