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TMI Blog2019 (6) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly. Respondent No.1 (prescribed authority) passed the re-assessment orders and issued consequent demand notices. Being aggrieved, the petitioner is before this Court. 3. Learned counsel Sri. Rajesh Chander Kumar appearing for the petitioner would submit that the proposition notice dated 23.03.2018 for the tax periods in question came to be issued by respondent No.1 under Section 39(1) read with Sections 36(1) and 72(2) of the KVAT Act. It was alleged that the dealers with whom the petitioner had transacted, had either been deregistered and not filed VAT returns and paid taxes, or they were registered, but not declared sales made to the petitioner or had declared less sales and not paid taxes collected on the sales made to the petitioner. The said notice being ex-facie incorrect with the factual aspects, the petitioner filed its reply contending that the cancellation or registration can only have the prospective effect and not the retrospective effect and thus the purchases being prior to the date of deregistration, the input tax claimed thereof cannot be disallowed. It was further argued that there is no restriction to give input tax credit, if a selling dealer has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifying the impugned orders submitted that Sections 10(2) and 10(3) of the KVAT Act provides for allowing input tax credit subject to the selling dealer depositing the tax from the purchasing dealer as per the invoice raised. It was argued that the petitioner has not provided sufficient proof in claim of input tax on purchases i.e., original copies of purchase invoices, proof of physical movement of goods and details of goods taken inwards (like gate pass) after purchase. In the absence of sufficient proof, the input tax credit claim has been disallowed as per the provisions of Section 70 of the KVAT Act. Remitting of the tax by the selling dealer/s collected from the purchasing dealer/s is the condition precedent for allowing the input tax credit. Admittedly, the selling dealers have not remitted the tax collected from the petitioner in the transaction wherein the input tax credit has been claimed. Thus, the order impugned is passed in accordance with law and deserves to be confirmed by this Court. In support of his contentions the learned counsel placed reliance on the following judgments:- 1. M/s. Bhavani Enterprises vs. The Addl. Commissioner of Commercial Taxes in STA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] deals with input tax restrictions. Section 11[a][9] would be relevant for the purposes of the present case which spells out about the input tax restrictions inasmuch as the tax paid on goods purchased by a dealer who is required to be registered under the Act, but has failed to register. It is also admitted by the prescribed authority that there is no provision in KVAT Act which restricts input credit on purchases effected from defaulting dealers. 10. The division bench of this Court in the case of Rajesh Jain supra, has observed thus: "7. The aforesaid shows that the finding of fact ahs been recorded by the Tribunal that the assessee has fully discharged the burden of proof to claim the deduction of input tax as per the tax invoices. The aforesaid finding, in view of the evidence produced and referred to hereinabove by the Tribunal, cannot be said to be perverse. Hence, the question needs to be answered in favour of the assessee. Even if such question arises on the aspects of re-appreciation of the evidence such would result into question of fact. Hence, we do not find that any question of law would arise for consideration, as sought to be canvassed. 8. Mr. T.K. Vedamurthy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade available before this Court. The tax period involved in the present case is relating to 2005-06, if any de-registration is made subsequently, the same would not disentitle the purchasing dealer to claim input tax credit for the tax period of 2005-06." 12. From the aforesaid rulings, it is clear that the benefit of input tax cannot be deprived to the purchaser dealer, if the purchaser dealer satisfactorily demonstrates that while purchasing goods, he has paid the amount of tax to the selling dealer. If the selling dealer has not deposited the amount in full or a part thereof, it would be for the revenue to proceed against the selling dealer. 13. It is beneficial to refer to the judgment of the Hon'ble High Court of Delhi in the case of Arise India Limited and Others supra, wherein the validity of Section 9[2][g] of the Delhi Value Added Tax Act, 2004 ['DVAT Act' for short] fell for consideration. Section 9[2][g] of the DVAT Act reads as under: "[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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such meaning should be assigned to the provision which would make the provision of the Act effective and advance the purpose of the Act. This should be done wherever possible without doing any violence to the language of the provision. A statute has to be read in such a manner so as to do justice to the parties. If it is held that the person who does not deposit or is required to deposit the tax would be put in an advantageous position and whereas the person who has paid the tax would be worse, the interpretation would give result to an absurdity. Such a construction has to be avoided. In other words, the genuineness of the certificate and declaration may be examined by the taxing authority, but onus cannot be put on the assessee to establish the correctness or the truthfulness of the statements recorded therein. The authorities can examine whether the Form VAT C-4 was bogus and was procured by the dealer in collusion with the selling dealer. The department is required to allow the claim once proper declaration is furnished and in the event of its falsity, the department can proceed against the defaulter when the genuineness of the declaration is not in question. However, an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deregistered, others were still filing returns during the assessment year. However, in all the cases where input credit is proposed to be disallowed, it is very much true that those dealers have not remitted the taxes collected from the assessee. this would lead to substantial loss of revenue to the State. Since the amount collected by the assessee is not remitted to the Government, input credit on these purchases cannot be given to the assessee. Further, it is advised in the reply that the department should initiate recovery actions from the defaulting dealers in terms of Part V - Rule 55 to 130-B of KVAT Rules, 2003. However, the undersigned officer is very limited in resources and powers to initiate action against all such defaulters. An assessing officer has power to verify books of accounts and issue notices to only those dealers for whom assignment note is issued by the Hon'ble Commissioner of Commercial Taxes, Karnataka. What is more, the defaulting dealers in the instant case [assessee's sellers] are very few; however, they may run into thousands in some other case. Given the limited resource and manpower, it is nearly impossible for the department to initiate action aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignated bank and furnish monthly returns as specified under Section 35 to the prescribed authority, the proceedings are required to be initiated against such registered selling dealers in accordance with the provisions of the KVAT Act. 18. The Division Bench of this Court in the case of M/s. Bhavani Enterprises supra, was dealing with the penalty imposed by the prescribed authority under Section 70[2] of the KVAT Act wherein, the input tax credit availed by the assessee was held to be on the basis of fake and false invoices of the selling dealers who actually did not exist and upon investigation and query, being found that those dealers did not exist and therefore the input tax credit could not be allowed in the hands of the purchasing dealer. In that context, it is held that the burden of proving that input tax claim is correct lies upon the dealer claiming such input tax credit. 19. In the case of Microqual Techno Private Limited supra, the Revisional Authority exercising the suo motu power of revision against the order of the First Appellate Authority which set aside the penalty imposed had recorded a finding that the invoices produced were not genuine as the same were procure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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