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TMI Blog2019 (9) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... ses made from a dealer whose registration is cancelled, without first establishing that in respect of the goods purchased by the dealer, the vendor had not paid tax. The court is of the view that the petitioners have made out a strong primafacie case in their favour - Under the circumstances, the Tribunal and the first appellate authority were not justified in directing payment of huge amount of pre-deposit for the purpose of admitting the appeal and staying recovery. The matters are remanded to the first appellate authority to decide the matters afresh in accordance with law and on merits, on the basis of payment already made and treating the aforesaid property of the partner of the petitioners as security towards the pre-deposit for admission of appeals and grant of stay - petition allowed by way of remand. X X X X Extracts X X X X X X X X Extracts X X X X ..... input tax credit was allowed by the A.O., but the input tax credit of purchases from one M/s.H.L. Enterprise was disallowed on the ground that its registration certificate had been cancelled with retrospective effect. As per the petitioner, in the assessment order it was neither alleged nor established that the purchase transactions of the petitioner were not genuine and it was not disputed that the As per the petitioner, copy of the order cancelling registration certificate of the vendor was never given to the petitioner. As per the revenue, the petitioner was not able to produce proof of transportation of the goods. As per the petitioner, huge demand was raised against the petitioner. The petitioner challenged the assessment order by way of preferring appeal before the first appellate authority and the first appellate authority demanded payment of ₹ 20% of the total dues for admission of the first appeal. As the appellant did not make payment of the amount of pre-deposit, the first appellate authority summarily dismissed the appeal on the ground of non-payment of pre-deposit. Against the order of the first appellate authority, the petitioner preferred Second Appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2003 specifically provides that input tax credit can be disallowed only if the purchases are made from such dealer after name of the dealer is published as cancelled by the Commissioner under Section 27 (11) or Section 97 of the VAT Act. It is contended that It is also held by the Supreme Court in the case of State of Maharashtra v/s Suresh Trading Company, (1998) 109 STC 439 (SC) that input tax credit cannot be disallowed on the basis of retrospective cancellation of registration certificate of vendor. It is contended that similar view has been taken by this Court in the case of Meet Traders v/s State of Gujarat, (2013) 63 VST 246 (Guj.). It is contended that input tax credit can be disallowed only if it is concluded that the purchaser had colluded with the vendor and the registration certificate of the vendor was cancelled specifically in reference to transactions with the purchaser. 4.03. Mr.Sheth, learned counsel for the petitioners has further submitted that the copy of the order cancelling registration certificate of the vendor is required to be provided to the purchaser and after giving an opportunity to the purchaser to rebut adverse allegations if any in such order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court in the case of Capital Traders v/s State of Gujarat in Special Civil Application No. 18963 of 2019 decided on 11.2.2019 in the context of payment of pre-deposit itself in similar facts where the input tax credit was disallowed without providing the purchaser with a copy of the assessment order passed in the case of vendor, the pre- deposit condition imposed by the tribunal was fully waived by this Court by inter-alia making the following observations: "11. At this juncture, reference may be made to the decision of this court in the case of Shree Bhairav Metal Corporation v. State of Gujarat (supra), wherein it has been held thus: "9.4 As observed earlier, the impugned order has been passed by the adjudicating authority denying the ITC claimed by the petitioner 0n the alleged purchases made by the petitioner from M/s Lucky Enterprises on the ground that the registration certificate of M/s Lucky Enterprises on the ground that the registration certificate of M/s Lucky Enterprises seller has been cancelled ab initio on the ground that the seller had involved into the billing activities only and all the transactions by M/s Lucky Enterprises are held to be bogus. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed till the first appellate authority finally decides the appeal. Rule is made absolute accordingly with no order as to costs." 4.05. Mr. Sheth further submitted that, similar observations were also made by this Court in the case of Utsav Enterprise v/s State of Gujarat Special Civil Application No. 1173 of 2019 decided on 1.5.2019. 4.06. Mr. Sheth, in the alternative submitted that the appeals may kindly be directed to be heard on merits on the basis of payment already made and additional security in the form of immovable property. 4.7. Mr. Sheth, learned counsel for the petitioners further submitted that without prejudice to the above submissions and in the alternative it is respectfully submitted that the financial position of the petitioner is extremely weak. The business of the Petitioner is closed down. The Petitioner has already deposited ₹ 2,00,000 pursuant to order of Hon. Tribunal. Further the partner of the petitioner being Mr. Milan Nayankumar Mehta may be permitted to offer security in the form of his residential house where the partner is currently residing. The said security may be considered on consolidated basis for the demand in the case of the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioners on account of non-deposit of amount of pre-deposit, as ordered by the tribunal. He has submitted that the impugned orders are just, legal and proper and the same do not warrant any interference at the hands of this Court. 5.01. Mr.Joshi, learned AGP further contended that it is the duty of the petitioners to establish the genuineness of the purchase and the petitioners have failed to establish the genuineness of the the purchase. It is submitted that considering the stake involved in the matter and considering the provisions of the Act and considering the fact that the condition of pre-deposit is a statutory requirement, impugned orders are not required to be interfered with and the petitions are required to be dismissed. 6.00. Heard Mr.Uchit Sheth, learned counsel appearing for the respective petitioners and Mr.Soham Joshi, learned AGP appearing for the respondents in both the petitions at length. Considered the material on record as well as the pleadings of the parties. 6.01. The sole question that arises for consideration in the present case is as to whether the first appellate authority and the Tribunal were justified in directing the petitioners to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "Notwithstanding anything contained in this section, in no case the amount of tax credit on any purchase of goods shall exceed the amount of tax in respect of the same goods, actually paid, if any, under this Act or any earlier law, into the Government treasury:" 6.05. Sub-section (7A) of section 11 of the GVAT Act envisages disallowance of tax credit in excess of the amount of tax paid in respect of the same goods. Therefore, to disallow tax credit on any purchase, it has to be established that it is in respect of the very goods purchased by a dealer that the tax has not been paid. Input tax credit cannot be disallowed by working out the percentage of purchases made from a dealer whose registration is cancelled, without first establishing that in respect of the goods purchased by the dealer, the vendor had not paid tax. 6.06. In the light of the above discussion, the court is of the view that the petitioners have made out a strong primafacie case in their favour. Under the circumstances, the Tribunal and the first appellate authority were not justified in directing payment of huge amount of pre-deposit for the purpose of admitting the appeal and staying recovery. 6.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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