In a PATH BREAKING
JUDGEMENT the Madras High Court has held that Assessee cannot be asked to
reverse input tax credit due to non-payment of taxes by the selling dealers.
Sri Lakshmi Textiles Vs.
the Commissioner of Commercial Taxes and Others
Facts:
Sri Lakshmi
Textiles(“the Petitioner”) is a partnership firm engaged in the business of
inner garments and textiles registered under Tamil Nadu Value Added Tax Act,
2006 (“TN Vat Act”). The Petitioner was regularly filing the VAT return and
paying the VAT liability after adjusting the corresponding input tax credit.
For the Assessment Year 2013-2014, the Petitioner had reported total turnover
and taxable turnover of Rs. 2,02,88,151/- and Rs. 15,98,693/- respectively in
his return.
The Department alleged
that because some of the selling dealer of the Petitioner had not paid the tax,
the Petitioner is required to reverse the corresponding input tax credit and
further sought to levy penalty under Section 27(3) of the TN VAT Act on the
Petitioner.
Held:
The Hon’ble High Court
of Madras relied upon the decision in the case of Sri Vinayaga Agencies
Vs. the Assistant Commissioner (Ct), Chennai and another [(2013) 60 VST 283
(Mad)] and held that when the fact of Petitioner paying the taxes to his
supplier is not under dispute, the Petitioner cannot be compelled to reverse
the input tax Credit due to non-payment of VAT liability by the selling dealer.
Full Judgement is as follows:
BEFORE THE MADURAI BENCH OF
MADRAS HIGH COURT
DATED : 25.09.2015
CORAM
THE HONOURABLE MR.JUSTICE
R.SUBBIAH
W.P.(MD)No.17266 of 2015
and
M.P.(MD).No.1 of 2015
Tvl.Sri Lakshmi Textiles,
rep.by its Partner,
S.Venkatraman,
Tirunelveli District ... Petitioner
Vs.
1.The Commissioner of
Commercial Taxes,
O/o.the Principal and Special
Commissioner
of Commercial Taxes,
Ezhilagam, Chepauk,
Chennai-600 005.
2.The Commercial Tax Officer,
Tenkasi Assessment Circle,
Commercial Tax Building,
No.56-B, Railway Feeder Road,
Thenkasi,
Tirunelveli District-627
811. ... Respondents
Writ Petition filed
under Article 226 of the Constitution of India
praying for issuance of a Writ of Certiorari to call for the
records
pertaining to the impugned proceedings of the second respondent in
TIN/33915681560/2013-14, dated 10.08.2015 and quash the same.
!For Petitioner :
Mr.B.Rooban for
M/s.R.V.Manikandan Associates
For Respondent :
Mr.R.Karthikeyan
Government Advocate
:ORDER
This Writ Petition has been
filed praying for a Writ of Certiorari to call for the records pertaining to
the impugned proceedings of the second respondent in TIN/33915681560/2013-14,
dated 10.08.2015 and quash the same.
2. The case of the petitioner
is that the petitioner firm is a partnership concern carrying on business in
the name and style of 'Sri Lakshmi Textiles' dealing in inner garments and
textiles. The said concern is registered under the second respondent which is
regularly paying monthly returns under the Tamil Nadu Value Added Tax Act and
the petitioner promptly adjusted the legitimate tax dues to the department from
the Input Tax Credit available on the tax paid on purchases. During the
assessment year 2013- 2014, the petitioner has reported the total and taxable
turnover of Rs.2,02,88,151/- and Rs.15,98,693/- through returns and adjusted
the corresponding tax dues to the respondent Department from the Input Tax
Credit available for the petitioner. It is deemed that the second respondent
has passed the deemed assessment order by accepting the returns under Section
22(2) of the Tamil Nadu Value Added Tax Act.
3. While the situations
stood thus, the second respondent has issued a notice dated 28.07.2015 alleging
that on verification of the department web-site, some of the other end dealers
had not paid tax to the tune of Rs.10,317/- and proposed to reverse the said
Input Tax Credit and also to levy penalty under Section 27(3) of the TNVAT Act.
The entire purchases were duly accounted for in the books of accounts. No
material defect or wrong availment of Input Tax Credit as alleged by the second
respondent in the above-said notice. Hence, the petitioner filed reply dated
04.08.2015 with the second respondent explaining the real facts with regard to
the alleged defect along with the copies of the purchase bills/tax invoices of
the said dealers showing the collection of taxes from the petitioner and the
copies of the monthly returns filed.
4. Despite the said fact,
the second respondent has passed the impugned assessment order dated 10.08.2015
by confirming his proposal vide notice dated 28.07.2015. Though valid
objections have been filed by way of explanation, the respondent has simply
rejected the same by passing the impugned order. Further, the second respondent
himself has admitted that the claim of Input Tax Credit is covered by valid tax
invoices as required under Rule 10(2) of the Tamil Nadu Value Added Tax Rules
and when it is so, he cannot compel the petitioner to produce annexure II of
the other end dealer which can be easily verified by him through the department
internet website.
5. To back his averment,
the learned counsel for the petitioner relied on the following judgment of this
Court, which are as follows:-
(i)Althaf Shoes (P) Ltd Vs
Assistant Commissioner (CT) reported in 50 VST
179.
(ii)Sri Vinayaga Agencies
Vs. The Assistant Commissioner (Ct), Chennai and another, reported in (2013) 60
VST 283 (Mad).
(iii)Infiniti Wholesale
Ltd. Vs. The Assistant Commissioner (CT) in W.P.No.9265 of 2013 dated
06.11.2014.
6. In all the cases cited
supra, an identical prayer sought for by the petitioner in this Writ Petition
has been entertained and the same has also been allowed by this Court. If at
all there is non-payment of tax collected by the other end dealer, the
petitioner cannot be made liable for the same. Hence, the impugned order is
liable to be set aside.
6. The learned Government
Advocate submitted that though the petitioner firm has properly reported the
sales turnover in annexure-I and bill copies, however, the petitioner firm has
not produced the other end annexure-II as required by the Department. Further,
as per Section 17 of the Tamil Nadu Value Added Tax, the burden of proof lies
on the petitioner firm. That apart, the petitioner has not preferred an appeal
before the Appellate Deputy Commissioner, Tirunelveli and therefore, the
petitioner firm is not entitled to avail the tax. Therefore, this Writ Petition
is liable to be dismissed.
7. I heard the submissions
made on either side and perused the materials available on record.
8. A perusal of the records
would show that at the time of purchasing the goods, admittedly, the petitioner
has paid the tax to the seller, which is not under dispute. The reason assigned
in the impugned order is that the petitioner firm is denied Input Tax Credit
just because the dealer/seller has failed to report the same before the
respondents. The reason adduced by the respondent is unacceptable for the
reason that when admittedly the petitioner firm has paid the tax, he cannot be
made liable for the failure on the part of the seller to report the same to the
respondent. Therefore, the judgment relied upon by the petitioner cited supra
is squarely applicable to the case on hand. In the case of Sri Vinayaga
Agencies Vs. The Assistant Commissioner (Ct), Chennai and another, reported in
(2013) 60 VST 283 (Mad), in paragraph No.9, it has been held as follows:-
?9.Sub-Section(16) of Section 19 states that the Input Tax Credit availed is
provisional. It, however, does not empower the authority to revoke the input
tax credit availed on a plea that the selling dealer has not paid the tax. It
only relates to incorrect, incomplete or improper claim of Input Tax Credit by
the dealer. It is not so in these cases. In the present case, the
petitioner-dealer, admittedly, has paid the tax to the selling dealer and
claimed Input Tax Credit and that was accepted at the time when the self-
assessment was made. Even the pre-revision notices and the orders under
challenge fairly state that the petitioner-dealer had paid tax to the dealer.
It is, therefore, for the department to proceed against the selling dealer for
recovery of tax in the manner known to law. The provision under which the
present has been initiated, namely, invoking sub-section (16) of Section 19,
does not appear to be correct on the admitted facts as above. All the revision
orders revising the Input Tax Credit on the admitted case of tax having been
paid to the selling dealer, therefore, are found to be totally incorrect,
erroneous and contrary to the provisions of the TNVAT Act and Rules. As a
result, all the orders are liable to be set aside.?
9. In view of the dictum
laid down by this Court, following the orders of this Court, this Writ Petition
is also liable to be allowed. Accordingly, the Writ Petition is allowed. No
costs. Consequently, connected miscellaneous petition is closed.
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