IMPORTANT POINT
The claim of Input Tax Credit cannot be sustained when the selling dealer has not paid the tax to the Government despite collecting it from the purchasing dealer.

JUDGMENT :

K. VINOD CHANDRAN, J.

1. The issue raised in the above writ petition is as to the sustainable claim of Input Tax Credit, when it has been proved that the purchaser, a registered dealer has satisfied the tax liability to the selling dealer, another registered dealer, evidenced by a tax invoice; even when the selling dealer does not pay the said tax to the Government after collecting it from the purchaser. Whether the purchasing dealer can be denied Input Tax Credit evidenced by the invoice and is not the State obliged to take proceedings against the selling dealer, who defaulted payment of collected tax to the State; for which the statute provides ample scope, is the question raised.

2. The question unfortunately is raised against an assessment order on which there is a statutory appeal provided. The assessment order is dated 24/25.05.2022 and as per Section 107 of the Bihar Goods and Services Tax Act, 2017 (for brevity “BGST Act”) an appeal has to be filed within three months and with sufficient cause shown for the delay occasioned, within a further period of one month. It is trite that an appeal would not lie after the specific period provided for delay condonation. Hence, an appeal ought to have been filed either as on 24.08.2022 or with a delay condonation application within 24.09.2022. Admittedly, no appeal has been filed and the petitioner has filed the above writ petition long after the period of appeal has expired. Be that as it may, we proceed to consider the issue raised, since it falls for interpretation of the provision enabling Input Tax Credit under the BGST Act.

3. Smt. Archana Sinha, learned counsel appearing for the petitioner points out that the purchases were made after making payments through bank accounts. Invoices were issued by the selling dealer which is also produced as Annexure-1 series. Annexure-1 series shows the invoice issued by the selling dealer, evidencing the payment of the value of the goods along with the tax, by the purchasing dealer through bank account and the movement of the goods purchased. Obviously, the selling dealer has not paid up the tax liability, to the State, which stood satisfied by the purchasing dealer and collected by the selling dealer. The underlying object of Input Tax Credit regime brought in, is to avoid the cascading effect of tax and this would be totally frustrated if the department officials attempt recovery of tax from the purchasing dealer, which tax liability has already been satisfied by payment of the tax component, to the selling dealer. The recovery now sought has the character of a double taxation and it should be the department who proceeds against the selling dealer to recover the collected amount of tax; which if not paid after collection, entails penalties under the tax enactment. Learned counsel for the petitioner also relied on two decisions of learned Single Judges of the Madras High Court. Sri Vinayaga Agencies vs. The Assistant Commissioner (CT) and Another in WP Nos. 2036 to 2038 of 2013 dated 29.01.2013 and WP (MD) No. 2127 of 2021 and connected cases; M/s D.Y. Beathel Enterprises vs. The State Tax Officer (Data Cell) dated 24.02.2021. It is argued that the reasoning squarely applies in the above case.

4. The Government Advocate, however, relies on Section 16 of the BGST Act and argues that the Input Tax Credit is tied to certain conditions stipulated under the provision; non-fulfilment of which would result in denial of such credit. On facts it is submitted that the petitioner did not respond to the show cause notice and the reminder served and it was hence there was an ex-parte order passed. It is pointed out that ALD. Automotive Pvt. Ltd. vs. The Commercial Tax Officer and Others in Civil Appeal Nos. 10412-10413 of 2018 held that Input Tax Credit is in the nature of a benefit/concession and not a right extended to the dealer under the statutory scheme, which benefit can accrue to the assessee only as per the scheme of the statute. Godrej