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2016 Supreme(Guj) 857
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Harsha Devani and G.R. Udhwani, JJ.
Mahadev Enterprise - Appellants
Vs.
State of Gujarat and Ors. - Respondents
Special Civil Application No. 90 of 2016
Decided On : 05-05-2016
Advocate Appeared:
For the Appellant :Uchit N. Sheth, Advocate
For the Respondents: Maithili Mehta, Assistant Government Pleader
The main legal point established in the judgment is that input tax credit cannot be denied without evidence of non-genuine transactions and that revisional proceedings cannot be initiated based on extraneous material.
Headnote:
Tax Credit - Gujarat Value Added Tax - Section 11(5)(mmmm) of the GVAT Act - The court held that 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. The initiation of revisional proceedings was based upon material extraneous to the record of the officer appointed under section 16 of the Act, and the impugned order passed by the Tribunal was quashed and set aside.
Fact of the Case:
The petitioner, a proprietary concern engaged in trading, challenged the order confirming additional tax liability and interest raised by the revisional authority under the Gujarat Value Added Tax Act, 2003 (GVAT Act). The dispute arose from the disallowance of input tax credit on purchases made from a vendor whose registration certificate had been cancelled with retrospective effect.
Finding of the Court:
The court found that the initiation of revisional proceedings was without jurisdiction as it was based on extraneous material not forming part of the assessment record. The court also held that input tax credit cannot be denied without evidence of non-genuine transactions.
Issues: The issues involved the denial of input tax credit based on the cancellation of the vendor's registration certificate and the jurisdiction of the revisional authority to initiate proceedings based on extraneous material.
Ratio Decidendi: The court ruled that input tax credit cannot be denied without evidence of non-genuine transactions and that the initiation of revisional proceedings based on extraneous material was without jurisdiction.
Final Decision: The impugned order confirming additional tax liability and interest was quashed and set aside, and the petitioner was held entitled to input tax credit on purchases made from the vendor.
Harsha Devani, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the order dated 15th July, 2015 passed by the Gujarat Value Added Tax Tribunal (hereinafter referred to as the "Tribunal") whereby the Tribunal has confirmed the additional liability raised by the revisional authority as well as the interest thereon.
2. The petitioner, a proprietary concern, is engaged in the business of trading in edible oil and oilseeds and is registered under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the "GVAT Act") as well as under the Central Sales Tax Act, 1956. It is the case of the petitioner that if it purchased goods from registered dealers of the State of Gujarat on 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/s. Om Incorporation had been cancelled only after the revision proceedings were proposed to be initiated against the petitioner. The petitioner, therefore, filed an application under the Right to Information Act, 2005 (hereinafter referred to as the "RTI Act") requesting for a copy of the order cancelling the registration of M/s. Om Incorporation as well as a copy of the assessment order passed in the case of M/s. Om Incorporation for the year 2006-07. Pursuant to such application, the petitioner was provided with copies of the order sought for by it. It is the case of the petitioner that from the order cancelling registration of M/s. Om Incorporation, it is clear that the registration had been cancelled on 1st July, 2010 because of non-filing of returns by the said dealer. Moreover, the registration had been cancelled only from 1st January, 2007 even though the said dealer was holding registration from 28th April, 2002. Also, on the website of the Commercial Tax Department, the effective date of cancellation of registration was being shown as 1st January, 2007.
2.4 While no proceedings were conducted pursuant to the above notice, on 7th January, 2013, another officer being the Deputy Commissioner of Commercial Tax, Audit Division-7, Rajkot, issued a revision notice in Form 503 on the same ground, that is, on the ground that the registration certificate of M/s. Om Incorporation had been cancelled with retrospective effect. In response thereto, the petitioner gave a written reply dated 9th February, 2013, enclosing therewith a copy of the registration cancellation order of M/s. Om Incorporation. It was contended by the petitioner that the registration certificate of the vendor had been cancelled much after the date of the transactions and hence, input tax credit could not be disallowed in view of the provisions of section 11(5)(mmmm) of the GVAT Act. During the pendency of the revision proceedings, the petitioner filed another application under the RTI Act to inquire whether M/s. Om Incorporation had disclosed sales made to t
