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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Sri P. Sam Koshy, Sri Narsing Rao Nandikonda, JJ
M/S. REACTIVE METALS OF INDIA LIMITED – Appellant
Versus
THE STATE OF A.P. REP. STATE REPRESENTATIVE – Respondent
TAX REVISION CASE NO.27 of 2007
For the Appellants/Petitioners: Ms. Akruti Agarwal, Sri Karthik Ramana Puttamreddy
For the Respondents: Sri Swaroop Oorilla
The dealer may claim input tax credit regardless of the seller's tax payment status, provided initial evidential requirements are satisfied.
Headnote:(A) Telangana Value Added Tax Act, 2005 - Sections 13(2)(a), 16(1) and Rule 20(2)(i) - Input Tax Credit - Entitlement of dealer to claim, even if the seller has not remitted tax - Court found that mere denial by the department without substantiation is insufficient - Claim of sales tax relief based on purchase of machinery allowed. (Paras 26, 27)
(B) Burden of Proof - It lies on the dealer to show eligibility for tax relief - Transferred responsibility does not reside solely with the dealer after the initial proof is provided. (Paras 15, 25)
Facts of the case:
The petitioner sought Sales Tax Credit of Rs.28,98,236/-, which was reduced to Rs.5,13,175/- by the Commercial Tax Officer. The Appellate Deputy Commissioner dismissed the appeal without a proper hearing.
Findings of Court:
The petitioner was entitled to claim Sales Tax Credit for items purchased, as the department failed to substantiate denial under the statutory provisions.
Issues: Eligibility for sales tax credit against provisions and rejection basis by administrative authorities.
Ratio Decidendi: A dealer entitled to sales tax relief even if seller fails to remit tax, provided the dealer initially complies with relevant evidential requirements.
Result: The petitioner's claim was upheld and the appeal was allowed.
| Table of Content |
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| 1. this case involves the appeal against the sales tax appellate tribunal's decision. (Para 1 , 2) |
| 2. petitioner sought a significant tax credit based on stock purchases and claims. (Para 3 , 4 , 5 , 6) |
| 3. arguments regarding denial of credit and obligations of proof were presented. (Para 10 , 11 , 12) |
| 4. court ruled favorably for the petitioner, emphasizing tax credit eligibility. (Para 26 , 27) |
ORDER: (per Hon’ble Sri Justice Narsing Rao Nandikonda)
This Tax Revision Case is preferred by the petitioner under Section 34 of the Telangana Value Added Tax Act, 2005 (for short, ‘the VAT Act, 2005’) against the order, dated 24.04.2007 in T.A.No.459 of 2006 passed by the learned Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad (for short, ‘the Tribunal’).
2. Heard Ms.Akruti Agarwal, learned counsel representing Sri Karthik Ramana Puttamreddy, learned counsel for the petitioner and Sri Swaroop Oorilla, learned Special Government Pleader appearing for the respondent.
3. The petitioner, M/s. Reactive Metals of India Limited is a VAT dealer under the provisions of the VAT Act, 2005. It was also a dealer under the repealed APGST Act. The petitioner is an assessee on the rolls of the Commercial Tax Officer, Basheerbagh. Section 13 (2)(a) read with Rule 37 of the VAT Act, 2005, provides for Sales Tax Credit in respect of stock held in any form in the State (vide Amendment) by Act 339/2006 with effect from 01.04.2006. It is stated that as per the said provisions, the dealer, who is entitled to claim such credit, is required to file an application in Form 115 giving details of the stock purchased during the period from 1st April, 2004 to 31st March 2005 and lying stock as on 31st Mach 2005 together with bills and the amount of tax paid thereon. The petitioner is required to disclose the seller’s name, description of the goods, closing stock, corresponding invoice numbers, date, value of the goods and the rate of APGST paid and the amount claimed for refund. The application has to be filed within ten (10) days from the date of introduction of the VAT Act, 2005 and thereafter the Assessing Authority is required to process the application and sanction it in Form 116. If there was any restriction or deny of credit, the Assessing Authority is required to issue a notice in Form 117 and thereafter, pass a detailed order giving reasons for restriction in Form 126.
4. The petitioner-company applied for Sales Tax Credit as per Section 13 (2)(a) read with Rule 37 of the VAT Act, 2005 and claimed a sum of Rs.28,98,236/-. Basing on the observations made by the Assistant Commissioner (CT), VAT Management Unit, Abids Division, the Commercial Tax Officer, Basheerbagh issued a notice in VAT 117 stating that the claim of the petitioner is restricted to an amount of Rs.5,13,175/- as against Rs.28,98,236/-. It is further stated that the petitioner claimed sales tax relief on the following goods viz., steel, cement and electrical items, which are found in the negative list, for which the amount involved is Rs.7,99,800/-. Further, the inputs used in construction of buildings are held to be not eligible for Sales Tax relief.
5. Pursuant to the said notice, the petitioner submitted objections on 09.09.2005 stating that the restrictions made by the Commercial Tax Officer are illegal and unjust. He further stated that the material used in construction of building i.e., bricks, sand, paints including bore-well and labour charges together constitutes an amount of Rs.20,08,161/-, on which no credit is claimed. Therefore, the petitioner requested to allow the credit of Rs.20,98,436 (+) Rs.85,793/- towards coal and Rs.6,52,842/- towards steel and cement. The Assessing Authority issued rejection proceedings, dated 01.10.2005 in Form VAT 126, without considering the objections, dated 09.09.2005, filed by the petitioner, which reads thus:
“Form VAT 117 issued on 01.09.2005 Assessee filed objections on 09.09.2005. These are not considered. Hence, rejected and
