In M/s.Vijay Galaxy v. CTO, the Madras High Court has held that a claim for input tax credit cannot be denied by the department by mere ground that the selling dealer has not paid tax.
Justice T.S Sivagnanam, allowed a writ petition against the order of the Sales Tax department stating that the petitioner is not eligible for input tax credit under section 19(3) of the Tamil Nadu Value Added Tax Act by observing that the selling dealer has not paid the tax.
The bench noticed the decision in Althaf Shoes (P) Ltd. vs. Assistant Commissioner (CT), wherein the Court held that so long as the purchasing dealer had complied with the requirements as given under rule 10(2), the claim of the purchasing dealer could not be denied by the Department in view of Rule 10 of the Tamil Nadu Value Added Tax Rules, 2007 r/w Section 19(1) of the Tamil Nadu Value Added Tax Act.
The bench further relied on a department circular wherein it was pointed out that so long as the vendor was found to be a registered dealer on the files of the Department, the claim of the dealer for refund could not be rejected nor delayed; the mere fact that the Department had not made an assessment on the dealer’s vendor, per se, could not stand in the way of the assessing officer considering the claim of the dealer under Section 19 of the Act.
Further, as per section 17 of the Act, the burden on the purchasing dealer rested to the extent of showing that he was not liable to tax under the Act and read in the context of the fact that the petitioner-dealer therein had given his sellers’ TIN number and had also produced the invoices evidencing the purchase of materials paying tax, the Department could not successfully canvass its claim that the petitioner therein was not entitled to have the refund.
Before concluding, the bench also noted that in the above case, the petitioner’s vendor were all registered dealers on the files of the Department and that the petitioner therein had also given the TIN number of those vendors. Thus, it was observed that when such particulars were available, it was for the Department to take necessary action against the vendors, who had not remitted the tax collected by them to the State, and without taking recourse to that, the Department could not deny the claim of the petitioner.
Read the full text of the Order below.
