The disputed order and notice requesting the refund of the Input Tax Credit (ITC) with penalty and interest were annulled by the Jharkhand High Court (HC) panel composed of Acting Chief Justice Aparesh Kumar Singh and Justice Deepak Roshan.
It was observed that the department cannot deny the migration of Tax Deduction Source (TDS) under section 44 of the Jharkhand Value Added Tax Act (JVAT).
The petitioner Anvil Cables Pvt. Ltd., who has a manufacturing facility in Jamshedpur, is involved in the manufacture and sale of aluminium cable and conductor, according to the case’s summary facts. Further, petitioner is one of Jharkhand Bijli Vitran Nigam Limited’s principal dealers (JBVNL). Before releasing the petitioner’s payment, the JBVNL used advance recovery to deduct tax in accordance with section 45 of the JVAT Act.
The “Special Provision related to Advance Recovery of Tax on Sales and Supply to Governments and the Other Persons,” which includes the Electricity Board, is covered by Section 45 of the JVAT Act.
For the period of 01.04.2017 to 30.06.2017, the petitioner submitted its quarterly report. The total TDS for the aforementioned period was Rs. 2,59,26,991 according to column 57 of the aforementioned return.
After subtracting the VAT due for the period and making other adjustments, a balance of Rs. 1,24,68,378.36 was automatically filled in for column 61 of the return, which reads, “Excess Input Tax Credit to be C/F to following period.”
The petitioner submitted a statutory form called GST TRAN-1 that drifts Rs. 1,19,41,397 from the VAT regime to the GST regime in order to receive credit for the aforementioned sum. The respondent-Department properly acknowledged the petitioner’s TRAN-1, and the petitioner was given permission to carry forward the amount deducted for TDS in accordance with the JVAT Act.
The bench observed that the opportunity of hearing notice was received after 2 and half years to the petitioner in a revisional proceeding initiated under section 108 of Jharkhand Goods and Service Tax Act (JGST) in which no reason was stated for initiating such proceeding.
The petitioner duly appeared wherein he was informed that pursuant to audit objection (Annexure-13) revisional proceeding has been initiated against the petitioner for wrongly availing the TDS amount in its TRAN-1 not being ITC.
The petitioner filed a written declaration on February 15, 2021, proposing a preliminary objection over audit objections and other grounds.
The Joint Commissioner of State Tax issued the Ex-Parte impugned order rejecting the TRAN-1 and directing the petitioner to refund excess ITC claimed amounting to Rs. 1,19,41,937.86 along with penalty under section 73(9) at 10% and interest at 24%, totaling Rs. 1,60,02,196.69, without taking into consideration the preliminary objection raised by the petitioner and the grounds therein and even without providing any opportunity for hearing.
The issue before the court is that the amount deducted towards TDS under section 44 of the Jharkhand Value Added Tax is a credit of the amount of Value Added Tax which a registered person is entitled to migrate in its electronic credit ledger.
The bench observed that the action of respondent authority denying the migration of TDS amount and consequently, levying interest and penalty thereupon is not sustainable in the eye of law.
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