The Himachal Pradesh High Court has set aside the order of Excise & Taxation Commissioner disallowing portion of ITC (Input Tax Credit) and directs refund of balance ITC with 6% interest.
The petitioner M/s Pooja Cotspin Limited, is a registered dealer under the Himachal Pradesh Value Added Tax Act, 2005. The Assessing Authority assessed the petitioner for the year 2010-11 under the VAT Act and also the Central Sales Tax Act, 1956. In the assessment order a total sum of Rs. 1,31,43,515/- was assessed as excess Input Tax Credit (ITC), out of which a sum of Rs. 49,27,694/- was applied towards the payment of due Central Sales Tax and balance of Rs. 82,15,821/- was assessed as excess Input Tax Credit, which was ordered to be carried forward to the next year under Section 12(4) of the VAT Act. Petitioner made a request for a refund of ITC, however, he was directed to file a separate application for refund by the Assessing Officer.
Petitioner submitted the requisite application for refund of excess ITC of Rs. 82,15,821/- before the Commissioner. Commissioner had disallowed the refund of Rs. 17.06,715/- to the petitioner on the ground that the petitioner purchased raw material from selling dealer M/s Samana Industries Ltd. for Rs. 14,17,05,652/- during 2010-11 and said selling dealer had paid tax of Rs. 70,85,283/- on such purchase. M/s Samana Industries Ltd. had claimed deferment to the tune of Rs. 17,06,715/- on VAT payable for Rs. 70,85,283/- and thus, a sum of Rs. 17,06,715/- had not been deposited into the Government Treasury as M/s Samana Industries Ltd. had opted for an upfront payment of tax. Since the amount of Rs. 17,06,715/- had not gone into the Government Treasury, hence, according to the Commissioner, the same was not refundable to the dealer. Thus, a refund of Rs. 65, 09,106/- only was held payable to the petitioner.
Aggrieved against the aforesaid order passed by the Commissioner, the petitioner preferred an appeal before the Tribunal. Tribunal upholds the findings of the Commissioner on the grounds that the petitioner was not entitled to avail the refund against the amount which was not deposited by the selling dealer i.e. M/s Samana Industries. Ltd. by availing the benefit of deferment scheme, and also that refund to the extent of Rs. 17,06,715/- was unverifiable under Section 11(7) (c )(iii) of the Act. Hence, the petitioner filed a revision petition before the honorable High Court.
It was observed by the honorable High Court that the lump-sum payment of composite tax under Section 16(2) of the Act in no way can be equated with the powers of State under Section 62(5) of the Act as both have separate and distinct fields of operation. There cannot be any overlapping between the two provisions, therefore, disallowance of Rs. 17,06,715/- payable from ITC to the petitioner by invoking the provisions either of Section 7 or Section 16(2) of the Act is wholly illegal and against the mandate of law.
From the conjoint reading of Section 7 and Section 16(2) of the Act and Rule 45 of the rules, it is clear that a registered dealer under the Act has the option to pay presumptive lump-sum tax under Section 7 or by way of composition under Section 16(2) in the manner as prescribed in Chapter VI of the Rules. Importantly, by virtue of Rule 45(6), the dealer opting to pay the lump-sum is not liable to issue tax invoices under Section 30. Presumably, the benefit of deferred payment availed by M/s Samana Industries ltd. under notification No. EXN-F(1)-2/04 has been misunderstood and overlapped with the lump-sum payment payable under Section 16(2) of the Act.
Further observed by the honorable High Court that there is no dispute on facts that the selling dealer i.e. M/s Samana Industries Limited had initially availed the benefit of deferred payment subsequently converted to upfront payment of 65% of the payable amount by virtue of provisions of the notification dated 26.07.2005. It was provided in said notification that the upfront payment of 65% of the tax liability for any tax period of the financial year shall be deemed to be payment of the tax due according to the return of the assessee. Therefore, a deficit, if any, of 35% in receipt of tax suffered by the State was its voluntary Act under a scheme formulated by it. Such deficit to the State coffers cannot be made the basis for penalizing the petitioner who was not at fault.
The Division Bench comprising of Justice Sabina and Justice Satyen Vaidya, has held that “the instant revision petition is allowed. Tribunal upholding order dated passed by the Excise & Taxation Commissioner, Himachal Pradesh is set-aside. Petitioner is held entitled to refund of balance Input Tax Credit to the tune of Rs.17,06,715/-. Since the petitioner remained divested from the substantial amount of his business money without his fault, he is held entitled to payment of interest from Respondent No.1 at 6% per annum on the amount of Rs.17,06,715/- from the date it fell due till the date of actual payment”.
M/S POOJA COTSPIN LIMITED, SALLEWALNALAGARH, DISTRICT SOLAN vs STATE OF HIMACHAL PRADESH
CITATION: 2022 TAXSCAN (HC) 222
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