Non-Production of Original Tax Invoice from Registered Dealer and Reversal of ITC by VAT Dept not amounts to Double Taxation: Madras HC [Read Order]

In a significant ruling the Madras High Court observed that the non-production of original tax invoice from registered dealer and reversal of input tax credit ( ITC ) by the Value Added Tax ( VAT ) Department does not amount to double taxation.

On 11.03.2009, the third respondent had issued a notice proposing to reverse the Input Tax Credit claimed by the petitioner to the tune of Rs.1,04,673/- for the month of September 2008 on the ground that the registration of the selling dealer was already cancelled.

According to the counsel for the petitioner, as per Section 19(10)(a) of the Tax Value Added Act, 2006, the only condition imposed for claiming input tax credit is to produce the original tax invoice. In the present case, though the petitioner had furnished the original tax invoice issued by the wholesale dealer namely M/s.Smart Trading Company Madurai, the same has not been accepted by the authorities on the ground that the registration of the selling dealer was already cancelled and was not subsisting on the date when the petitioner had effected purchase.

According to the counsel for the writ petitioner, it is impossible to verify about the validity/subsistence of the registration of the selling dealer and further contended that the petitioner is a bonafide purchaser. In case, if the input tax credit is reversed, the tax paid towards the purchase effected by him will result in forfeiting under Section 40 of the Act. As a consequence of the impugned provision, for a single transaction, a tax would be levied at two points which is quite contrary to the object of Tamil Nadu Value Added Tax Act, 2006.

The Additional Government Pleader appearing for the respondents contended that the registration of the whole sale dealer was cancelled on 21.04.2008 itself and the petitioner is said to have purchased from the said whole sale dealer in September 2008. The counsel had further contended that the seller dealer is a non-existing dealer and thereby, assessing authority proposed to reverse the claim of Input Tax Credit to the extent of Rs.1,04,673/- under Section 19(16) of TNVAT Act 2006 by an audit notice dated 11.03.2009.

A Division Bench of Justices D Krishnakumar and R Vijayakumar observed that “Therefore, it is clear that when a registered dealer claims any benefit under Section 19 of TNVAT Act 2006, he has to strictly adhere to the condition laid down in the said section. In the present case, admittedly, the petitioner has not produced the original tax invoice from a registered dealer and therefore, he cannot complaining that the authorities are attempting to reverse the Input Tax Credit in his favour.”

“In fact, the petitioner has effected purchase five months after cancellation of the registration of the selling dealer. Since the registration of the selling dealer had already been cancelled in April 2008, he would not have paid the tax. Therefore, the allegation of the petitioner that the notice issued by the respondent authorities for reversing the Input Tax Credit would amount to double taxation is not legally sustainable” the Court concluded.

To Read the full text of the Order CLICK HERE

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