Maharashtra Sales Tax Tribunal recently lambasted the sales tax department for cancelling the registration certificates of suppliers with retrospective effect and denying the input tax claim of the assessees under the provisions of the Maharashtra Value Added Tax Act.
The Tribunal, while partly allowing the appeal of M/s Mahalaxmi cotton Ginning Pressing & Oil Industries remanded back the matter to the files of the Assessing Officer to re-consider the IPT claim by giving an opportunity to appellant.
In the instant case, the appellant company filed his return with interest due under section 30(2) and 30(3) amounted to total of Rs. 1,62,73,557/-. The assessing officer had disallowed the claim of ITC against the purchase from the 29 suppliers based on the summary of ITC verification received from Mahavikas. The entire tax dues were set-off against disallowance of input tax credit.
The first appellate authority partly allowed the appeal by reducing the disallowance of set-off and consequently granted a relief in interest amount, which amounted to Rs.1,54,22,255/-.against this order the appellant again contested the same before sales tax tribunal, Maharashtra.
Before the Tribunal, the assessee contended that he had produced all the details before the assessing officer and also requested the AO through a letter to furnish them the documents obtained from those suppliers which form the basis of rejection of se-off. The assessee further argued that majority of suppliers is from out of the state. They come only during the cotton growing season and sell the cotton. The sales tax department had granted them registration and the assessee would make sale through brokers after verifying their registration number and make payment through RTGS.
It further submitted that the appellant operates on a very thin margin and he has to pay vat@4% not deposited by the supplier and incurs loss. He also stated before the court that they filed FIRs on defaulting parties but the department couldn’t take any action on it.
Coming to the effect of retrospective cancellation of registration of the suppliers, the appellant has placed his reliance in Supreme Court decision in an identical issue that resale were disallowed to the appellant as the registration certificate of suppliers was cancelled with retrospective effect.
On the contrary, the Revenue contended that appellant seeks direction from this tribunal that the set-off be disallowed only after exhaustion of all the remedies against the supplier.
The bench comprising President Ashwinikumar Deore and judicial member G.B.Indurkar noted that the present case didn’t raise any question regarding the genuineness of the return filed by assessee. It is a case of mismatch of set-off claimed by appellant and tax dues.
According to the tribunal provision of section 48(5) where the pre-condition for allowing set-off is that the tax has been paid into government treasury. Though the action taken by the department cannot said to be timely. The court recognized the right of cross examination so called hawala dealers and right to get suppliers records to be recognized.
The bench observed that the dealers whose registrations were cancelled by the department was granted with the registration after due verification and enquiry by the department. From the submission of the appellant-assessees, it was evident that most of these dealers are from Madhya Pradesh who comes to Maharashtra during the cotton season. They do business and go away. On subsequent visit to these places, they were not found at the place of business and on the basis of enquiries made in the business premises, the department officials cancelled the registration ab-initio.
Read the full text of the Order below.
