VAT ITC availed is Only Provisional until Dealer Produces Proof for ‘Transaction of Sale’: Madras HC directs Dealer to Submit Proof [Read Order]

The Madras High Court, in its recent order reiterated the observation in the case Sahyadri Industries Ltd,where it was held that the Input Tax Credit ( ITC ) availed under Value Added Tax ( VAT ) is only provisional until the dealer produces proof for the ‘Transaction of Sale’.

JusticeSenthil Ramamoorthy said that under Section 17(2) of the TNVAT Act, the burden of proof lies on the purchasing dealer to establish that a valid sale transaction had in fact occurred.

The court referred the case of State Tax Officer v. M/s. Arunachala Impex Private Limited in the present case. In this referred matter, the court followed the decision of Sahyadri Industries Ltd. v. State of Tamil Nadu, 2023.

The petition was filed by Victoria Steel Enterprises Limited, challenging notices issued by the Assistant Commissioner (CT) proposing reversal of ITC for the assessment years 2011-14.

In the decision of Sahyadri Industries Ltd, the court held that “it was incumbent on the part of a registered dealer like petitioner-appellants availing input tax credit to prove that indeed a transaction of “sale” had taken place. They should not only preserve but also produce collateral evidence in the form of transport documents, such lorry receipts or consignment note, etc.”

Until the burden of proof is properly discharged, the credit availed has to be held to be provisional under the scheme of Section 19(16) of the T.N. Vat Act, 2006. Also, the officer can revoke the credit if a dealer fails to discharge the burden, said the court.

The current bench, applying the decision of the above case, disposed of the writ petitions directing petitioner to submit a detailed reply along with all relevant supporting documents within 30 days.

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