VAT ITC Denied Due to Supplier's Registration Cancellation: Madras HC Remits Case for Reassessment [Read Order]
The court held that ITC claims could not be allowed solely based on the supplier's registration status at the time of purchase if the supplier later proved to be non-compliant or fictitious
Madras HC – Madras High Court – VAT ITC Denied – VAT – ITC – input tax credit – Value Added Tax – taxscan
Madras HC – Madras High Court – VAT ITC Denied – VAT – ITC – input tax credit – Value Added Tax – taxscan
In a recent ruling, the Madras High Court remanded the case back to the Assessing Officer for reassessment concerning the denial of input tax credit (ITC) under VAT ( Value Added Tax ) due to the cancellation of the supplier’s registration.
It is to be noted that M/s. Quality Industries was one of the suppliers of the respondent, M/s. Arunachala Impex Pvt. Ltd. The issue in this case began when a reversal notice was issued by the Tamil Nadu VAT authorities, stating that M/s Quality Industries had failed to file returns and pay taxes. The authorities were of the opinion that the VAT ITC claimed by the petitioner amounting to Rs. 98,30,251 cannot be accepted due to the cancellation of their supplier.
The respondent contended that at the time of purchase, the supplier's registration was valid, and they had made all required payments. However, the authorities found the company's documentation insufficient to establish the legitimacy of the transactions or the supplier's tax compliance.
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In this case, the State Tax Officer has appealed against the order of the single bench of the Madras High Court, which ruled in favor of the respondent.
The single bench relied on several judgments such as State of Maharashtra v Suresh Trading Company (1997) 11 SCC 378, and upheld the ITC claims of buyers when suppliers' registrations were valid during transactions. The judgment set aside the reversal order, stating that the denial of ITC based on the subsequent cancellation of the supplier’s registration was unjustified.
One of the issues raised by the department was whether the buyer had sufficiently proven the authenticity of the transactions. The bench by relying on the judgment in Sahyadri Industries Ltd. v. State of Tamil Nadu, opined that it was the buyer's responsibility to provide collateral evidence, such as transport documents and payment records, to substantiate claims.
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The court held that ITC claims could not be allowed solely based on the supplier's registration status at the time of purchase if the supplier later proved to be non-compliant or fictitious.
The court remanded the case back to the assessing officer and allowed the respondent to furnish additional evidence to substantiate their ITC claim.
To Read the full text of the Order CLICK HERE
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