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Whether once a claim of Input tax credit stands denied, then Appellate authority must record his satisfaction for reversal of such order in case it was challenged – YES: HC

2019-TIOL-1517-HC-ALL-VAT

IN THE HIGH COURT OF ALLAHABAD

Sales/Trade Tax Revision No. 55 Of 2019

COMMISSIONER COMMERCIAL TAX

Vs

M/s ARHAN ENTERPRISES

Saumitra Dayal Singh, J

Dated: July 04, 2019

Appellant Rep by: Bipin Kumar Pandey
Respondent Rep by: 
Praveen Kumar

VAT – denial of ITC – unregistered dealers

THE assessee company was engaged in trading of iron & steel. A dispute arose during the assessment proceedings with respect to certain purchases made by the assessee from various registered dealers. According to the revenue, the registration certificates of these dealers had been cancelled or they were non-existing in case of certain dealers. In view of that objection, the Input Tax Credit availed by the assessee against the purchases made by these 13 dealers was proposed to be reversed. It also appeared that certain evidence was led by the assessee that either the registration certificates of the selling dealers had been restored or the assessee had made purchases before suspension or cancellation of the registration certificates of those selling dealers. On appeal, the FAA set aside the assessment and remitted the matter to the AO to pass fresh order after considering the material brought on record by the assessee. On further appeal, the Tribunal deleted the RITC made by the AO.

On revision, the HC held that,

Whether once a claim of Input tax credit stands denied, then the Appellate authority must record his satisfaction for reversal of such order in case it was challenged by the aggrieved dealer – YES: HC

++ while it does appear that certain documents in support of the defence set up by the assessee had been brought on record before the AO as also the FAA and which documents, if accepted, may lead to the conclusion of acceptance of ITC at the hands of the assessee, however, from a perusal of the assessment order, it is not clear, whether such documents had been brought on record by the assessee at that stage. The FA has, however, only noted the documents and evidence being brought on record. However, he has also not recorded any positive finding with respect to the same. In fact, he chose to remit the matter to the AO to make a fresh assessment after considering the material brought on record by the assessee;

++ the Tribunal had, on its part, also neither called for any remand report from the AO nor recorded any independent finding as to the evidentiary value of the documents placed on record by the assessee. Merely because certain documents may have been brought on record by the assessee, may not itself be sufficient to grant ITC. Once that claim had been rejected by the AO, the appellate authority was obliged to record a positive finding after due appraisal of the evidence on record. For such appraisal of evidence to arise, it would have been necessary for the Tribunal to have called for a remand report and to have thereafter recorded cogent findings of fact, based on appraisal of such evidence.

Revenue’s revision allowed

JUDGEMENT

Per: Saumitra Dayal Singh:

1. The present revision has been filed by the revenue against the order of the Trade Tax Tribunal, Ghaziabad dated 06.10.2018 in Second Appeal No. 311 of 2018 (for AY 2010-11), by which the Tribunal has allowed the assessee’s appeal and partially deleted the Reverse Input Tax Credit (RITC) made by the assessing officer in the original assessment.

2. The present revision has been filed on the following question of law:

“I. Whether on the facts and circumstances of the case the Commercial Tax Tribunal was legally justified in deciding the appeal on merits especially when the matter was remanded by the Ist Appellate Authority to make enquiries with regard to evidences submitted for the first time before Ist Appellate Authority?”

3. Briefly, during the assessment in question, the assessee was engaged in the trading in iron and steel. A dispute arose during the assessment proceedings with respect to certain purchases made by the assessee from various registered dealers, namely S/Shri Garg Steel, Ghaziabad; Paras Sales Corporation, Mahroli, Ghaziabad; S.G. Steel, Ghaziabad; Trade Link India, Ghaziabad; Bhanu Traders, Ghaziabad; Pacific Sales Corporation, Ghaziabad; Laxmi Steel Traders, Ghaziabad; Giriraj Steel Traders, Ghaziabad; Jaidurga Enterprises, Ghaziabad; Gopalji Steel, Ghaziabad; Sri Mohan Traders, Ghaziabad; Ramdeo Trading Company, Ghaziabad and; G.P. Trading Company, Ghaziabad. According to the revenue, the registration certificates of these dealers had been cancelled or they were non-existing in case of certain dealers. In view of that objection, the Input Tax Credit (ITC) availed by the assessee against the purchases made by these 13 dealers was proposed to be reversed. It also appears that certain evidence was led by the assessee that either the registration certificates of the selling dealers had been restored or the assessee had made purchases before suspension or cancellation of the registration certificates of those selling dealers. In short, it was sought to be established that the assessee had acted bona fide and that there was no collusion between the assessee and the selling dealers. Even otherwise, it was contended that there was no error in the grant of ITC. The said submission of the assessee did not find favour with the assessing officer who proceeded to pass assessment order (upon remand) on 28.03.2016 and provided for RITC of Rs. 66,02,896/-. Being aggrieved, the assessee went in appeal before the first appellate authority before whom again evidence was led by the assessee to establish that there was no error on its part in claiming the ITC. After considering the arguments, the first appellate authority, by his order dated 16.01.2018, allowed the appeal and set aside the assessment. He remitted the matter to the assessing officer to pass a fresh order after considering the material brought on record by the assessee.

4. The aforesaid order became subject matter of challenge by the assessee before the Tribunal. The Tribunal has accepted the contention advanced by the assessee and deleted the RITC made by the assessing officer. Also, certain other relief have been granted by the Tribunal which are not in dispute in the present revision.

5. Heard Shri B.K. Pandey, learned Standing Counsel for the revenue and Shri Praveen Kumar, learned counsel for the assessee.

6. Learned Standing Counsel for the revenue would submit that the Tribunal has prematurely allowed the assessee’s appeal on merits inasmuch as even if it is assumed to be correct that the assessee had filed certain documents before the assessing officer and, in any case, even if the documents filed before the first appellate authority and the Tribunal are taken into consideration, none of the authorities has recorded a finding that the explanation furnished by the assessee was true and correct. Merely because the assessee had filed a document before the assessing officer, it did not lead to a conclusion of a bona fide explanation being accepted. It was for the assessing officer as also the first appellate authority and the Tribunal to have recorded a finding with respect to the genuineness and truthfulness of the explanation. In fact, the first appellate authority had rightly remitted the matter to the assessing officer to consider the material brought before him (first appellate authority) and to pass fresh order.

7. Shri Praveen Kumar, learned counsel for the assessee, on the other hand, submits that, in the present case, there is sufficient material available on record to establish that all the transactions had been performed by the assessee with dealers who were either registered on the date of transaction being performed or whose registration had been subsequently restored/revised. The fact that registration certificates of certain selling dealers may have been cancelled subsequent to the sale transaction or the fact that they had been suspended for some time would lose relevance or would be irrelevant.

8. Further, it is his submission in absence of any rebuttal made by the revenue, the Tribunal has not erred in granting the benefit of ITC to the assessee.

9. Having heard learned counsel for the parties and having perused the record, while it does appear that certain documents in support of the defence set up by the assessee had been brought on record before the assessing officer as also the first appellate authority and which documents, if accepted, may lead to the conclusion of acceptance of ITC at the hands of the assessee, however, from a perusal of the assessment order, it is not clear, whether such documents had been brought on record by the assessee at that stage. The first appellate authority has, however, only noted the documents and evidence being brought on record. However, he has also not recorded any positive finding with respect to the same. In fact, he chose to remit the matter to the assessing officer to make a fresh assessment after considering the material brought on record by the assessee.

10. The Tribunal had, on its part, also neither called for any remand report from the assessing officer nor recorded any independent finding as to the evidentiary value of the documents placed on record by the assessee.

11. Merely because certain documents may have been brought on record by the assessee, may not itself be sufficient to grant ITC. Once that claim had been rejected by the assessing officer, the appellate authority was obliged to record a positive finding after due appraisal of the evidence on record. For such appraisal of evidence to arise, it would have been necessary for the Tribunal to have called for a remand report and to have thereafter recorded cogent findings of fact, based on appraisal of such evidence.

12. That having not been done, the findings recorded by the Tribunal are clearly erroneous and are premature.

13. In view of such fact, it is also appropriate that the matter be remitted to the first appellate authority to pass a fresh order with respect to the issue of RITC only, as no other issue is disputed in the present case.

14. Accordingly, the question of law is answered in the negative, i.e. in favour of the revenue and against the assessee. The matter is remitted to the first appellate authority to pass an appropriate order, as expeditiously as possible, preferably within a period of four months from the date of production of a certified copy of this order.

15. The revision is accordingly allowed.

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