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2013 (2) TMI 80 - DELHI HIGH COURTInput credit claimed - Whether the VAT authorities were justified in disallowing the claim of assessee a purchasing dealer - appellant trades in electrical goods and is a registered dealer under the VAT Act - Held that:- Section 9(1) grants input credit to purchasing dealers & Section 9(2) lists out specific situations where the benefit is denied. The negative list, as it were, is restrictive and is in the nature of a proviso. As a result, this Court is of the opinion that the interpretation placed by the Tribunal that there is statutory authority for granting input credit, only to the extent tax is deposited by the selling dealer, is unsound and contrary to the statute. It is also iniquitous because an onerous burden is placed on the purchasing dealer to keep a vigil over the amounts deposited by the selling dealer. The Court does not see any provision or methodology by which the purchasing dealer can monitor the selling dealer’s behavior, vis-à-vis the latter’s VAT returns. Indeed, Section 28 stipulates confidentiality in such matters. Nor is this Court in agreement with the Tribunal’s opinion that insertion of clause (g) to Section 9(2) is clarificatory. As Section 9(2) is an exception to the general rule granting input tax credit to dealers who qualify for the benefit. The conditions for operation of the exception are well defined. The absence of any condition such as the one spelt out in clause (g) and its addition in 2010 rules out legislative intention of its being a mere clarification of the law which always existed. This Court is further of the opinion that the Bombay High Court judgment in M/S.Mahalaxmi Cotton Ginning [2012 (5) TMI 152 - BOMBAY HIGH COURT] is of no assistance to the revenue, because there, the Court had to deal with the Constitutionality of Section 48(5) of the local VAT law as in the present case, as noticed previously, the VAT Act is silent, Section 9(2) (g) was introduced only with effect from 1-4-2010. This Court is of the opinion that in the absence of any mechanism enabling a purchasing dealer to verify if the selling dealer deposited tax and in the absence of notification that can be ascertained by men in business that a dealer’s registration is cancelled (as has happened in this case) the benefit of input credit, under Section 9(1) cannot be denied. As the cancellation of both selling dealers’ registration occurred after the transactions with the appellant. The VAT authorities observed that the scanty amounts deposited by the selling dealers was incommensurate with the transactions recorded, and straightaway proceeded to hold that they colluded with the appellant. Such a priori conclusions are based on no material, or without inquiry, and accordingly unworthy of acceptance - thus appellant is entitled to the credit claimed after due verification, in accordance with law, within two months from today - in favour of the assessee.
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