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2019 (5) TMI 1529 - HC - VAT and Sales TaxCompliance with the pre-deposit - whether the first appellate authority and the Tribunal were justified in directing the petitioners to make predeposit in terms of the orders passed by them? - HELD THAT:- In the assessment order, the Assessing Officer has, after examining the transaction tree, observed that in case of certain dealers the sales appear to be of Cancelled Tin/Abinitio Cancelled Tin. He has observed that in case of certain dealers who have sold goods to this dealer, there is absence of Tin movement of goods and as they are involved in only billing activities, their registrations have been cancelled abinitio. Input tax credit cannot be taken in respect of purchases made from such dealers. Keeping in view the provisions of section 11(7A) of the GVAT Act, the Assessing Officer has held that as tax had not been paid earlier, the dealer is not entitled to input tax credit on such purchases. The Assessing Officer has worked out the percentage of purchases made by the petitioners from the three parties and has proportionately disallowed the input tax credit on such purchases. Having regard to the fact that at the time when the assessment order was made, the petitioners did not have the copies of the assessment orders made in the case of the vendors, the petitioners did not have any opportunity to prove the genuineness of such transactions. Subsection (7A) of section 11 of the GVAT Act envisages disallowance of tax credit in excess of the amount of tax paid in respect of the same goods. Therefore, to disallow tax credit on any purchase, it has to be established that it is in respect of the very goods purchased by a dealer that the tax has not been paid. Input tax credit cannot be disallowed by working out the percentage of purchases made from a dealer whose registration is cancelled, without first establishing that in respect of the goods purchased by the dealer, the vendor had not paid tax. The court is of the view that the petitioners have made out a strong primafacie case in their favour - the Tribunal and the first appellate authority were not justified in directing payment of huge amount of predeposit for the purpose of admitting the appeal and staying recovery. Petition allowed.
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