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TMI Blog2011 (9) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... ons is with regard to denial of input-tax credit by the Assessing Authority on the ground that the dealers from whom the petitioners have purchased goods, have not deposited full tax in the State treasury. The petitioners have not been held entitled for deduction of input tax credit in terms of the provisions of section 8 of the Haryana Value Added Tax Act, 2003 (for brevity, "the Act"). The facts have been extracted from Civil Writ Petition No. 6573 of 2007. The prayer made in these petitions filed under articles 226/227 of the Constitution of India is for issuance of a writ of mandamus for declaring section 8(3) of the Act as ultra vires on the ground that the same is arbitrary and unreasonable/inasmuch as it violates articles 14 and 19(1)(g) of the Constitution and confer excessive powers on the State Government to frame Rules. Further writ of mandamus has been prayed for declaring rule 20(1) and 20(4) of the Haryana Value Added Tax Rules, 2003 (for brevity, "the Rules") to be unreasonable and arbitrary as the same is hit by the rigours of article 14 of the Constitution. The petitioner also seeks a writ in the nature of certiorari for quashing the order dated March 15, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods sold to a dealer being called into question, the purchasing dealer may be called upon to produce before the authority conducting the proceedings, a certificate to be issued by the selling dealer. Such claim can only be allowed if the assessing authority is satisfied about the contents of the certificate. It has further been claimed that the selling dealers have also discharged their tax liability and deposited the tax payable in their hands by deducting the input tax credit available to them. Whenever the petitioner effected purchases from the selling dealers, it has obtained requisite VAT invoices. Forms VAT C4 in terms of rule 20 of the Rules are also obtained by the petitioner with a certificate from the selling dealers that they have paid full amount of tax under the Act on the sales made to the petitioner. The petitioner also filed its returns for different periods showing sales and purchases made by it. The tax was paid on the value addition and input-tax credit has been claimed on the basis of invoices issued by the selling dealers. It is also claimed that annual return in form R2 has also been filed by the petitioner showing summary of all the sales and purchases con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her states that vires of the provisions of the above section 8(3) of the Act and rules 20(1) and 20(4) of the Rules framed under the Act have been challenged by the petitioner to by-pass statutory remedies available to it which could legally be done by availing of the remedy of appeal against the order of assessment as provided under section 33 of the Act. It was further asserted that where a statute provided remedies against the orders of the assessment, the court should refrain from entertaining writ petition against such orders. The respondents further demonstrated that sub-section (3) of section 8 of the Act did not declare certificate in form VAT C4 as a conclusive evidence for input tax and the said provision, however, permits the authority to allow the claim only if the authority was satisfied after making enquiry that the particulars contained in the certificate were true and correct. It has further been mentioned that once the petitioner has come to know about the fact that the tax has not been paid by the selling dealers to the State, the petitioner could claim refund of tax from its selling dealers. As regards the averments of the petitioner that the scheme frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of seven years the assessee has to pay back the tax collected by it during seven years. It is a sort of a loan given by the State to the assessee so that the assessee can use the tax amount to meet its working capital requirement. As stated the liability of the respondent-assessee accrued each year, therefore, there is no question of the Department paying interest at 18 per cent on the tax collected by the assessee during the aforestated period. The tax was collected by the assessee from its customers as an agent for the Government. The assessee is allowed to retain that amount which has accrued to the account of the State Government. . ." It was next contended that no liability could be fastened on the petitioner on account of non-deposit of input tax received by the selling dealer from the purchasing dealer as the term "paid" is to be interpreted to mean "ought to have been paid" as held by the Supreme Court in N. B. Sanjana, Assistant Collector of Central Excise, Bombay v. Elphinstone Spinning and Weaving Mills Co. Ltd. AIR 1971 SC 2039 as under: "This now takes us to the question of proper interpretation to be placed on the expression 'short-levied' and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 'paid' occurring in certain other enactments as in Gursahai Saigal v. Commissioner of Income-tax, Punjab [1963] 48 ITR 1 (SC); [1963] 3 SCR 893 ; AIR 1963 SC 1062 and in Allen v. Thorn Electrical Industries Ltd. [1968] 1 QB 487. . ." According to the learned counsel, the sub-rules (1) and (4) of rule 20 of the Rules, and form VAT C4 are arbitrary prescribing thereunder requiring the purchasing dealer to establish that the contents thereof are true. Meaning thereby, for the assessee to establish that the registered selling dealer has deposited the tax collected from the purchasing dealer is an onerous condition which is not capable of performance as the purchasing dealer has no control over the registered selling dealer or its predecessors. It was next urged that the State has all the machinery at its command to effect recovery from the real defaulter and no person other than the defaulting person can be penalized for somebody else's lapses. Reliance was placed upon the following decisions of various courts, viz., Chunni Lal Parshadi Lal v. Commissioner of Sales Tax, U. P., Lucknow [1986] 62 STC 112 (SC); AIR 1986 SC 1966, Vikas Pipe v. Commissioner of C. Ex., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entualities enumerated therein. If, however, the person who does not get himself registered or is not authorized to collect tax and still collects the tax, he would be liable to pay penalty as provided under section 39 of the Act. The dealer holding a valid certificate of registration who is authorized to collect tax would be required to pay tax in accordance with the provisions of the Act and the Rules framed thereunder. He is also obliged to furnish returns from time to time in terms of section 14 of the Act. He is also required to pay tax in terms of section 14(3) or 14(4) as the case may be, and if he fails to do so, he would be liable to pay penal interest as provided under section 14(6) of the Act. Along with the returns, the dealer is further required to furnish a list of purchases and the sales in forms LP7 and LS9, respectively, to the assessing authority. It would be expedient to reproduce sub-section (3) of section 8 of the Act and sub-rules (1) and (4) of rule 20 of the Rules, which read thus: "S. 8. Determination of input tax.-(1) and (2) ... (3) Where any claim of input tax in respect of any goods sold to a dealer is called into questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have adjusted the input tax paid to M/s..................Name and complete address of the selling dealer) holding TIN............on the goods sold to M/s.................(Name and complete address of the purchasing dealer) holding TIN............as per tax invoice (s) stated below:- Sl. No. Description of goods sold Tax Invoice No. Date Taxable amount Amount of tax Total 1. Total taxable amount : Rs........ 2. Total amount of tax : Rs........ Place....... Date ...... Signature of the selling VAT dealer Name....................... Status......................... Stamp of the dealer (Official seal) Note:- 1. Original copy to be issued by the selling dealer to the purchasing dealer. 2. Duplicate copy to be retained by the selling VAT dealer. 3. Strike out whichever is not applicable." On analysis, the controversy in the petition narrows down to, whether a purchasing dealer can be held liable for input tax which has been recovered from him by the registered selling dealer or its predecessors but not paid into the Government treasury. A VAT dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and meaning." Further, another Constitution Bench of the Supreme Court in Sunil Batra v. Delhi Administration AIR 1978 SC 1675, in para 38, had observed as under: "Constitutional deference to the Legislature and the democratic assumption that people's representatives express the wisdom of the community lead courts into interpretation of statutes which preserves and sustains the validity of the provision. That is to say, courts must, with intelligent imagination, inform themselves of the values of the Constitution and, with functional flexibility, explore the meaning or meanings to adopt that construction which humanely constitutionalizes the statute in question. Plainly stated, we must endeavour to interpret the words in sections 30 and 56 of the Prisons Act and the paragraphs of the prison manual in such manner that while the words belong to the old order, the sense radiates the new order. The luminous guideline in Weems v. United States [1909] 54 L Ed 793 at page 801 sets our sights high: 'Legislation, both statutory and constitutional is enacted, it is true, from an experience of evils, but-its general language should not, therefore, be necessarily confin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive and advance the purpose of the Act. This should be done wherever possible without doing any violence to the language of the provision. A statute has to be read in such a manner so as to do justice to the parties. If it is held that the person who does not deposit or is required to deposit the tax would be put in an advantageous position and whereas the person who has paid the tax would be worse, the interpretation would give result to an absurdity. Such a construction has to be avoided. In other words, the genuineness of the certificate and declaration may be examined by the taxing authority, but onus cannot be put on the assessee to establish the correctness or the truthfulness of the statements recorded therein. The authorities can examine whether the form VAT C4 was bogus and was procured by the dealer in collusion with the selling dealer. The Department is required to allow the claim once proper declaration is furnished and in the event of its falsity, the Department can proceed against the defaulter when the genuineness of the declaration is not in question. However, an exception is carved out in the event where fraud, collusion or connivance is established between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority though that was the finding of the Sales Tax Officer. The question has been reframed for that purpose, i.e., to bring out the real controversy in the background of the facts found in this case." Madras High Court in Govindan and Co.'s case [1975] 35 STC 50 (Mad) was seized of the matter relating to liability of a dealer where benefit of tax was claimed on the ground that the sales effected by the assessee were second sales, it was held that the assessee was not required to show that their sellers had in fact paid tax. What was required for them was to show that the earlier sales were taxable sales and the tax was really payable by their sellers. The conclusion reads thus (page 51 in 35 STC): "Though the order of the Tribunal is one upholding the remit order passed by the Appellate Assistant Commissioner, the learned counsel for the petitioners contends that the direction of the Tribunal that the petitioners are to prove that the twelve dealers from whom they purchased the goods were real persons and that they had in fact paid the tax on the iron and steel is not correct and that it is not the duty of the petitioners to prove that their sellers have i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the law defines the registered dealer and tax-paid goods, the assessee, i.e., purchasing dealer, produced the bill issued by the registered dealer then his burden is discharged and he cannot be held responsible or he cannot be forced to go around from pillar to post to collect the material in order to get the rebate. Rather, it should be on the assessing authority to obtain the necessary particulars if any suspicion arises. In Govindan and Co. v. State of Tamil Nadu [1975] 35 STC 50 (Mad), the question was that whether the goods suffered the tax or not in a single point tax and in that context, it was observed: To claim the benefit of tax on the ground that the sales effected by the assessees are second sales, the assessees need not show that their sellers have in fact paid tax. It is enough for them to show that the earlier sales are taxable sales and that the tax is really payable by their sellers'." Further, the selling-registered dealer who had collected tax from the purchasing-registered dealer acts as an agent for the Government as held in Atul Fasteners Ltd.'s case [2007] 7 VST 278 (SC); [2007] 4 SCC 471. Still further, paid would mean and embrace ..... X X X X Extracts X X X X X X X X Extracts X X X X
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