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2015 (4) TMI 779 - GUJARAT HIGH COURT

2015 (4) TMI 779 - GUJARAT HIGH COURT - TMI - Adjustment of carried forward input tax credit - Whether the learned Tribunal has committed any error in declaring and holding that an assessee/dealer is entitled to the Input Tax Credit adjustment against its output tax liability under the VAT Act under the current year under consideration and whether the learned Tribunal has committed any error in quashing and setting aside the order passed by the Assessing Officer as well as the first Appellate Au .....

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Input Tax Credit admissible to an assessee/dealer is determined. Once on assessment it is found that dealer is entitled to a particular Input Tax Credit, in that case, Rule 18 of the Rules, 2006 which provides for calculation of tax would come into play. On conjoint reading of section 11 of the VAT Act read with Rule 18 of the Rules, 2006, a dealer is entitled to adjust its output tax liability against its admissible Input Tax Credit in the current year under consideration.

When on a .....

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ssessment or even audit assessment or even reassessment, by that itself is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit against its output tax liability of VAT Act of the current year under consideration. - assessee/dealer is entitled to adjust the Input Tax Credit against its output tax liability of the VAT Act of the current year under consideration and after adjusting the same the liability of interest on the balance amount due is required to be considered. .....

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K Kaji, Adv. & Ms Vaibhavi K Parikh, Adv. JUDGMENT (Per : Honourable Mr. Justice M. R. Shah) 1.0 As common question of law and facts arise in this group of Tax Appeals, they are disposed of by this common judgment and order. 2.0 In Tax Appeal No.857/2013, the following substantial question of law arises. "Whether the tribunal is right in holding that the opponent is entitled to adjustment of input tax credit towards the output tax liability in the Assessment Year in question, though in .....

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the Hon'ble Tribunal erred in permitting adjustment of tax demanded as difference of assessed tax and returned tax from carried forward of input tax credit of ₹ 70,872/of 200607. The Tribunal erred in interpreting Sec. 13, R/w Rule 18 as it does not permit such adjustment. (C) Whether the Tribunal is right in permitting adjustment of tax due on assessment against carried forward input tax credit?" In Tax Appeal No.1282/2014, the following substantial questions of law arise. " .....

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wing substantial questions of law arise. "(1) Whether Tribunal erred in deleting levy of interest merely because assessee had excess input credit adjustable against tax demand? (2) Whether Tribunal erred in not directing that for computing interest liability for subsequent year the assessee shall not enjoy benefit of such input tax credit? (3) Whether Tribunal erred in deleting levy of penalty?" In Tax Appeal No.1319/2014, the following substantial questions of law arise. "[1] Whe .....

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y and the levy of penalty are concerned, now the aforesaid two questions/issues are not res integra in view of the decision of the Division Bench of this Court in the case of State of Gujarat vs. Dashmesh Hydraulic Machinery rendered in Tax Appeal No.28/2008 and other allied Tax Appeals. In the case of Dashmesh Hydraulic Machinery (Supra), the Division Bench of this Court had considered the observations made by another Division Bench in the judgment in Tax Appeal No.1284/2014 and after consideri .....

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( the Tribunal for short) proposing following questions for our consideration: "(1) Whether Tribunal erred in deleting levy of interest and penalty merely because assessee had excess input credit adjustable against tax demand? (2) Any other substantial question of law as may be deemed fit by the Hon'ble High Court may kindly be framed." 2. From the record, it emerges that the Revenue contests the deletion of interest and penalty by the Tribunal in case of the respondent - assessee. .....

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t the additional tax liability, which aroused due to disallowance of ITC. We therefore, remove entire interest and penalty. We pass following order." 3. From the observation of the Tribunal, it appears that though the assessing officer had raised additional tax demand of ₹ 76,010/and imposed interest and penalty on such basis, the Tribunal was of the opinion that the assessee had sufficient Input Tax Credit and those tax credits could have been adjusted against the assessee s addition .....

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ssary for imposing penalty. 4. When the Tribunal found on facts that in view of availability of input tax credit as against the assessed additional tax, there was no intention on part of the assessee to avoid payment of taxes, no question of law arises. Tax appeal is dismissed. Civil Application also dismissed." 7. Same situation arises in the present matters inasmuch as the demand is confirmed and the adjustment is confirmed under interest and penalty imposed are deleted. 8. It is not in d .....

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canvassed". The aforesaid is not disputed by Shri Chintan Dave, learned AGP appearing on behalf of the Revenue. He has fairly conceded that as such now the aforesaid two issues/questions are squarely answered/covered against the Revenue in view of the decision of the Division Bench of this Court in the case of Dashmesh Hydraulic Machinery (Supra). Under the circumstances and for the reasons stated in the judgment and order passed by the Division Bench of this Court in the case of Dashmesh H .....

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liability in the assessment year in question, though in the return submitted by the assessee such Input Tax Credit was carried forward to the return of the next tax period of the subsequent year?" For the sake of convenience the facts in Tax Appeal No.857/2013 are considered as in all other Tax Appeals the learned Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as "Tribunal") has relied upon its earlier decision which is the subject matter of Tax Appeal No.85 .....

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ax Act, 1969 as well as the Central Sales Tax Act and the registration came to be granted with effect from 12.11.2005 only. That the assessee claimed Input Tax Credit of ₹ 8,05,709/in respect of the goods in stock as provided in Section 12 of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as "VAT Act") by filing the Form No.108. It is required to be noted that the goods were partly purchased and sold before the date of registration, while some goods were in stock .....

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ock on 31.03.2006 as claimed in Form No.108. That being aggrieved and dissatisfied with the decision of the Assessing Authority in denying the Input Tax Credit of the goods in stock on 31.03.2006, the assessee approached the Assistant Commissioner of Commercial Tax and represented that as a matter of fact the tax was paid in excess and therefore, the assessee cannot be denied credit as that will amount to double taxation which is contrary to the scheme of the VAT Act. That the learned Assistant .....

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Act relating to purchase made during the year 200607, as per the returns filed by the assessee was in excess of the Input Tax Credit of ₹ 5,24,669/after giving set off to the output tax liability, such excess tax credit was carried forward to the next year 200708 in the returns filed under the VAT Act. It appears that thereafter the Assistant Commissioner of Commercial Tax initiated the audit assessment proceedings against the assessee under Section 34 of the VAT Act. During the course of .....

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ax Credit on the opening stock of goods claimed under Section 12 of the VAT Act was disallowed in the assessment, the Assessing Officer allowed the Input Tax Credit amounting to ₹ 4,55,483/of the tax paid on purchases made during the year under Section 11 of the VAT Act since these purchases were made after effective date of registration. 4.2 However, instead of adjusting the Input Tax Credit against output tax liability of the assessee during the year, the Assessing Officer carried forwar .....

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ues. Moreover, the Assessing Officer also imposed huge penalty at the rate of 200% under Section 12(7) of the VAT Act on the ground of wrongful claim of Input Tax Credit as well as penalty at the rate of 150% under Section 34(12) of the VAT Act. 4.3 Feeling aggrieved and dissatisfied with the assessment order insofar as not adjusting the Input Tax Credit towards the output tax liability of the assessee of the current year and levying interest and imposing penalty under Sections 12(8) and 34(12) .....

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iability also came to be rejected on the ground that the assessee/dealer has failed to purchase evidence in support of such claim. That the learned Appellate Authority also confirmed the penalty imposed under the VAT Act. 4.4 Feeling aggrieved and dissatisfied with the order passed by the first Appellate Authority, the assessee/dealer preferred Second Appeal before the learned Tribunal being Second Appeal No.829/2011 and considering the relevant provisions of the VAT Act more particularly sectio .....

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st Appellate Authority whereby he dismissed the said appeal by declaring that the assessee/dealer is entitled to set off the admissible Input Tax Credit against the output tax liability under the VAT Act. The learned Tribunal also set aside the order imposing the penalty under Section 12(7) of the VAT Act as well as section 34(12) of the VAT Act. 4.5 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Tribunal insofar as holding that the assessee is enti .....

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t the learned Tribunal has materially erred in allowing the appeal and quashing and setting aside the order passed by the Assessing Officer as well as the first Appellate Authority. It is submitted that the learned Tribunal has materially erred in holding that the assessee/dealer is entitled to set off admissible Input Tax Credit against the output tax liability under the VAT Act, during the current year. 5.1 It is submitted by Shri Dave, learned AGP that when the assessee/dealer wrongly claimed .....

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the next subsequent year. It is submitted that it is not that the Assessing Officer had denied the Input Tax Credit to the dealer/assessee at all. It is submitted that the learned Assessing Officer only directed to carry forward the Input Tax Credit to the next subsequent year. 5.2 It is further submitted that the learned Tribunal has not properly appreciated the fact that as such the dealer/assessee was within the knowledge of how much Input Tax Credit is available to it. It is submitted that .....

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it assessment of the dealer/assessee took place only on 14.03.2011 and meanwhile the dealer/assessee had already filed its returns for subsequent years, by claiming opening credit balance of ₹ 5,24,669/as claimed by it in its returns. It is submitted that if the Input Tax Credit under Section 11 of the VAT Act is allowed to the dealer in the current year as held, it will affect opening credit balance and thereby it may happen that in same assessment year, issue of time limit may arise. It .....

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ing above submissions, it is requested to allow the present Tax Appeals and quash and set aside the impugned orders passed by the learned Tribunal holding that the assessee/dealer is entitled to set off admissible Input Tax Credit against the output tax liability with respect to the current year under consideration and consequently to restore the order passed by the Assessing Officer. 6.0 All these Tax Appeals are opposed by Shri Uchit Sheth, Shri Manish Kaji and Ms. Vaibhavi Parikh, learned adv .....

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ore particularly section 11 of the VAT Act read with Rule 18 of the Rules, 2006. 6.1 It is submitted that once on assessment/reassessment it is found that the assessee/dealer is entitled to have Input Tax Credit, in that case, considering the provisions of Section 11 of the VAT Act read with Rule 18 of the Rules, 2006, the assessee/dealer is entitled to adjust the said Input Tax Credit against its liability towards its output tax liability under the VAT Act in the current year under consideratio .....

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ed that merely because the dealer/assessee claimed the Input Tax Credit which in the given case may be more than its entitlement under the VAT Act and the Rules, 2006, is no ground to deny to adjust such Input Tax Credit against the output tax liability of the dealer under the current year. It is submitted that as such the declaration / Form No.108 to be submitted by the dealer/assessee claiming Input Tax Credit is always subject to the assessment by the Assessing Officer. It is submitted that i .....

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the actual amount of Input Tax Credit admissible under the VAT Act. It is submitted that the moment on assessment it is held that the dealer/assessee is entitled to a particular Input Tax Credit, thereafter the same is to be adjusted and/or considered in light of the provisions of Section 11 of the VAT Act read with Rule 18 of the Rules, 2006. It is submitted that therefore the learned Tribunal on interpretation of sections 11, 12 of the VAT Act and Rule 18 of the Rules, 2006 has rightly held an .....

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e. 7.0 Heard learned advocates appearing on behalf of respective parties at length. A short question of law which is posed before this Court to be considered in the present Tax Appeals is whether the learned Tribunal has committed any error in declaring and holding that an assessee/dealer is entitled to the Input Tax Credit adjustment against its output tax liability under the VAT Act under the current year under consideration and whether the learned Tribunal has committed any error in quashing .....

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e entitled to claim tax credit equal to the amount of, (i) tax collected from the purchasing dealer by a registered dealer from whom he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period. (ii) ... (iii) ... (b) ... (2) ... to (4) ... (5) Notwithstanding anything contained in this Act, Tax credit shall not be allowed for purchases- (a) ... to (d) ... (dd) made prior to the date of registration. 12. Tax C .....

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n the Commissioner may, after giving the dealer an opportunity of being heard direct him to pay a penalty equal to twice the amount of tax credit so claimed. 13. Net amount of Value Added Tax The net amount of Value Added Tax for a tax period payable shall be determined after the adjustment of tax credit in the manner as may be prescribed." GUJARAT VALUE ADDED TAX RULES, 2006 15. Calculation of Tax Credit u/s.11 15(1) ... 15(2) ... 15(3) A registered dealer shall calculate tax credit as per .....

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der the Central Sales Tax Act (hereinafter called "central sales tax liability") for the said tax paid and the remaining amount of central sales tax shall be payable : or (b) if there is no Central Sales Tax liability or if the central sales tax liability for the said tax period is less than the said negative amount, then no tax under the Act as well as under the Central Act will be payable and the net amount, after adjusting the Central Sales tax liability, shall be carried forward to .....

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dit admissible to an assessee/dealer is determined. Once on assessment it is found that dealer is entitled to a particular Input Tax Credit, in that case, Rule 18 of the Rules, 2006 which provides for calculation of tax would come into play. On conjoint reading of section 11 of the VAT Act read with Rule 18 of the Rules, 2006, a dealer is entitled to adjust its output tax liability against its admissible Input Tax Credit in the current year under consideration. Thereafter and after adjusting the .....

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scheme of the VAT Act and the Rules, 2006 more particularly with respect to the Input Tax Credit. Therefore, merely because while submitting the form and raising the claim of Input Tax Credit, the assessee had claimed more / excess Input Tax Credit than admissible, is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit (which is held to be admissible only after assessment) against its output tax liability under the VAT Act in the current year under consideration. To .....

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/ reassessment, as the case may be, a final amount of Input Tax Credit is assessed and determined. Once on assessment or reassessment, as the case may be, a final amount of Input Tax Credit is assessed and determined, an assessee/dealer is entitled to such Input Tax Credit and on such Input Tax Credit the assessee is entitled to adjust such Input Tax Credit against its output tax liability under the VAT Act of the current year under consideration. Only in a case where the admissible available In .....

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ing that the appellant is entitled to adjustment of admissible Input Tax Credit towards its output tax liability of the current year under consideration, the learned Tribunal has rightly observed and held that the assessee is liable to pay interest only on the dues rising on assessment after adjusting the admissible Input Tax Credit towards its output tax liability. 7.2 So far as the submission by Shri Dave, learned AGP appearing on behalf of the State/Revenue that while submitting the Form No.1 .....

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