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Lotus Impex Versus The Commissioner, Department of Trade & Taxes, New Delhi & Another

2016 (2) TMI 813 - DELHI HIGH COURT

Claim of refund of VAT paid on purchases and export of tractors - VAT was not deposited by the seller - Section 38 (3) (a) (i) of the DVAT Act - (VATO) disallowed the input tax credit (ITC) claimed on certain purchases - Held that:- a feeble attempt has been made to justify the initiation of fresh proceedings under Section 59 of the DVAT Act, while offering no satisfactory explanation for allowing the time period for completion of the original default assessment proceedings under Section 32 of t .....

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orders dated 6th October, 2009 and remanding the matters to the VATO for deciding afresh. - Apart from the obvious error committed by the VATO in purporting to review a non-existent order, even the requirements of Section 74 B of the DVAT Act were not satisfied and therefore the powers thereunder could not have been invoked. - Further, the jurisdictional requirement for invoking the extended period of limitation under Section 34 of the DVAT Act is not satisfied. - Revenue directed to ref .....

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14 & 135/2014 1. With the consent of the parties, the writ petitions are taken up for final hearing. 2. The Petitioner is a partnership firm registered with the Department of Trade and Taxes (DTT) under the Delhi Value Added Tax Act 2004 (DVAT Act). It is engaged in the business of export of motor vehicles and tractors in Delhi. The Petitioner filed monthly returns of sales and purchase in Form DVAT 16 under Section 26 of the DVAT Act for the period 1st August, 2008 to 31st August, 2008 on 2 .....

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e period August 1st to 31st 2008, the refund was due by 29th November, 2008 and for the refund claimed for the period 1st to 31st October, 2008 it was due by 28th January, 2009. 5. It is stated that by two separate assessment orders dated 6th October, 2009 (for the periods 1st August to 31st August, 2008 and 1st October, 2008 to 31st October, 2008) the Value Added Tax Officer (VATO) disallowed the input tax credit (ITC) claimed on certain purchases. For the period 1st to 31st August 2008 refund .....

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va Sons, M/s Standard Motor Cycle House found to be bogus by the Enforcement Survey of these dealers. Consequently the purchases from these dealers are bogus. The report of the VAT (Audit) revealed that purchases of these three dealers were neither verified from the records of selling dealers nor from their bank records. Since these dealers did not purchase goods, they could not sell the same. In view of the above, the transactions with these dealers are on paper only and the benefit of input ta .....

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. Input tax credit is governed by Section 9 of the DVAT Act, 2004, and if the same has to be disallowed, it has to be under provisions of the said Section. A plain reading of this Section would reveal that except Section 9 (g), no other sub-section disallows input tax credit on the basis of irregularities committed by the selling dealer. Section 9 (g) has been incorporated in the Act with effect from 1.4.2010 and cannot be implemented for the period of audit with retrospective effect. Orders pas .....

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the above said lines after giving the Objector a reasonable and proper opportunity of being heard." 8. It is stated that the above orders of the OHA was not complied with by the VATO and no fresh orders were passed. The period for passing an order of default assessment in terms of Section 34 of the DVAT Act expired on 31st March 2013. In the absence of any pending proceedings against the Petitioner, the DTT was liable to refund the entire amount of refund as claimed in the return in terms .....

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dards Motor Cycle House. It was stated that neither the books of accounts were provided by the said dealers nor any stock or godown was found at the premises. Accordingly, their respective registrations were cancelled. The claim by the Petitioner in respect of the purchases made from the said dealers for this period was disallowed. Likewise, the refund claimed to extent of ₹ 25,30,534/- for the period 1st to 31st October 2008 was also disallowed for the same reason. 10. It is further state .....

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be attended to. It was subsequently discovered and action was initiated on the same. 12. It is stated that thereafter the dealer was issued a notice under Section 59 (2) of the DVAT Act on 11th July, 2014 to the Petitioner for producing documents as stated therein. The Petitioner appeared before the VATO on 17th July 2014, 25th July 2014 and 31st July 2014 and 8th August 2014. Explaining the reason for initiating the above proceedings, the Respondent has enclosed with the short affidavit, the no .....

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ounsel for the DTT had advised that default assessment should be done for the period 2008-09 in the first instance. 13. What is evident from the short affidavit is that a feeble attempt has been made to justify the initiation of fresh proceedings under Section 59 of the DVAT Act, while offering no satisfactory explanation for allowing the time period for completion of the original default assessment proceedings under Section 32 of the DVAT Act to lapse. The averment in the short affidavit to the .....

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ion 32 of the DVAT Act for the aforementioned periods (1st August to 31st August, 2008 and 1st October, 2008 to 31st October, 2008) on 20th August 2014. For the period 1st to 31st August 2008 the Petitioner's refund claim was disallowed and a fresh tax demand in the sum of ₹ 2,66,349 (including tax, additional tax and interest) was raised. By a separate order of the same date of default assessment of penalty under Section 33 of the DVAT Act for the same period in the sum of ₹ 1,4 .....

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t of tax and penalty by amendments to the present petitions. 16. At the outset, it requires to be noticed that in the fresh orders of default assessment of tax passed on 28th August 2014, the VATO makes no reference to the orders passed by the OHA on 11th August and 21st October 2010 setting aside the original assessment orders dated 6th October, 2009 and remanding the matters to the VATO for deciding afresh. Curiously, in the orders dated 28th August 2014, the VATO states that I am reviewing th .....

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end of the year in which any order passed by him has been served, on his own motion, rectify any mistake apparent on record and shall within the said period or thereafter rectify any such mistake apparent on the record. When the original assessment orders dated 6th October 2009 of the VATO had been already set aside by the OHA by orders dated 11th August and 21st October 2010, there was simply no question of the Commissioner, and much less the VATO exercising powers under Section 74 B of the DV .....

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ction 34 (1) of the DVAT Act, have to record reasons for the belief that tax was not paid "by reason of concealment, omission or failure to disclose fully material particulars" on the part of the Assessee. In the present case, there is no such reason to believe recorded by the Commissioner in the above terms and therefore, the jurisdictional requirement for invoking the extended period of limitation under Section 34 of the DVAT Act is not satisfied. 19. This Court has in H M Industries .....

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either the above two conditions are satisfied in the present case. As far as the Petitioner was concerned, on the date of the aforementioned purchases, the registration of the selling dealers were not cancelled, as pointed out by the OHA in the order dated 11th August 2010. 21. Section 9 (2) (g) of the DVAT Act inserted with effect from 1st April 2010 provides that unless the tax paid by the purchasing dealers has been actually deposited by the selling dealer with the Government or has been lawf .....

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would apply, if at all, only where it is able to be shown that the Petitioner was aware at the time of purchase that the selling dealer was in fact not a registered dealer or was a bogus dealer or had not deposited the tax in question. None of these conditions are fulfilled as far as the present case is concerned. 23. There is an even more fundamental problem with the entire exercise of the Respondent passing orders of default assessment of tax and penalty against the Petitioner. Given the histo .....

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ew to avoiding the legal consequences that the Respondent has resorted to the issuance of a fresh notice under Section 59 of the DVAT Act. What the DTT did by that process was to give itself a second opportunity of assessing the Petitioner to tax for the aforementioned periods (1st August to 31st August, 2008 and 1st October, 2008 to 31st October, 2008) long after the limitation for doing so expired and only, it seems, to deny somehow the refund due to the Petitioner. 24. Therefore, as far as th .....

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