M/S Transworld Star vs. Addl. Commissioner Of Commercial Taxes
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Cause title — parties, addresses and appearances
COMMON JUDGMENT Though these appeals were listed separately, they are taken up for consideration together.
These two appeals are filed by the common assessee challenging the order passed by the Revisional Authority by which, the Input Tax Credit (hereinafter referred to as ‘ITC’ for short) claimed by the appellant in respect of certain purchases made from M/s Ashapura Metal Corporation and JAS Modular Systems in the Financial Year 2014-15 were disallowed.
The appellant entered into purchase transactions with M/s Ashapura Metal Corporation and JAS Modular Systems during the Financial Year 2014-15. The purchase invoice was raised by the selling dealer for a sum of Rs.1,58,76,115/- and Rs.2,40,03,328/-, respectively on which, VAT at the rate of 14.5% was charged. The appellant sought ITC in respect of the above purchase. The prescribed authority issued a notice in Form 275 calling
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upon the appellant to produce the books of accounts for inspection. The prescribed authority after considering the books held that the selling dealer raised an invoice charging 14.5% VAT on the bill but remitted only 5% VAT and that there was a mismatch in the turnover and the monthly return of the selling dealer. The prescribed authority therefore reversed the ITC of Rs.10,02,703/- and Rs.16,88,965/- towards the tax on purchases amounting to 9.5% of the differential tax not remitted by the selling dealers and levied interest of Rs.10,48,501/- and Rs.12,44,059/- and penalty of Rs.1,20,517/- and 1,68,898/-, respectively.
Being aggrieved by the order of the prescribed authority, the appellant filed an appeal under Section 62(6) of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ‘the Act’ for short) before the Joint Commissioner of Commercial Tax (henceforth referred to as ‘the First Appellate Authority’ for short). The First Appellate Authority after considering the material
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placed on record and accepting the arguments of the appellant held that the appellant had conducted its business diligently and had discharged its duty and paid the required tax to the selling dealer by crediting it through account payee cheque. Therefore, it held that the appellant cannot be liable for the default of the selling dealers in not crediting the tax to the Government
The Revisional Authority exercised juri iction under Section 64(1) of the Act and took suo-moto cognizance of the issue. The Revisional Authority held that;
“a) Unless the tax collected on sales by the selling dealer is remitted to the Government, the set off tax paid on purchases from such dealers does not qualify for rebate/ITC under law.
b) The transaction between the appellant and the selling dealer is bogus as they were not existing at the time of transaction and;
c) The appellant had not discharged his burden of proof to claim the input tax.”
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Feeling aggrieved by the aforesaid order of the Revisional Authority, the present appeal is filed.
Learned counsel for the appellant contended that it is impossible for the appellant to verify whether that the selling dealer had deposited the tax with the Government. He further contended that the only diligence expected of the appellant was to ascertain whether the selling dealer was registered in accordance with the provisions of the Act and to effect the transactions in accordance with the Act. He submitted that except this, there was no requirement of ensuring that the selling dealer deposits the tax collected with the Government. He also brought to our notice, the order of the Revisional Authority, wherein, it was held “this only leads to conclusion that the selling dealer is issuing tax invoices in favour of the assessee only with an intention to facilitate the assessee to claim ITC without declaring corresponding sales and making payment of tax to the department”. Learned counsel also invited our attention to the finding
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recorded by the revisional authority by relying upon the E-sugam details and holding that the commodity which were of high value, was impossible to be transported through a motor goods carrier or three wheeler passenger vehicle etc. He also held that some of the vehicles found in E-sugam did not carry fitness certificate and some of them were not renewed. The revisional authority also refused to accept the contention of the appellant that payment made through online cheques did not render the transaction genuine.
Learned counsel therefore contended that the order of the revisional authority is wholly without appreciation of the provisions of the Act. He further contended that if the selling dealer has not deposited the tax with the Government, it is for the State to pursue the same against the selling dealer. Learned counsel also brought to our notice the order passed by this Court in STRP.No.82/2018 under similar circumstances.
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Per contra, the learned Government Advocate submitted that the State cannot be expected to give ITC unless the selling dealer is not only shown to be existing and also establishing the legitimacy of such sales attracting liability in the hands of the selling dealer and that such VAT is deposited by the selling dealers with the State, in discharge of the obligations under the provisions of the Act. Learned Government Advocate therefore contended that it is for the appellant to prove that the transactions in question was genuine and the selling dealers were registered dealers with whom the transactions in question was brought about. He however did not dispute that in similar facts this Court has ruled against the State in STRP.No.82/2018. 10. We have given our anxious consideration to the arguments canvassed by the learned counsel for the parties.
It is not in dispute that the selling dealers namely M/s Ashapura Metal Corporation and JAS Modular
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Systems are the dealers registered under the provisions of the Act and there is also no dispute that proper invoices were raised by M/s Ashapura Metal Corporation and JAS Modular Systems in respect of the goods that were sold. It is also not in dispute that the goods that were sold carried VAT at the rate of 14.5%. It is also not in dispute that the amount of invoice value along with tax was paid by the appellant to the selling dealers by an online transfer. It is not the case of the revenue that these dealers are not registered and or that they are not traceable.
It is in fact their case that selling dealers admitted the sale of goods which carried VAT of 5% and had deposited the same. If the selling dealers had failed to disclose their monthly returns about the sales invoices under which they had charged 14.5% VAT to the appellant, it is for the revenue to pursue the selling dealers to recover the shortfall, more particularly, when the selling dealers had received the invoice value along with VAT through an online transfer from the appellant. The claim of
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the revenue that the goods purchased by the appellant could not have been transported by the vehicle is of no consequence, since the transaction is completed and a postmortem cannot now be resorted to verify whether the items were in fact transported by the conveyance or not? In that view of the matter, having regard to the various provisions under the Act which permits the revenue to pursue the selling dealers through various mode to recover the VAT collected including and not limited to initiating criminal proceedings against the selling dealers.
Hence, we do not find any justification in the revisional authority exercising juri iction to upset the findings of the First Appellate Authority. As rightly contended by the learned counsel fro the appellant, a similar question arose for consideration before this Court in STRP No.82/2018 and this Court took a view that due diligence has to be exercised only to the extent of ascertaining whether the selling dealer is registered and to
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ensure that the transactions are brought about in the manner provided under the Act.
In that view of the matter, these appeals are allowed and the impugned order passed by the Revisional Authority dated 25.01.2021 are set aside. Consequently, the appellant is entitled to ITC for the purchases made by it from M/s Ashapura Metal Corporation and JAS Modular Systems during the Financial Year 2014-15. The revenue shall ensure that the same is credited to the account of the appellant within a period of one month from the date of receipt of a certified copy of this judgment. JUDGE JUDGE NR/-
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STA NO. 2/2021 Connected Cases: STA NO. 3/2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU [M/S TRANSWORLD STAR VS. ADDL. COMMISSIONER OF COMMERCIAL TAXES AND ANOTHER]
SCSJ & NRJ: 13.07.2021 (through video conferencing)
ORDER ON 'FOR BEING SPOKEN TO'
Learned counsel for the appellant has brought to the notice of this Court that while allowing the appeals, inadvertently in paragraph-14 there is a omission of mentioning order dated 21.02.2021 which was impugned in the connected appeal i.e., STA No.3/2021. He has also brought to the notice of this Court that in the same paragraph there is a omission of Financial Year 2013-14 which is mentioned in the connected appeal i.e., STA No.3/2021. 2. Resultantly, the order dated 15.06.2021 is modified as under: i) In the third line of paragraph-14, after order dated 25.01.2021, the order dated 21.01.2021 shall be inserted and the same is also set aside.
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ii) Similarly, in the sixth line of paragraph-14, after the Financial Year 2014-15, 2013-14 shall be inserted.
The present order shall be read conjointly with the order dated 15.06.2021. JUDGE JUDGE
TL List No.: 1 Sl No.: 1
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.