M/S.Quality Tiles And vs. The Assistant Commissioner(CT)

Held

The Court held that the Writ Petition is maintainable, stating that the mere existence of an alternative remedy does not automatically oust the High Court's jurisdiction under Article 226 of the Constitution of India, and the case should be tested on its facts. Regarding the reversal of input tax credit, the Court found that the petitioner's purchases were supported by proper tax invoices. It was held that the default of the selling dealer in not paying tax cannot lead to the denial of input tax credit to the purchasing dealer, who has fulfilled the parameters by producing tax invoices and filing returns. The Court emphasized that the statute provides machinery for recovery from the seller. The Court further noted that the respondent had not conducted a proper enquiry before passing the impugned order, failing to follow the guidelines laid down in the M/s.JKM Graphics Solution Pvt Ltd judgment. Therefore, the impugned order was set aside, and the matter was remanded to the respondent for fresh consideration after affording the petitioner a sufficient opportunity, including a personal hearing and conducting a thorough enquiry. The issue of penalty under Section 27(3) & 27(4) was implicitly not decided as the matter was remanded.

Facts

The petitioner, M/s. Quality Tiles and Floorings, challenged an order dated 25.05.2018 passed by the Assistant Commissioner (CT), Madurai. This order, passed under Section 22(2) of the TNVAT Act for the year 2013-2014, was a deemed assessment. Subsequently, a notice dated 25.01.2018 proposed revision of assessment and levy of penalty under Sections 27(3) & 27(4) of the TNVAT Act, citing audit discrepancies. The petitioner replied on 27.02.2018. While some proposed defects were dropped, the respondent sustained the proposal for reversal of input tax credit under Section 19(15) of the TNVAT Act, alleging purchases from Tvl. Manish Granites whose registration was cancelled prior to the purchase. The disputed amount is not explicitly stated.

Key Issues

1. Whether the Writ Petition is maintainable despite the existence of an alternative remedy under the TNVAT Act, particularly concerning the challenge to an order passed under Section 22(2) and proposed revision under Section 27(3) & 27(4) of the TNVAT Act? 2. Whether the reversal of input tax credit under Section 19(15) of the TNVAT Act is justified when the petitioner purchased goods supported by proper tax invoices from a dealer whose registration was subsequently cancelled, and whether the petitioner can be held responsible for the selling dealer's failure to remit tax? Petitioner's arguments: The petitioner contended that purchases from Tvl. Manish Granites were covered by proper tax invoices, and input tax credit was claimed based on these invoices, thus not violating Section 19(10)(a) of the TNVAT Act. They argued that the selling dealer's failure to pay taxes should be recovered by the Department from the seller, not by denying credit to the petitioner. Reliance was placed on the judgment in M/s.JKM Graphics Solution Pvt Ltd (99 VST 343). Respondent's arguments: The respondent argued that the Writ Petition was not maintainable as the petitioner had not exhausted the alternative appeal remedy before the Appellate Deputy Commissioner, as provided under the TNVAT Act, and that irregularities were found during an inspection.