M/S.Cee Kay Yes Decors vs. The Commercial Tax Officer

Held

The Court held that the impugned order of assessment dated 30.11.2015 is set aside. The Court reasoned that the petitioner, as a purchasing dealer, had paid the tax to the selling dealer and claimed ITC, which was accepted at the time of self-assessment. The Court reiterated the principle from Sri Vinyaga Agencies Vs. Assistant Commissioner (CT) that Section 19(1) of the TNVAT Act entitles an assessee to claim ITC provided tax due on purchases has been paid. The Court emphasized that the liability for non-payment of tax by the selling dealer rests with the selling dealer and cannot be imposed on the purchasing dealer who has demonstrated payment. Furthermore, the Court noted that the assessment order was cryptic and non-speaking, failing to demonstrate application of mind to the petitioner's objections. In light of Circular No.3 of 2019, which directs assessing officers to keep assessments related to data mismatch in abeyance, and the need for a proper reconciliation mechanism, the matter was remanded for denovo decision.

Facts

The petitioner, M/s.Cee Kay Yes Decors, a works contractor, challenged an order dated 30.11.2015 passed by the Commercial Tax Officer, Tallakulam Assessment Circle, Madurai. The order, passed under Section 27 of the Tamil Nadu Value Added Tax Act (TNVAT Act) for the period 2011-2012, reversed Input Tax Credit (ITC) based on a mismatch between the petitioner's reported transactions and data on the Commercial Taxes Department's intranet. The Assessing Authority alleged that purchases were made from dealers whose Registration Certificates (RC) had been cancelled, leading to the reversal of ITC. The petitioner argued that the assessment order was cryptic and lacked application of mind.

Key Issues

1. Whether the reversal of Input Tax Credit (ITC) based on an alleged mismatch of data, without a proper reconciliation mechanism and due opportunity to the assessee, is sustainable under Section 19(1) of the TNVAT Act? The petitioner contended that Section 19(1) of the TNVAT Act entitles an assessee to claim ITC if tax due on purchases has been paid. They argued that the liability for non-payment of tax by the selling dealer cannot be fastened on the purchasing dealer, who has provided proof of payment. They relied on this Court's decisions in 50 VST 179 and 60 VST 283, and W.P.No.9265 of 2013. The petitioner also argued that the impugned order was non-speaking and lacked application of mind. The respondent (Revenue) argued that ITC was reversed because purchases were made from dealers whose RCs were cancelled, indicating a mismatch in data. The judgment does not record specific arguments from the respondent regarding the legal provisions or precedents.