Ms Pooja Cotspin Limited vs. State Of H.P.

Held

The Court held that the denial of ITC amounting to Rs. 17,06,715/- was wrong, illegal, and against the provisions of the VAT Act and its rules. The Court found that the provisions for presumptive tax (Section 7) or lump-sum composition (Section 16(2)) of the Act have distinct fields of operation and cannot be expanded to include deferment of tax notified under Section 62 of the Act. The Court reasoned that the selling dealer, M/s Samana Industries Limited, had availed a deferred payment scheme which was later converted to an upfront payment of 65% of the tax liability. The deficit in tax receipt by the State was a voluntary act under its own scheme and could not be a basis for penalizing the petitioner. The Court concluded that the petitioner was entitled to the refund of the entire ITC amount of Rs. 82,15,821/-. The disallowance of Rs. 17,06,715/- was set aside. The petitioner was also held entitled to interest at 6% per annum on this amount from the date it fell due until actual payment.

Facts

M/s Pooja Cotspin Limited (petitioner) was assessed under the Himachal Pradesh Value Added Tax Act, 2005 (VAT Act) and Central Sales Tax Act, 1956 for the year 2010-11. The assessment order dated 29.09.2011 determined an excess Input Tax Credit (ITC) of Rs. 1,31,43,515/-. While Rs. 49,27,694/- was applied towards Central Sales Tax, Rs. 82,15,821/- was to be carried forward. The petitioner applied for a refund of this amount. The Excise & Taxation Commissioner disallowed Rs. 17,06,715/- from the refund, holding it to be an unverifiable claim as the tax amount had not been deposited into the government treasury by the selling dealer, M/s Samana Industries Limited, due to a deferred payment scheme. The Himachal Pradesh Tax Tribunal affirmed this order. The petitioner filed a revision petition before the High Court.

Key Issues

1. Whether the Tribunal erred in disallowing Input Tax Credit (ITC) in respect of purchases from dealers covered by the Deferment Scheme, 2005, contrary to Sections 11(1), 30(1) and (2), and Section 11(7)(c)(iii) and 11(8) read with Rule 20 of the HP VAT Act, 2005? (Petitioner's contention: The scheme does not disallow ITC. Revenue's contention: Not recorded). 2. Whether the Tribunal erred in allowing the provisions related to presumptive tax and lump-sum composition under Sections 7 and 16(2) of the HP VAT Act, 2005, to include deferment of tax notified under Section 62 of the Act? (Petitioner's contention: These provisions are confined to specific fields and cannot be expanded to include deferment. Revenue's contention: Not recorded). 3. Whether the denial of ITC amounting to Rs. 17,06,715/- under Section 11(7)(c)(iii) was valid, given that this provision has no application to purchases from dealers enjoying deferment and making upfront payment, and no other provision sustains such denial? (Petitioner's contention: The denial is invalid as Section 11(7)(c)(iii) is misapplied and no other provision supports it. Revenue's contention: Not recorded).