Depart. to proceed against selling dealer for recovery of tax, HC

Facts in Brief:

1. These Writ petitions are filed under Article 226 of the Constitution of India praying for a Writ of Certiorarified Mandamus, alling for the records on the file of the respondent in TIN 33950906422/ 2012-2013 and 2011-12 respectively dated 22.5.2015 and quash the same as illegal contrary to the provisions of the Act and law laid down by this High Court.

HC held as under,

2. The petitioner has filed two objections. The first objection with respect to both assessment years dated 24.09.2014 were followed by detailed objections on 16.03.2015, taking a specific ground that it is not open to the respondent to reverse the claim of ITC on the ground that sellers registration certificates were cancelled. The petitioner has also substantiated its claim that they have effected purchases from registered dealers in the regular course of business, for which the registration addresses are also given, which are as under:-

3. When the purchases of goods from the above dealers were duly entered and reflected in the accounts and monthly returns filed, giving details of purchasers including the registration particulars, commodity code, value, rate of tax, amount of VAT and category of goods in the Annexure I of the said returns, the respondent, in the impugned orders, have not mentioned anywhere that the purchases of goods from the above dealers are doubtful or incorrect. That apart, the foundation upon which the respondent has passed the impugned orders clearly shows the reason that the certificates of registration of the dealers have been cancelled, reversal of ITC has to be effected against the petitioner. The said approach adopted by the Assessing Officer, in my considered view, is contrary to the settled legal position, as laid down by this Court in Sri Vinayaga Agencies vs. Assistant Commissioner (CT), Vadapalani I Assessment Circle,Chennai and another reported in M/S.Rinku Steel Industries vs The Assistant Commissioner(Ct) on 19 June, 2015 [2013] 60 VST 283 (Mad)., wherein, it is held as follows:-

"Sub-section (16) of Section 19(1) states that input-tax credit availed of is provisional. It, however, does not empower the authority to revoke the input tax credit availed of on a plea that the selling dealer has not paid the tax. It only relates to incorrect, incomplete or improper claim of input tax credit by the dealer. It is not so in these cases. In the present case, the petitioner-dealer, admittedly, had paid the tax to the selling dealer and claimed input tax credit and that was accepted at the time when the self assessment was made. Even the pre-revision notices and the orders under challenge fairly state that the petitioner-dealer had paid tax to the dealer. It is, therefore, for the Department to proceed against the selling dealer for recovery of tax in the manner known to law. The provision under which the present action has been initiated, namely, invoking sub-section (16) of section 19, does not appear to be correct on the admitted facts as above. All the revision orders revising the input tax credit on the admitted case of tax having been paid to the selling dealer, therefore, are found to be totally incorrect, erroneous and contrary to the provisions of the TNVAT Act and Rules. As a result, all the orders are liable to be set aside".

4. In the light of the above, the impugned orders are liable to be set aside and accordingly, the same are set aside. The writ petitions are allowed. However, it is open to the respondent to proceed against the dealers, if so advised. No costs. Connected miscellaneous petitions are closed. 

Case Reference - M/S.Rinku Steel Industries vs The Assistant Commissioner(Ct).