Case Law Details
Opal Energy Solution Private Ltd. Vs Commercial Tax Officer (Madras High Court)
The Madras High Court considered a writ petition challenging reassessment proceedings initiated under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. The reassessment proposed reversal of Input Tax Credit (ITC) under Section 19(16) on the ground that the petitioner had purchased goods from three dealers whose registrations had subsequently been cancelled.
The petitioner contended that all purchases were genuine and had been made from registered dealers. It was submitted that the dealers’ registrations were active on the dates of purchase, the departmental website reflected their registration status as active, and monthly returns had also been filed by those dealers. The petitioner furnished purchase invoices and argued that its ITC claim could not be denied merely because the registrations of the selling dealers were later cancelled retrospectively.
During the hearing, the Department produced details showing that the registrations of the concerned dealers had indeed been cancelled retrospectively.
The High Court relied on the Supreme Court’s decision in State of Maharashtra v. Suresh Trading Company. The Supreme Court had held that a purchasing dealer is entitled to rely upon the registration certificate of a selling dealer when the registration is valid and current. Any retrospective cancellation may affect the selling dealer, but it cannot adversely affect a purchaser who acted on the basis of a valid registration certificate at the time of the transaction. The Supreme Court had also rejected the contention that purchasers are required to investigate whether circumstances existed that could justify future cancellation of the seller’s registration.
Applying the above principle, the Madras High Court held that the petitioner’s ITC claim could not be denied on the basis of retrospective cancellation of the sellers’ registrations. Accordingly, the impugned assessment order was set aside and the writ petition was allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The issue involved in this writ petition is covered by a Judgment of the Supreme Court in the case of State of Maharashtra vs. Suresh Trading Company [(1998) 109 STC 439 (SC)]. The petitioner had purchased goods from three dealers namely, M/s.Vinesh Trading, Chennai, M/s.Umiya Sales Agency, Chennai and M/s.Krish Corporation, Chennai.
2. Notices proposing re-assessment were issued in terms of Section 27 of the Tamil Nadu Value Added Tax Act, 2006, [in short ‘Act’]. The proposals contained therein was for reversal of Input Tax Credit under Section 19(16) of the Act on the ground that the purchase has been from dealers, whose registration had been cancelled.
3. The petitioner replied to the notice on 14.03.2014 pointing out that the sales were all genuine, the dealers from whom purchases were effected are registered dealers, the status of registration was ‘active’ as on the date of purchase and that the Departmental website also indicated that monthly returns had been filed by the aforesaid dealers. Invoices of purchase were also filed before the officer. Hence, the petitioner contended that the purchases/claim of ITC could not be negated on the basis of the alleged retrospective cancellation of the registration of the dealers.
4. The learned Special Government Pleader has today very fairly produced the details of registration, cancellation which indicate that the registration of the dealers have indeed been cancelled on 30.11.2012, 19.11.2014 and 18.12.2012 retrospectively.
5. The Supreme Court in the case of Suresh Trading Company [Supra] states as follows:
“5. In our view, the High Court was right. A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf of the department that it was the duty of persons dealing with registered dealers to find out whether a stat of facts exists which would justify the cancellation of registration must be rejected. To accept it would be to notify the provisions of the statute which entitle person dealing with registered dealers to act upon the strength of registration certificates.”
6. In the light of the above, the impugned order of assessment is set aside. Accordingly, this writ petition is allowed. No costs. Consequently, connected Miscellaneous Petition is closed.
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