Case Law Details
Farwood Industries Limited Vs Assistant Commissioner (CT) (Madras High Court)
The Madras High Court considered whether the tax department was justified in levying tax and denying Input Tax Credit (ITC) by rejecting purchases made by the petitioner on the ground that the vendor’s registration certificate had been cancelled retrospectively. The Court noted that the issue was no longer res integra and was squarely covered by the decision of the Supreme Court in State of Maharashtra v. Suresh Trading Company (1998) 109 STC 439 (SC), wherein it was held that retrospective cancellation of a selling dealer’s registration cannot be used to deny ITC to a purchasing dealer who had transacted when the registration was valid. The Court also observed that in the petitioner’s own earlier cases, it had followed the Supreme Court’s ruling and set aside similar orders rejecting ITC claims. Following the settled legal position, the Court held that the denial of ITC based on retrospective cancellation of the vendor’s registration was unsustainable. Accordingly, the impugned assessment order dated 25.05.2015 was set aside and the writ petition was allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
With the consent of both the parties, the Writ Petition is taken up today and heard through video conferencing.
2. The issue involved in the present Writ Petition is as to whether the department is justified in levying taxes rejecting the sales made by the vendor to the petitioner, retrospective of the cancellation of the registration certificate of the vendor and consequently, denying the Input Tax Credit (ITC) claim. This issue is already covered by a decision of the Hon’ble Supreme Court in the case of State of Maharastra V. Suresh Trading Company reported in 1998 (109) STC 439 (SC) holding that retrospective cancellation in such cases cannot be adopted and thereby, the ITC claim cannot be denied. Following the decision of the Hon’ble Apex Court, this Court in the earlier cases of the petitioner in W.P.35264 of 2015 as well as in W.P.No.35265 of 2015, had adopted the law laid down and thereby set aside the rejection of the ITC claim.
3. In view of the aforesaid decisions, the impugned assessment passed by the respondent dated 25.05.2015 is set aside. Consequently, the Writ Petition stands allowed. Connected Miscellaneous Petition is closed. No costs.
Author Bio
