Damson Technologies Pvt. Ltd. Vs Commissioner of Trade & Taxes (Delhi High Court)
Delhi High Court has delivered a significant judgment in Damson Technologies Pvt. Ltd. Vs Commissioner of Trade & Taxes, and a batch of similar cases, overturning default assessment notices for tax, interest, and penalty issued under the Delhi Value Added Tax Act, 2004 (DVAT Act). The core of the ruling addresses the constitutional challenge to Section 9(2)(g) of the DVAT Act, which had allowed authorities to deny Input Tax Credit (ITC) to purchasing dealers if their selling dealer failed to deposit the collected tax.
The court’s common judgment, encompassing cases like W.P.(C) 6093/2017, effectively concludes that denying ITC to bona fide purchasers for the defaults of selling dealers, over whom the purchasers have no control, is legally untenable and violates constitutional principles.
The Legal Challenge and Its Roots
The petitioners challenged Section 9(2)(g) of the DVAT Act, contending it infringed upon Articles 14 (equality before law) and 19(1)(g) (right to carry on trade or business) of the Constitution of India. This contested provision stipulated that ITC would not be granted unless the tax collected by the selling dealer was “actually deposited by the selling dealer with the Government or had been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period.”
