Aparici Ceramica Vs Commissioner of Trade & Taxes (Delhi High Court)
Delhi High Court has declared Section 9(2)(g) of the Delhi Value Added Tax Act, 2004 (DVAT Act), unconstitutional, stating it infringes upon Articles 14 (Equality before Law) and 19(1)(g) (Right to practice any profession, or to carry on any occupation, trade or business) of the Constitution of India. This decision, issued in a batch of writ petitions including Aparici Ceramica Vs Commissioner of Trade & Taxes, sets aside notices for default assessment of tax, interest, and penalty issued under Sections 32 and 33 of the DVAT Act, dated September 8, 2015, and other corresponding dates.
The primary contention in these petitions was the validity of Section 9(2)(g), which effectively denied Input Tax Credit (ITC) to a purchasing dealer if the selling dealer failed to deposit the collected tax with the government or lawfully adjust it against their output tax liability.
Factual Background of the Cases
To illustrate the implications of the disputed provision, the court considered two representative cases:
Suvasini Charitable Trust (SCT): SCT, a charitable organization registered under the DVAT Act, engages in providing food items. It regularly availed ITC on VAT paid on its purchases. In one instance, a fire at the premises of a selling dealer, M/s. Vidya Polymers, destroyed records, leading to their failure to deposit VAT collected from buyers, including SCT. Despite SCT possessing valid tax invoices, the Value Added Tax Officer (VATO) issued a default assessment order, denying ITC based on Section 9(2)(g). This order, along with a penalty under Section 86(10) of the DVAT Act, was issued without providing SCT an opportunity for a hearing. SCT’s appeals were subsequently dismissed by the Objection Hearing Authority (OHA).
