Gheru Lal Bal Chand vs State Of Haryana And Another (Punjab and Haryana High Court), Civil Writ Petition No.6573 of 2007 Dated-23 September, 2011
Introduction :-The case was based on the certificate by the selling dealer, which can be constructed as GSTR1 return which gives the right to the assessee for the claiming of ITC based on that return. The issue raised in petition is with regard to denial of Input Tax Credit by the Assessing Authority on the ground that the dealers from whom the petitioners have purchased goods, have not deposited full tax in the State Treasury. The petitioners have not been held entitled for deduction of Input Tax Credit in terms of the provisions of Section 8 of the Haryana Value Added Tax Act, 2003.
Fact of the case :- the petitioner is a partnership firm under the name and style of M/s Gheru Lal Bal Chand, engaged in the business of sale and purchase of cotton. The petitioner procures material from different persons and sells the same in terms of the provisions of the relevant Act and the Rules and the tax which is paid by the dealer after deduction of Input Tax Credit is paid in the treasury. The firm is registered under the provisions of Act, As per the petitioner, the scheme under the Act is that on the sale of goods, tax calculated would be treated as “output tax”. The assessing authority observed that the petitioner was not entitled for deducting input tax credit as per provisions of Section 8 of the Act, because the Value Added Tax (VAT) dealers from whom the petitioner had purchased certain goods had not deposited the full tax in the State Treasury.
Contention of the assessee :-
Apex Court in Corporation Bank v. Saraswati Abharansala and another, (2009) 19 VST 84 (SC) it is held that “Sales tax is leviable on sale of goods. It must be collected by the dealer as an agent of the State at such rate as may be specified. Neither the State nor the agent is entitled to collect tax at a rate higher than specified.”
State of Punjab and others v. Atul Fasteners Ltd., (2007) 4 SCC 471, it is held that “The question of paying interest will also not arise because sales tax is an indirect tax. It is collected by the assessee from its customers. The incidence of tax falls not on the assessee but on its customers. The assessee collects the sales tax from its customers as a part of sale price. It forms part of his turnover for the stipulated period. Under the Scheme the liability to pay tax by the assessee accrues each year but the payment of tax is deferred. On expiry of seven years the assessee has to pay back the tax collected by it during 7 years. It is a sort of a loan given by the State to the assessee so that the assessee can use the tax amount to meet its working capital requirement. As stated the liability of the respondent assessee accrued each year, therefore, there is no question of the Department paying interest @ 18% on the tax collected by the assessee during the afore- stated period. The tax was collected by the assessee from its customers as an agent for the Government. The assessee is allowed to retain that amount which has accrued to the account of the State Government.”
No liability could be fastened on the petitioner on account of non-deposit of input tax received by the selling dealer from the purchasing dealer as the term “paid” is to be interpreted to mean “ought to have been paid” as held by the Supreme Court in Sanjana, Assistant Collector of Central Excise, Bombay and others v. The Elphinstone Spinning and Weaving Mills Co. Ltd., AIR 1971 Supreme Court 2039
State has all the machinery at its command to effect recovery from the real defaulter and no person other than the defaulting person can be penalized for some body else’s lapses. Reliance was placed upon the following decisions of various Courts, viz., M/s. Chuni Lal Parshadi Lal vs. Commissioner of Sales Tax, U.P. Lucknow, AIR 1986 Supreme Court 1966, Vikas Pipe vs. Commissioner of C. Ex. Chandigarh-II, 2003 (158) E.L.T. 680 (P&H), Govindan and Co. vs. State of Tamil Nadu (1975) 35 STC 50 (Madras), Multi Metal Products vs. Commissioner of Sales Tax, M.P. (1999) 112 STC 605 (M.P.).
State can be held entitled to enforce recovery from the purchasing dealer in an eventuality when transaction is actuated with fraud or any connivance is established between the purchasing dealer and the registered selling dealer.
Submission of the Revenue :-
The State is authorized to collect the tax from the purchasing dealer where it is found that the declaration furnished by the registered selling dealer is false. The provision on these principles cannot be declared to be ultra vires and bad in law.
Analysis and Decision of High Court :- decision of the HC are mentioned in the Para 33 of the said judgement which is purely in the favour of the assessee without any reasonable concern/doubt, it can be considered a big win of the assessee in the respective HC, while coming to the decision, HC has observed below supporting for the decision.
1) They have relied upon of case of M/s Chunni Lal Parshadi Lal’s case where it was held that purchasing dealer had dealt with the goods after the purchase had held that the assessee cannot be made liable to tax on such sale.
2) They relied upon the judgment of the Madras High Court in Govindan & Co.’s case where benefit of tax was claimed on the ground that the sales effected by the assessee were second sales, it was held that the assessee was not required to show that their sellers had in fact paid tax. What was required for them was to show that the earlier sales were taxable sales and the tax was really payable by their sellers. The civil appeal filed against this judgment was dismissed by the Hon’ble Supreme Court vide order reported as State of Tamil Nadu v. Raman & Co. and others, (1994) 93 STC 185.
3) They relied upon the judgement of Madhya Pradesh High Court in Multi Metal Products’ case, this case has considered the judgment of Atul Fasterns Ltd case taking dealer acts as an agent of the government and Elphinstone Spinning and Weaving Mills Co. Ltd.’s case in which paid would mean ought to have been paid marked, MP HC also considered the decision of the Govindan & Co case also.
4) For the interpretation of the statue, they relied upon on the decision of State of Madhya and others v. M/s Chhotabhai Jethabhai Patel and Co. and another, AIR 1972 SC 971 in para 10 had held as, “It is settled law that where two constructions of a legislative provision are possible one consistent with the constitutionality of the measure impugned and the other offending the same, the Court will lean towards the first if it be compatible with the object and purpose of the impugned Act, the mischief which it sought to prevent ascertaining from relevant factors its true scope and meaning.”
5) For the defining the word used in the Act, Court used the decision of Sunil Batra v. Delhi Administration and others, AIR 1978 Supreme Court 1675, in para 38 had observed as under: “Constitutional deference to the Legislature and the democratic assumption that people’s representatives express the wisdom of the community lead courts into interpretation of statutes which preserves and sustains the validity of the provision. Courts must, with intelligent imagination, inform themselves of the values of the Constitution and, with functional flexibility, explore the meaning of meanings to adopt that construction which humanely constitutionalizes the statute in question.
6) the genuineness of the certificate and declaration may be examined by the taxing authority, but onus cannot be put on the assessee to establish the correctness or the truthfulness of the statements recorded therein. The authorities can examine whether the Form VAT C-4 was bogus and was procured by the dealer in collusion with the selling dealer. The department is required to allow the claim once proper declaration is furnished and in the event of its falsity, the department can proceed against the defaulter when the genuineness of the declaration is not in question. However, an exception is carved out in the event where fraud, collusion or connivance is established between the registered purchasing dealer or the immediate preceding selling registered dealer or any of the predecessors selling registered dealer
Conclusion :- on the reading of the judgement, it is found that revenue didn’t fight in the present case, they even simply rely on the general provisional of the statue as marked above, so decision was given in the favour of the assessee, even department has not submit the decisions of Chuni Lal Parshadi Lal vs. Commissioner of Sales SC and central wines Vs special commercial tax officer SC in which held that dealer is not a agent of the government, in my personal opinion, revenue was very week in the court room for their supporting plea, so decision was given in the favour of the assessee.
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