Case Law Details

Case Name : Infiniti Wholesale Ltd. Vs. Assistant Commissioner (CT) [(2015) 55 64 (Madras)]
Appeal Number :
Date of Judgement/Order :
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CA Bimal Jain

CA Bimal Jain

Infiniti Wholesale Ltd. (“the Petitioner”) is registered as a ‘dealer’ under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (“TN VAT Act”). The Petitioner is involved in trading of consumer items and wholesalers for various enterprises. The Petitioner usually purchased goods directly from the manufacturers of consumer durables and other goods who are registered dealers and raise Tax Invoices as contemplated under Rule 10(2) of the Tamil Nadu Value Added Tax Rules, 2007 (“VAT Rules”).

The Assessing Authority on verification of the returns filed by the petitioner for the Assessment Year 2011-12 issued a SCN dated July 20, 2012 proposing to reverse the input tax credit availed by the Petitioner in terms of Section 19(13) of the TN VAT Act on the four grounds i.e., the selling dealers had not filed returns or not paid taxes or they were unregistered dealers or their registrations were retrospectively cancelled.

The Petitioner on August 5, 2012 has submitted reply stating that credit was availed on local purchase on the basis of tax invoices (which they possess) issued by local registered dealers and hence Section 19(13) of the TN VAT Act is not applicable. Albeit there is no statutory requirement under Section 19(1) of the TN VAT Act, the Petitioner will provide documentary evidence to the Department before availing input credit, though the Petitioner bona fidely stated that they may obtaining confirmation from the vendors that the tax has been paid as well as returns are being filed as per the TN VAT Act.

In spite the Petitioner submitted the confirmation of Rs. 2,60,92,645/-, which was based on the confirmations furnished by its vendors, the Respondent passed the impugned assessment order, dated February 25, 2013. Being aggrieved, the Petitioner filed a writ petition before the Hon’ble Madras High Court.

The Hon’ble Madras High Court allowed the writ petition and set aside the impugned order in favour of the Petitioner and held that input tax credit availed by the petitioner could not be denied and there is no need to reverse the input tax credit availed by the purchaser of the goods on the grounds that the selling dealer has not filed returns or not paid taxes or they were unregistered dealers or their registrations were retrospectively cancelled.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email:

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  1. Ajay Kahar says:

    Tamil Nadu High Court has interpreted and adopted a correct and positive fact, for what VAT Credit scheme have been framed. Seller who has defaulted in payment or return filing should only be penalized and not the bonafide purchaser who purchase the goods and taking valid tax credit based on valid documents.

    However the since VAT is baby of Individual State, every State Government is making interpretation and direction as per their wish, without giving an importance of logic of the ITC scheme. Even in Gujarat, Government has issued their internal circular to Commercial VAT Department, NOT TO ALLOW CREDIT TO PURCHASING DEALER IF SELLER DEFAULTED either in payment or return filing. Burden to prove that seller has paid the tax collected on bills raised to purchased impliedly cast upon the purchasing dealer through this circular. In such a scenario Government is disallowing ITC to Purchasing Dealer on the one hand and also Recovering from seller, the Tax collected and not paid by him. Then Government will get benefit twice. Ultimately Purchasers have to suffer.

    Hence In my opinion The above order issued by Hon. High court of Tamil Nadu will apply only in the state of TN.

    With due regards to all state provisions, I would humbly request to Hon. Advocates of respective States to bring/put the subject matter (based on TN High court judgement) before High Court of concern States so that all the Dealers get relief.

    Thank you.

  2. Prakash Kochar says:

    Bombay Highcourt has passed the order against assessee purchaser in case of Laxmi Cotton, on ground that tax amount is not deposited by Seller in Govt. Treasury, therefore input credit is not allowable, as per MAH. Vat Act.
    Whether this order will be help to assessee in whose cases ITC is denied on ground that seller is defaulter in payment of tax/has not filed returns/RC is cancelled. Kindly suggest.

  3. Anil says:

    We are also victim of Punjab VAT department. They are deducting input vat unilaterally without issuing any SCN. Hopefully, we can challenge them on the basis of said verdict.

  4. Mukesh Rathi says:

    Dear sir,

    I am a reader of your articles and its very helpful, I have a query that if I being a manufacturing company forgot to take credit of vat (WB) on inputs in one financial year than can we take the same in the immediate next financial year.

  5. dr sunil b mundada says:

    res sir.

    as per the above ession of madras high court can we chalang as i am also suferer like wise wher retrospective cancelled & hawal declaerd vendours who have filed retuns in year 2008-2009 & department cancelled all in 2012 so pleas guide if further quaries needed i am abel to send on mail.

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