Swati Menthal and Allied Chemical Ltd. Vs State of U.P. & 3 Others (Allahabad High Court)
The Allahabad High Court adjudicated a batch of five writ petitions challenging reassessment proceedings initiated by the State of Uttar Pradesh under Section 29 of the U.P. Value Added Tax Act, 2008 (UPVAT Act). The petitioners, engaged in the manufacturing and trading of mentha oil and related products, had claimed Input Tax Credit (ITC) for goods supplied to Special Economic Zone (SEZ) units against Form-I. These claims were accepted during regular assessment for the Assessment Years 2014-15, 2015-16, and 2016-17, and the assessments noted that sales against Form-I were correctly disclosed. The reassessment proceedings were initiated on the basis that ITC claimed had not been reversed, allegedly discovered after the original assessment orders, with reliance on a Karnataka High Court judgment in M/s Shamaraju & Co. (India) Pvt. Ltd. v. Union of India.
The petitioners argued that the reassessment proceedings were a change of opinion and impermissible under law. They contended that ITC claims arise under Section 13 of the UPVAT Act and, if wrongly claimed, can only be reversed under Section 14 through a Reverse Input Tax Credit (RITC) procedure. Reassessment under Section 29, according to the petitioners, could only be invoked in cases involving escapement of turnover, not for re-evaluating ITC. ITC, being an allowance to offset tax liability, is distinct from turnover and the determination of taxable sales or purchases. They cited a prior coordinate bench decision in Mentha and Allied Products Ltd. v. State of U.P., upheld by the Supreme Court through dismissal of the SLP, which similarly held that reassessment cannot be invoked solely for correcting ITC claims.
