Case Law Details
Sri Ranganathar Valves Private Limited Vs The Assistant Commissioner (CT) (FAC) (Madras High Court)
The present Writ Petitions relate to restriction of the amount of Input Tax Credit (ITC) predominantly on the head of (a) Prior sufferance of Taxes; (b) ITC on reversal on wastage; and (c) Ineligible claim of ITC on goods.
High Court states that, Input Tax Credit cannot be disallowed on the ground that the seller has not paid tax to the Government, when the purchaser is able to prove that the seller has collected tax and issued invoices to the purchaser. As such, restriction of the amount of Input Tax Credit on this ground, cannot be sustained and requires re-consideration. Further, with regard to reversal of input tax credit claim on wastage under Section 19(9) of the State Act, under which, there are two subsidiary issues namely invisible loss and visible loss, the respondent adopted a percentage of 5% and 1% respectively. It is held that the assessing authorities are not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the input tax credit availed of to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either four per cent or five per cent or on ad hoc percentage stands set aside. Thus to ascertain as to whether there are quantum of loss of goods, which were purchased, on which, tax was paid, the Assessing Officer has to conduct an exercise, by which, he has to ascertain as to what would be the loss and uniform or ad hoc percentage cannot be adopted. To do so, it would be necessary for the Assessing Officer to conduct an inspection of the place of business of the petitioner to acquaint himself with the manufacturing process. However, since the respondent had adopted a uniform percentage, the same calls for interference. In the light of the above findings, the impugned orders are set aside and the issue with regard to restriction of the amount of Input Tax Credit for prior sufferance of taxes is remanded back to the Assessing Officer for fresh consideration. It is open to the Assessing Officer to issue a show cause notice to the petitioner calling for his objections with regard to “Input Tax Credit on reversal on wastage” and “Ineligible claim of ITC on goods” are concerned.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
With the consent of both the parties, the present Writ Petitions are heard through Video Conferencing on 18.08.2020.
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OFFhand:
GiSt of court DECision>
“High Court states that, Input Tax Credit cannot be disallowed on the ground that the seller has not paid tax to the Government, when the purchaser is able to prove that the seller has collected tax and issued invoices to the purchaser. As such, restriction of the amount of Input Tax Credit on this ground, cannot be sustained and requires re-consideration.”
Seemingly is quite logical; and resoning is judicious and sound.
The conclusion reached by the HC has to be commended as unquestionably the right view. Suggest to bear mind , in comparison/ for an analogy, , the provision in the IT Act – sec 205; which, in essence, provides to the effect that if as per the mandated requirement of the Act tax has been deducted at source, – regardless of the tax so decucted is paid to the government or not,- no direct demand could be raised on assessee- i.e. the person from whose income that has been so deductible/deducted.
ANYone with contrary thoughts not to agree ?!?