Commissioner Vs Janki Industries Nai Basti (Allahabad High Court)
Conclusion: Dealers registered under Value Added Tax Act (VAT Act), 2008 were duty bound to reverse or debit the input tax credit as prescribed under Section 13(6) of the VAT after the discontinuation of business by the operation of law. Tribunal had failed in its duty while allowing the appeal of the opposite party by overlooking the provision of section 13(6) of the VAT Act.
Held: Revision was filed by the department addressing two substantial questions of law – whether the Commercial Tax Tribunal was justified in allowing the dealer to claim ITC under the VAT Act and its corresponding provisions in Section 16 of the Act and Section 140(1) of the Goods and Services Tax Act, 2017 , read with Rule 21(1)(y) of the VAT Rules and whether such ITC could be allowed when the business of the dealer stood discontinued on 30.06.2017. Additional Chief Standing Counsel (ACSC) submitted that the opposite party, engaged in the trade of food-grains, pulses, oilseeds, and related commodities, had declared its closing stock as of 30.06.2017 and claimed Input Tax Credit (ITC) of ₹4,65,822 for the Assessment Year 2017–18. Assessing Authority disallowed the ITC on the ground that the dealer had ceased business under the VAT Act from the said date, which was later upheld by first appellate authority. However, the Commercial Tax Tribunal, on second appeal, set aside the orders of both lower authorities and allowed the dealer’s claim, prompting the State to challenge the Tribunal’s decision by filing the present revision petition. ACSC contended that with the implementation of the GST regime on 01.07.2017, the VAT Act lost all its force, and as a result, all VAT Act registrations stood terminated. Hence, under Section 13(6) of the VAT Act, the dealer was duty-bound to debit any unused ITC standing to its credit on stoppage of business. In addition the counsel pointed out that under Section 13(1)(a) of the VAT Act, ITC could only be claimed if the goods purchased were resold within the state or exported, a condition not fulfilled by the dealer. Furthermore, Rule 21(1)(y) of the VAT Rules also mandated that unutilized ITC be reversed upon discontinuation of business. He contended that the Tribunal erred in overlooking these statutory requirements and wrongly allowed ITC despite the absence of any resale or continuation of business. Opposing the revision, assessee argued that even if it was assumed, without conceding, that the business was discontinued, the respondent was still entitled to refund of admissible ITC in accordance with Section 15(5). He relied on the judgment in M/s Sooraj Kirana Company v. Commissioner Commercial Tax to support the proposition that ITC could not be disallowed merely due to the transition to the new tax regime. However, they could not file the form due to technical glitches which were pleaded before the court with case laws. He further argued that Assessing Authority lacked the jurisdiction to reverse the ITC since the dealer had not availed the credit through any fraudulent means. Judicial precedents including Tractor & Farm Equipment Ltd. v. CCE, Madurai, and Shree Navneet Cotton Co. v. State of Gujarat were cited to emphasize the legitimacy of transitional credit under GST. ACSC submitted that the Tribunal’s direction ignored the findings categorically given by the first appellate authority which mentioned that the ITC had not been rightfully applied. According to the counsel, such findings became final in case there was no particular reversal through the Tribunal. On appeal It was held that once the business under the VAT Act was discontinued on 30.06.2017 by operation of law, it became the statutory obligation of the dealer to reverse or debit the ITC in accordance with Section 13(6) of the VAT Act. It was clearly confirmed by the court that the Tribunal in the impugned order, in its wisdom, has allowed the appeals of the opposite party by referring to the judgement cited by the revisionist, i.e., M/s Farooq Agencies Vs. Commissioner of Commercial Tax, was not applicable to the fact of the case. According to the Bench, a specific provision under the VAT Act, undisputedly applicable in the present case was not complied with by the opposite party, a registered dealer. Moreover, the Tribunal, being the final fact-finding authority, failed to address or even mention this statutory requirement while allowing the appeal in favour of the dealer. High Court noted that Tribunal, in allowing the dealer’s appeal without examining compliance with these provisions or addressing specific findings of the Assessing Authority and appellate authority, appears to have overstepped. Thus, the bench set aside the Commercial Tax Tribunal’s order.
