Shanti Kiran India Pvt Ltd Vs Commissioner Trade & Tax Deptt. (Delhi High Court)
The Delhi High Court disposed of six appeals filed under Section 81 of the Delhi Value Added Tax Act, 2004, challenging a common order of the Value Added Tax Appellate Tribunal dated 5 January 2012. The central question before the Court was whether VAT authorities were justified in disallowing input tax credit claimed by a purchasing dealer.
The appellant was a registered dealer trading in electrical goods and had purchased goods from registered selling dealers against valid tax invoices with VAT paid at applicable rates. Following an audit for the period 1 April 2007 to 31 March 2008, the VAT Officer disallowed input tax credit related to purchases from two selling dealers, citing that they had operated for short durations and deposited tax amounts disproportionate to their reported turnover. Based on this, demands for tax, interest, and penalties were raised. These orders were confirmed by the Objection Hearing Authority and later upheld by the VAT Tribunal.
The Tribunal held that under Section 9(1) of the Act, input tax credit was available only to the extent tax was actually deposited by the selling dealer. In doing so, it relied on clause (g) inserted into Section 9(2) with effect from 1 April 2010, treating it as clarificatory. The appellant challenged this interpretation, arguing that during the relevant period there was no statutory provision making input credit conditional upon actual deposit of tax by the selling dealer. It was contended that a purchasing dealer had no control over the seller’s tax compliance and no statutory mechanism to verify whether tax had been deposited, particularly in view of confidentiality under Section 28 of the Act. It was also argued that cancellation of the selling dealers’ registrations occurred after the transactions and could not retrospectively affect the purchaser’s entitlement.
