Harsh Jewellers vs Commercial Tax Officer and Another

Goda Raghuram, J.—The assessment order dated January 21, 2012 passed by the first respondent and consequent demand of penalty interest by the order dated January 23, 2012 issued by the same respondent are assailed on several grounds. The petitioner, a partnership concern, is a registered dealer on the rolls of the first respondent engaged in the business of gold and jewellery (bullion). During the tax period from April 2008 to March 2009, the petitioner purchased bullion from a local registered dealer, M/s. Karat 24, having TIN No. 28910171563, for Rs. 52,40,700, inclusive of tax and claimed input-tax credit of Rs. 51,889. On verification by the Revenue of the genuineness of the registered VAT dealer, it was found that the registration of M/s. Karat 24 was cancelled on February 28, 2010 and no output turnovers were declared during the tax periods in question. Therefore, by the impugned order of assessment dated January 21, 2012, after a show-cause notice, the claim of input-tax credit to the extent of Rs. 51,889 was disallowed and by the subsequent demand notice dated January 23, 2012, concluding that the petitioner failed to pay the tax dues to the Department within the stipulated period, the first respondent levied penalty interest of Rs. 17,247.

Relying on the judgment of a learned Division Bench of this court in Sri Ramanjaneya Groundnut Factory Vs. C.T.O. Kadiri and Another, and an earlier decision in Sri Ramanjaneya Groundnut Factory Vs. C.T.O. Kadiri and Another, , Sri Kumar, learned counsel for the petitioner, contends that since M/s. Karat 24 was a registered dealer during the relevant period and had issued the invoices verifying deduction of tax on the purchase of jewellery by the petitioner, and in view of the provisions of section 13(1) of the Andhra Pradesh Value Added Tax Act, 2005, the petitioner is entitled to claim input-tax credit and cannot be denied this claim solely on the ground that M/s. Karat 24 had failed to file its returns, disclose the turnover or remit the tax.

In Sri Ramanjaneya Groundnut Factory Vs. C.T.O. Kadiri and Another, , this court reiterated the principle enunciated earlier in The State of Andhra Pradesh Vs. Thungabhadra Industries Ltd., and held (in the context of the provisions of the APGST Act, 1957) that where exemption is granted on sales to registered dealer on the basis of affidavit of purchasing dealer confirming purchases and on the selling dealer furnishing details of despatch of goods and receipt of payment by bank drafts, the burden of proof on the selling dealer is discharged and reassessment leading to withdrawal of exemption on the ground that the purchasing dealer suppressed transaction and did not pay tax, cannot be sustained.

The above principle is a fortiori applicable since section 13(1) of the 2005 Act entitles input-tax credit to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period. The failure on the part of M/s. Karat 24 to file returns or remit the tax component of the sales made to the petitioner cannot per se be a ground to deny input-tax credit. The impugned order of assessment does not assert that the invoices produced by the petitioner are fraudulent or have not been issued by M/s. Karat 24 or that the purchaser did not in fact obtain the invoices from the registered dealer. It is also not disputed and in fact it is conceded in the order of assessment that the registration of M/s. Karat 24 was cancelled on February 28, 2010, i.e., after the transaction in question occurred, whereunder the petitioner purchased bullion from the registered dealer and has produced the vouchers.

For the aforesaid reasons and following the judgments of this court supra, the writ petition is allowed. The impugned order of assessment dated January 21, 2012 and the demand of penalty interest proceedings dated January 23, 2012 issued by the first respondent are quashed. It is however open to the first respondent to pass a revised order of assessment, if there be any material on the basis of which the input-tax credit could be denied, except on the ground that M/s. Karat 24, despite being a registered dealer on the relevant date, did not remit the tax. The writ petition is allowed as above, after hearing the learned counsel for the petitioner and the learned Special Government Pleader for Commercial Taxes. There shall however be no order as to costs.