Gujarat High Court
State Of Gujarat vs Atlas Pharmachem Industries Pvt. Ltd. & on 15 April, 2015
Author: M.R. Shah
Bench: M.R. Shah, S.H.Vora
O/TAXAP/27/2015 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 27 of 2015
With
CIVIL APPLICATION (OJ) NO. 56 of 2015
In
TAX APPEAL NO. 27 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE S.H.VORA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of India
or any order made thereunder ?
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STATE OF GUJARAT....Appellant(s)
Versus
ATLAS PHARMACHEM INDUSTRIES PVT. LTD. &
1....Opponent(s)
======================================
Appearance:
MR CHINTAN DAVE, AGP for the Appellant(s) No. 1
MR TUSHAR P HEMANI, ADVOCATE for the Opponent(s) No. 1
MS VAIBHAVI K PARIKH, ADVOCATE for the Opponent(s) No. 1
NOTICE SERVED for the Opponent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE S.H.VORA
Page 1 of 12
O/TAXAP/27/2015 JUDGMENT
Date : 15/04/2015
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) [1.0] Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Gujarat Value Added Tax Tribunal (hereinafter referred to as "the Tribunal") dated 13/09/2013 in Second Appeal No.74/2013 by which in an appeal preferred by the respondent-dealer, against the order passed by the first appellate authority dated 06/02/2013 dismissing the appeal on non-deposit of the amount of pre-deposit the learned Tribunal has allowed the said appeal on merits and has modified the assessment order dated 03/12/2012 passed by the learned Assessing Authority and the first appellate order dated 06/02/2013 and has directed that the tax liability for the current year in question shall be deducted from the available excess Input Tax Credit (ITC) and consequently deleted the interest and penalty imposed, the appellant-State of Gujarat has preferred the present Tax Appeal with the following proposed substantial questions of law;
(A) Whether the learned Tribunal erred in adjudicating on merits despite the first appellate authority dismissed only on the ground of pre- deposit?
(B) Whether the learned Tribunal has erred in holding that the Input Tax carried forward is required to be adjusted against the liability of CST?
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(C) Whether the learned Tribunal has erred in not
giving a specific direction requiring us to execute reversal of carry forward of Input Credit in subsequent year?
(D) Whether the learned Tribunal erred in deleting levy of interest and penalty?
[2.0] The main grievance voiced by Shri Chintan Dave, learned AGP appearing on behalf of the appellant-State is that as the appeal before the learned Tribunal was against the order of first appellate authority dismissing the appeal on the ground of non-deposit of pre-deposit, in light of the decisions of this Court in Tax Appeal Nos.711/2013 dated 30/08/2013; 667/2013 dated 12/09/2013; 688/2013 dated 30/01/2014; 595/2014 dated 13/08/2014; 1317/2014 dated 11/12/2014 and 104/2015 dated 19/03/2015, the learned Tribunal ought not to have entered into the merits of the case and / or ought not to have decided the issue on merits and / or considered the legality and validity of the original assessment order and, therefore, it is requested to quash and set aside the impugned order passed by the learned Tribunal and remand the matter either to the learned Tribunal or to the learned first appellate authority.
[3.0] Ms. Vaibhavi Parikh, learned advocate appearing on behalf of the respondent-dealer has as such fairly conceded that as the appeal before the learned Tribunal was against the order passed by the learned first appellate authority dismissing the appeal on non-deposit of the amount of pre-deposit, in view of the decisions of this Court in the aforesaid Tax Appeals, Page 3 of 12 O/TAXAP/27/2015 JUDGMENT the learned Tribunal ought to have restricted the appeal with respect to the order of pre-deposit and / or dismiss the appeal on non-deposit of pre-deposit and the learned Tribunal was not required to go into the merits of the case. However, she has submitted that now the issue involved with respect to the tax liability to be deducted from the Input Tax Credit available in the credit of the dealer has been now concluded by the Division Bench of this Court in the recent decision dated 20/03/2015 in the case of State of Gujarat Vs. Cosmos International Ltd. rendered in Tax Appeal Nos.857/2013 and other allied Tax Appeals, and, therefore, it is requested not to remand the matter either to the learned Tribunal or to the learned first appellate authority. It is submitted that such an exercise would be now academic. It is submitted that therefore now when on merits the issue has been concluded by this Court in favour of the respondent-dealer and against the revenue, it is requested to dismiss the present Tax Appeal instead of remanding the matter to the learned Tribunal or to the learned first appellate authority.
[4.0] In response to the notice issued by the earlier Bench (Coram:-Jayant Patel & S.H. Vora, JJ.), Ms. Pragya Joshi, Registrar of the Gujarat Value Added Tax Tribunal has appeared. The attention of the Registrar of the learned Tribunal is drawn on various decisions of this Court in Tax Appeal Nos.711/2013 dated 30/08/2013; 667/2013 dated 12/09/2013; 688/2013 dated 30/01/2014; 595/2014 dated 13/08/2014; 1317/2014 dated 11/12/2014 and 104/2015 dated 19/03/2015 by which different Benches have taken the view that when the appeal before the learned Tribunal is against the order passed by the learned first appellate authority dismissing Page 4 of 12 O/TAXAP/27/2015 JUDGMENT the appeal on non-deposit of pre-deposit, the learned Tribunal need not and / or should not enter into the merits of the case and the learned Tribunal is required to concentrate on the order passed by the learned first appellate authority dismissing the appeal on the ground of pre-deposit and / or amount of pre-deposit only. It appears that the earlier Bench has ordered the learned Tribunal to be joined as party respondent, through the Registrar, so as to draw the attention of the learned Tribunal the orders passed by different Benches in the aforesaid Tax Appeals. Ms. Pragya Joshi, Registrar of the Gujarat Value Added Tax Tribunal has stated at the bar that she has collected the judgment and orders passed by this Court in the aforesaid Tax Appeals and attention of the learned Tribunal shall be drawn to the aforesaid decisions.
[4.1] Now so far as the questions of law proposed / raised in the present Tax Appeal and one of the question, which is raised that the learned Tribunal ought not have entered into the merits of the case and the order impugned before the learned Tribunal was the order passed by the learned first appellate authority dismissing the appeal on non-deposit of pre-deposit is concerned, it is true that in light of the decisions of this Court in aforesaid Tax Appeals, the impugned order passed by the learned Tribunal deserves to be quashed and set aside and the matter is to be remanded to the learned Tribunal or to the learned first appellate authority. However, for the reasons stated hereinbelow and in the facts and circumstances of the case, more particularly, when the main issue involved is now squarely covered by the decision of the Division Bench of this Court in the case of Cosmos International Ltd. (Supra), we propose to consider the issue Page 5 of 12 O/TAXAP/27/2015 JUDGMENT on merits rather than remanding the matter either to the learned Tribunal or to the learned first appellate authority as no fruitful purpose would be served now by remanding the matter to the learned Tribunal and / or even the learned first appellate authority as now the main issue on merits is concluded against the revenue by the judgment and order of this Court in the case of Cosmos International Ltd. (Supra). However, the aforesaid shall be in the peculiar facts and circumstances of the case narrated hereinabove and without citing the same as a precedent.
[4.2] Now so far as the other questions of law on merits i.e. question nos.(B), (C) & (D) are concerned, the aforesaid questions are squarely covered against the revenue in view of the decision of the Division Bench of this Court dated 20/03/2015 passed in Cosmos International Ltd. (Supra). In the aforesaid decision, the Division Bench of this Court has confirmed the decision of the learned Tribunal by which it was held that the dealer can adjust the tax liability out of the amount in the current year of tax liability out of the Input Tax Credit available in the credit of the dealer. After considering the various provisions of the Gujarat Value Added Tax Act and Rules, 2006, more particularly Sections 11, 12 & 13 and Rule 15 and 18, the Division Bench of this Court in paras 7 to 8 has observed and held as under;
[7.0] Heard learned advocates appearing on behalf of respective parties at length. A short question of law which is posed before this Court to be considered in the present Tax Appeals is whether the learned Tribunal has committed any error in declaring and holding that an assessee/dealer is entitled to the Input Tax Credit adjustment against its output tax liability under the VAT Act under the Page 6 of 12 O/TAXAP/27/2015 JUDGMENT current year under consideration and whether the learned Tribunal has committed any error in quashing and setting aside the order passed by the Assessing Officer as well as the first Appellate Authority in directing to carry forward such Input Tax Credit to the next subsequent year?
[7.1] While considering the aforesaid issue, the relevant provisions of VAT Act and the Rules, 2006 are required to be referred to and considered which are as under:
"11. Tax Credit (1)(a) A registered dealer who has purchased the taxable goods (hereinafter referred to as the "purchasing dealer") shall be entitled to claim tax credit equal to the amount of,-
(i) tax collected from the purchasing dealer by a registered dealer from whom he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period.
(ii) ...
(iii) ...
(b) ...
(2) ...
to (4) ...
(5) Notwithstanding anything contained in this Act, Tax credit shall be allowed for purchases-
(a) ...
to
(d) ...
(dd) made prior to the date of registration.
12. Tax Credit for stock on (31st March, 2006) 12(1) to 12.6) - The provisions of section 11 shall apply mutates mutandis to the tax credit to be availed of under this section.
12(7) If the Commissioner is satisfied that a dealer -
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(a) has claimed tax credit for such stock for which he is not entitled for claiming tax credit as per the provisions of section 11 and subsections (3) and (4) of section 12, or (b) has claimed excess tax credit than what he is entitled to under section 11 or under this section the Commissioner may, after giving the dealer an opportunity of being heard direct him to pay a penalty equal to twice the amount of tax credit so claimed.
13. Net amount of Value Added Tax The net amount of Value Added Tax for a tax period payable shall be determined after the adjustment of tax credit in the manner as may be prescribed."
GUJARAT VALUE ADDED TAX RULES, 2006
15. Calculation of Tax Credit u/s.11 15(1) ...
15(2) ...
15(3) A registered dealer shall calculate tax credit as per Form201 and such calculation shall be made separately for each tax period.
18. Calculation of Tax (1) The net amount of tax payable under section 13 by a registered dealer, other than the dealer who has been granted permission to pay lump sum tax under Section 14, 14A read with clause (bb) of subrule (8) of rule 28, 14B, 14C or 14D shall be determined in Form201.
(2) If the amount calculated as per sub rule (1) has a negative value-
(a) the same shall be adjusted against tax liability, if any, under the Central Sales Tax Act (hereinafter called "central sales tax liability") for the said tax paid and the remaining amount of central sales tax shall be payable : or
(b) if there is no Central Sales Tax liability or if the central sales tax liability for the said tax period is less than the said negative amount, then no tax under the Act as well as under the Central Act will be payable and the net amount, after adjusting the Central Sales tax liability, shall be carried forward Page 8 of 12 O/TAXAP/27/2015 JUDGMENT to the next tax period of the same year or, as the case may be, the subsequent year."
Section 11 of the VAT Act provides for an Input Tax Credit admissible and Rule 18 of the Rules, 2006 provides for calculation of the Input Tax Credit. It cannot be disputed that for the purpose of claiming Input Tax Credit, an assessee/dealer is required to submit its claim in the required format i.e. in Form No.108 and on that the assessment order is required to be passed and on assessment the Input Tax Credit admissible to an assessee/dealer is determined. Once on assessment it is found that dealer is entitled to a particular Input Tax Credit, in that case, Rule 18 of the Rules, 2006 which provides for calculation of tax would come into play. On conjoint reading of section 11 of the VAT Act read with Rule 18 of the Rules, 2006, a dealer is entitled to adjust its output tax liability against its admissible Input Tax Credit in the current year under consideration. Thereafter and after adjusting the Input Tax Credit against its output tax liability of the current year under consideration, if still there is any Input Tax Credit available to a dealer/assessee, a dealer is entitled to adjust such balance Input Tax Credit against its central sales tax liability of the current year under consideration. If thereafter still there is any Input Tax Credit in the credit of the assessee/dealer, such balance Input Tax Credit is required to be carried forward to the next subsequent year and that is the scheme of the VAT Act and the Rules, 2006 more particularly with respect to the Input Tax Credit. Therefore, merely because while submitting the form and raising the claim of Input Tax Credit, the assessee had claimed more / excess Input Tax Credit than admissible, is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit (which is held to be admissible only after assessment) against its output tax liability under the VAT Act in the current year under consideration. To deny such Input Tax Credit in the current year under consideration would be against the provisions of the VAT Act and the Rules, 2006 more particularly section 11 of the VAT Act read with Rule 18 of the Rules, 2006. It is not in dispute that whatever is claimed by the assessee as Page 9 of 12 O/TAXAP/27/2015 JUDGMENT Input Tax Credit by submitting the Form No.108 is always subject to the assessment/reassessment and the actual amount of Input Tax Credit is determined only on assessment by the Assessing Officer. Only after assessment / reassessment, as the case may be, a final amount of Input Tax Credit is assessed and determined. Once on assessment or reassessment, as the case may be, a final amount of Input Tax Credit is assessed and determined, an assessee/dealer is entitled to such Input Tax Credit and on such Input Tax Credit the assessee is entitled to adjust such Input Tax Credit against its output tax liability under the VAT Act of the current year under consideration. Only in a case where the admissible available Input Tax Credit is less than the output tax liability of the current year under consideration, after permitting to adjust such Input Tax Credit against its output tax liability of the VAT Act of the current year under consideration, the assessee/dealer is liable to pay the interest on such balance due amount of output tax liability and on such amount the assessee/dealer is liable to pay the interest as provided under the VAT Act and the Rules, 2006. Under the circumstances, while declaring / holding that the appellant is entitled to adjustment of admissible Input Tax Credit towards its output tax liability of the current year under consideration, the learned Tribunal has rightly observed and held that the assessee is liable to pay interest only on the dues rising on assessment after adjusting the admissible Input Tax Credit towards its tax liability.
[7.2] So far as the submission by Shri Dave, learned AGP appearing on behalf of the State/Revenue that while submitting the Form No.108, the assessee with malafide intention claimed more/excess Input Tax Credit than it was entitled to and/or admissible under the VAT Act and the Rules, 2006 and therefore, the assessee is not entitled to adjust such Input Tax Credit against its output tax liability of the current year under consideration and the same is required to be carried forward to the next subsequent year is concerned, the aforesaid has no substance and cannot be accepted. As observed hereinabove, on assessment only the amount of Page 10 of 12 O/TAXAP/27/2015 JUDGMENT Input Tax Credit is assessed and determined. As observed herein above the claim made by the assessee/dealer towards the Input Tax Credit made while submitting Form No.108 is always subject to the assessment or in a given case reassessment. Therefore, when on assessment the assessee / dealer is held to be entitled to a particular Input Tax Credit, in that case, the assessee/dealer is entitled to the benefit of Rule 18 of the Rules, 2006 and is entitled to adjust such Input Tax Credit against its output tax liability under the VAT Act of the current year under consideration. Merely because while submitting the Form No.108 the assessee/dealer submitted the claim of Input Tax Credit more than which is held to be admissible on assessment may be original assessment or even audit assessment or even reassessment, by that itself is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit against its output tax liability of VAT Act of the current year under consideration.
[8.0] In view of the above, we agree that the view taken by the learned Gujarat Value Added Tax Tribunal, Ahmedabad declaring and holding that the assessee/dealer is entitled to adjust the Input Tax Credit against output tax liability of the VAT Act of the current year under consideration and after adjusting the same the liability of interest on the balance amount due is required to be considered."
[5.0] In view of the above decision of this Court, no substantial questions of law arise as proposed by the appellant-State. Under the circumstances, instead of remanding the matter to the learned Tribunal and / or learned first appellate authority and in view of the aforesaid decision of the Division Bench of this Court in the case of Cosmos International Ltd. (Supra), we have considered the issues / questions on merits, as no fruitful purpose shall be served to remand the matter to the learned Tribunal and / or to the first appellate authority, as even otherwise on remand also the Page 11 of 12 O/TAXAP/27/2015 JUDGMENT learned first appellate authority is bound to follow the decision of the Division Bench of this Court in the case of Cosmos International Ltd. (Supra) and is bound to take the same view, which has been taken by the learned Tribunal i.e. permitting and / or allowing the dealer to adjust the tax liability in the current year out of the Input Tax Credit available in the credit of the dealer. Accordingly, we dismiss the present Tax Appeal. No costs.
CIVIL APPLICATION No.56/2015 In view of dismissal of the Tax Appeal, no order in the Civil Application and the same stands disposed of.
(M.R. SHAH, J.) (S.H. VORA, J.) Siji Page 12 of 12