Gujarat High Court
State Of Gujarat vs Nishi Communication....Opponent(S) on 29 January, 2015
Bench: Jayant Patel, S.H.Vora
O/TAXAP/60/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 60 of 2015
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STATE OF GUJARAT....Appellant(s)
Versus
NISHI COMMUNICATION....Opponent(s)
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Appearance:
MR PRANAV TRIVEDI, AGP for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL
and
HONOURABLE MR.JUSTICE S.H.VORA
Date : 29/01/2015
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE JAYANT PATEL)
1. The present appeal has been preferred by the Revenue on the following substantial questions of law which are reproduced as under:
(1) Whether the Hon'ble Tribunal has erred in holding that the input tax carried forward is required to be adjusted against the liability of VAT?
(2) Whether the Hon'ble Tribunal has erred in not giving a specific direction requiring us to execute reversal of carry forward of input credit in subsequent year?
(3) Whether the Hon'ble Tribunal erred in deleting liability of penalty and interest by permitting such adjustment of carried forward input tax credit?
(4) Any other substantial questions of law as may be deemed fit by the Hon'ble High Court may kindly be framed."Page 1 of 6
O/TAXAP/60/2015 ORDER
2. We have heard Mr.Trivedi, learned AGP for the appellant.
3. In our view, even if any question is to be considered, only one question may arise for consideration and not the aforesaid formulated four questions and the same can be as under:
"Whether the Tribunal has committed any error in law and in facts in deleting the interest and penalty or not?"
4. The facts show that the assessing authority made the assessment by demand of tax of Rs.26,645/, interest of Rs.19,184/ and penalty of Rs.68,744/. In the appeal, before the Deputy Commercial Commissioner, the demand of tax, interest and penalty was confirmed. In the further appeal before the Tribunal, it was found that as against the demand of tax of Rs.26,645/, there is already credit balance of ITC of Rs.28,117/, which was properly carried forward and if permitted to be adjusted, there would not be any liability to pay tax and consequently, the Tribunal found that the levy of interest and penalty cannot be sustained and therefore, deleted the same. Under the circumstances, the present appeal before this Court.
5. In our view, if the credit was already available to the assessee and as the same could be carried forward, it could validly be adjusted against the demand of tax. If principal amount of tax Page 2 of 6 O/TAXAP/60/2015 ORDER thereafter was not recoverable, there would not be any justification for charging interest nor any justification for penalty. We do not find that the Tribunal has committed any error in the impugned decision.
6. Apart from the above, the issue is already covered by the decision of this Court in Tax Appeal No.28/15 decided vide order dated 19.01.2015, wherein, this Court had an occasion to examine similar question and it was observed thus
1. The present appeal is directed against the order dated 19.3.2014 passed by the Tribunal, whereby the demand of tax is confirmed, but the interest and penalty imposed are deleted.
2. The Revenue has preferred the present appeal and has formulated various questions, which we find that all do not arise but the only substantial question of law, considering the facts and circumstances, may arise in the present matter as under:-
"Whether Hon'ble Tribunal erred in deleting the liability of penalty and interest by permitting such adjustment of carried forward input tax credit ?"
3. On facts, it appears that the Assessing Authority made re-assessment and made the demand of Rs.34,802/-, but additionally charged interest as well as penalty. The matter was carried in appeal and the Deputy Commercial Tax Commissioner dismissed the appeal. The matter was further carried in appeal before the Tribunal and the Tribunal confirmed the demand of re-assessment, but Page 3 of 6 O/TAXAP/60/2015 ORDER deleted the interest and penalty imposed upon the Assessee. Under these circumstances, the present appeal by the Revenue.
4. We have heard Mr.Dave, learned AGP for the Revenue.
5. Our attention is drawn by Mr.Sudhir Mehta, learned Counsel appearing for the Assessee on advance copy, that the issue is already earlier decided by this Court in Tax Appeal No.1284 of 2014 vide decision dated 25.11.2014, wherein it was held that if there is no attempt to evade or avoid payment of tax, the interest or the penalty could not have been imposed.
6. We may record that this Court in the above referred Tax Appeal No.1284 of 2014 vide its decision dated 25.11.2014 had observed thus:-
"1. State is in appeal against the judgment of the Gujarat Value Added Tax Tribunal ('the Tribunal' for short) proposing following questions for our consideration:
"(1) Whether Tribunal erred in deleting levy of interest and penalty merely because assessee had excess input credit adjustable against tax demand?
(2) Any other substantial question of law as may be deemed fit by the Hon'ble High Court may kindly be framed."
2. From the record, it emerges that the Revenue contests the deletion of interest and penalty by the Tribunal in case of the respondent - assessee. The Tribunal in the impugned judgment also held as under:
"The appellant has paid the amount of tax fully therefore, we are not disturbing the amount of carried Page 4 of 6 O/TAXAP/60/2015 ORDER forward ITC. The appellant is entitled to claim said ITC for next tax period. As stated above, the appellant is not liable to pay interest on tax demand as the ITC was first required to adjust against the current year liability as per the provision of rule 18 of the Rule. The appellant had sufficient balance of ITC to adjust against the additional tax liability, which aroused due to disallowance of ITC. We therefore, remove entire interest and penalty. We pass following order."
3. From the observation of the Tribunal, it appears that though the assessing officer had raised additional tax demand of Rs.76,010/and imposed interest and penalty on such basis, the Tribunal was of the opinion that the assessee had sufficient Input Tax Credit and those tax credits could have been adjusted against the assessee's additional assessed tax liability. That being the position, the Tribunal correctly held that the interest could not be charged. Further, we notice Section 34(7) of the Gujarat Value Added Tax Act, which pertains to the power of the Commissioner to impose penalty, begins with the expression "if a Commissioner is satisfied that the dealer, in order to evade or avoid payment of tax........" Under the circumstances, the basic intention of attempting to evade or avoid payment of taxes would be necessary for imposing penalty.
4. When the Tribunal found on facts that in view of availability of input tax credit as against the assessed additional tax, there was no intention on part of the assessee to avoid payment of taxes, no question of law arises. Tax appeal is dismissed. Civil Application also dismissed."
7. Same situation arises in the present matter inasmuch as the demand is confirmed and the Page 5 of 6 O/TAXAP/60/2015 ORDER adjustment is permitted but the interest and penalty imposed are deleted.
8. It is not in dispute that the Assessee had no surplus balance of input credit, which has been adjusted against the demand of tax upon re-assessment. Under these circumstances, the element of avoidance of tax could be said as lacking. Consequently, the deletion of interest and penalty on the part of Tribunal could not be said as unjustifiable. In the event, when the issue is already covered by the above referred decision, we do not find that any substantial question of law would arise as sought to be canvassed.
9. Under these circumstances, the appeal is meritless. Hence, dismissed.
7. In our view, same situation would arise. Hence, we do not find that any substantial question of law would arise for consideration as sought to be canvassed. Under the circumstances, the appeal is meritless. Therefore, dismissed.
(JAYANT PATEL, J.) (S.H.VORA, J.) bjoy Page 6 of 6