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State of Gujarat v/s Delta Rubber & Plastics Products

    Tax Appeal No. 1321 of 2014, Civil Application (OJ) No. 684 of 2014 in Tax Appeal No. 1321 of 2014 & Cross Objection No. 1 of 2015

    Decided On, 05 August 2015

    At, High Court of Gujarat At Ahmedabad

    By, THE HONOURABLE MR. JUSTICE A.J. DESAI & THE HONOURABLE MR. JUSTICE ABDULLAH GULAMAHMED URAIZEE

    For the Appellant: Maithili Mehta, A.G.P. For the Respondent: Uday R. Bhatt, Advocate.



Judgment Text

A.J. Desai, J.

1. The present Tax Appeal under Section 78 of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as 'VAT Act' for brevity) has been preferred by the State of Gujarat challenging the judgment and order dated 21.11.2013 passed by the Gujarat Value Added Tax Tribunal in Second Appeal No. 22 of 2012 by which the Tribunal has partly allowed the appeal preferred by the assessee and the interest demanded and penalty imposed by the Deputy Commissioner of Commercial Tax is removed. While the assessee has also challenged the said judgment and has claimed that he would be entitled for input tax credit since the same has not been granted only on the ground that the registration of the dealer/seller who had sold the goods to the assessee has been cancelled with retrospective effect.

2. The following question was framed by the Court at the time of admission of the appeal:-

"Whether the Tribunal erred in deleting the levy of interest and penalty merely because assessee had excess input credit adjustable against tax demand?"

3. The brief facts arise from the record are as under:-

4. The respondent - assessee had purchased certain goods from different sellers who are registered under the provisions of VAT Act on different dates. As far as one Vikas Enterprise is concerned, from whom the assessee had purchased the goods to the tune of Rs. 77,938/-. Since its registration was ab initio cancelled, the authority passed assessment order on 27.10.2010 and imposed tax to the tune of Rs. 73,797/- + interest and penalty. The said decision was challenged by the assessee by way of filing appeal before the Deputy Commissioner of Commercial Tax, Appeal - 2, Ahmedabad. The said appeal was partly allowed and the penalty was reduced from Rs. 2,21,392 to Rs. 1,84,493 by the judgment and order dated 21.12.2011. The assessee challenged the said decision before the Tribunal by way of preferring Second Appeal No. 22 of 2012. The said appeal came to be partly allowed. Hence, this appeal.

5. Ms. Maithili Mehta, learned Assistant Government Pleader appearing for the appellant would submit that the Tribunal had erred in holding that that the input tax credit which was excess amount lying with commercial department should have been carried further for the next year and the authority ought not to have imposed interest or penalty and the same is illegal since the registration of the seller was cancelled ab-initio. However, she has fairly submitted that the decision relied upon by the Tribunal in the case of Cosmos International Limited passed by the Tribunal was challenged before this Court in Tax Appeal No. 857 of 2013 and allied matters which has been dismissed by the Division Bench of this Court by common oral judgment dated 20.3.2015. She, therefore, would submit that appropriate order may be passed.

6. Mr. Uday R. Bhatt, learned advocate appearing for the assessee has placed on record copy of decision dated 20.3.2015 passed by the Division Bench of this Court in Tax Appeal No. 857 of 2013 and allied matters.

7. We have gone through the said judgment. We are of the opinion that the Tribunal has committed no error in removing the interest as well as penalty imposed upon the assessee. Hence, the appeal preferred by the State of Gujarat is hereby dismissed. In view of dismissal of main appeal, Civil Application also stands dismissed.

8. As far as the cross objections filed by the assessee is concerned, Mr. Bhatt would submit that the assessee had purchased the goods from a dealer who was a registered dealer and, therefore, subsequent events with regard to cancellation of registration of the said seller would not disentitle the assessee for claiming the benefit. In support of his submissions, he relied upon the decision of the Hon'ble Supreme Court in the case of State of Maharashtra Through The Secretary Vs. Suresh Trading Company, and submitted that the cross-objections may be allowed.

9. On the other hand, Ms. Maithili Mehta, learned Assistant Government Pleader has opposed the cross objections and submitted that since the registration of the seller is cancelled, he would not be entitled for any benefit.

10. We have heard learned advocates for the respective parties.

11. It is an undisputed fact that when the assessee had purchased the goods from the dealer/seller, he was registered under the provisions of the VAT Act. It is also an admitted position that subsequently, his registration has been cancelled. Therefore, in our opinion, the assessee cannot be deprived of his right of getting credit of input tax available under the provisions of VAT Act. The Hon'ble Supreme Court in the case of State of Maharashtra v. Suresh Trading Company (Supra) has observed in paragraph 5 as under:-

".... A purchasing dealer is entitled by law to rely upon the certificate of registration of the selling dealer and to act upon it. Whatever may be the effect of a retrospective cancellation upon the selling dealer, it can have no effect upon any person who has acted upon the strength of a registration certificate when the registration was current. The argument on behalf o

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f the department that it was the duty of persons dealing with registered dealers to find out whether a state of facts exists which would justify the cancellation of registration must be rejected. To accept it would be to nullify the provisions of the statute which entitle persons dealing with registered dealers to act upon the strength of registration certificates." 12. Considering the above aspects, in our opinion, the case of the present assessee is covered under the above referred decision of the Hon'ble Supreme Court. Hence, the cross objections is allowed.
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