Fact
of the Case:- the petitioner is a partnership firm under the
name and style of M/s Gheru Lal Bal Chand, engaged in the business of sale and
purchase of cotton. The petitioner procures material from different persons and
sells the same in terms of the provisions of the relevant Act and the Rules and
the tax which is paid by the dealer after deduction of Input Tax Credit is paid
in the treasury. The firm is registered under the provisions of Act as well as
the Central Sales Tax Act, 1956 (in short, the 'Sales Tax Act'). As per the
petitioner, the scheme under the Act is that on the sale of goods, tax
calculated would be treated as "output tax". But if the purchases are
made from within the State of Haryana, the tax paid on such purchases is to be
set off from the out-put liability and resultant tax liability is paid by the
selling dealer. The assessing authority observed that the petitioner was not
entitled for deducting input tax credit as per provisions of Section 8 of the
Act, because the Value Added Tax (VAT) dealers from whom the petitioner had
purchased certain goods had not deposited the full tax in the State Treasury.
The stand of the dealer, however, is that it made bona fide purchases from the
selling dealers who were duly registered by the Assessing Authority under the
Act and irrespective of the fact, whether they paid full tax or not, he should
be allowed the necessary input Tax Credit. The said selling dealers discharged
their tax liability and deposited the tax payable by them by deducting the
input tax credit available to them.
4. The case of the
petitioner is that when a registered dealer makes sales and issues tax invoice
in terms of Section 8 of the Act to the purchasing dealer, the latter is
entitled to claim Input Tax Credit. The person making purchases is, thus,
required to ensure that the dealer selling the goods is a registered dealer and
he has issued the tax invoice as per provisions of the Act. As per the mandate
of Section 8(3) of the Act, in the eventuality of a claim of Input Tax Credit
in respect of goods sold to a dealer being called into question, the purchasing
dealer may be called upon to produce before the authority conducting the
proceedings, a certificate to be issued by the selling dealer. Such claim can
only be allowed if the assessing authority is satisfied about the contents of
the certificate. It has further been claimed that the selling dealers have also
discharged their tax liability and deposited the tax payable in their hands by
deducting the input tax credit available to them. Whenever the petitioner
effected purchases from the selling dealers, it has obtained requisite VAT
invoices. Forms VAT C-4 in terms of Rule 20 of the Rules are also obtained by
the petitioner with a certificate from the selling dealers that they have paid
full amount of tax under the Act on the sales made to the petitioner. The
petitioner also filed its returns for different periods showing sales and
purchases made by it. The tax was paid on the value addition and Input Tax
Credit has been claimed on the basis of invoices issued by the selling dealers.
It is also claimed that annual return in Form R2 has also been filed by the
petitioner showing summary of all the sales and purchases conducted by it
during the year ending on 31.3.2004. For the year ending on 31.3.2007, the case
of the petitioner was taken for scrutiny by the Excise and Taxation
Officer-cum-Assessing Authority, Hisar - respondent No.2. In that regard,
notices Annexures P3/A and P3/B, under Section 8 of the Act read with Rule 20
of the Rules, were issued to the petitioner on the ground that it had effected
purchases from M/s Hans Raj Ram Kumar, Fatehabad, M/s Mohan Lal Manish Kumar,
Fatehabad, M/s Chandu Lal Mohan Lal, Fatehabad, M/s Sant Lal Harbans Lal,
Fatehabad, M/s Suresh Kumar & Co., Fatehabad, M/s Parteek Enterprises, M/s
Jagdish Rai Jai Bhagwan, Fatehabad and M/s Mahavir Parshad Rajat Kumar,
Fatehabad, who had not deposited tax in the Treasury. Accordingly, it was
proposed to disallow Input Tax Credit to the petitioner. The petitioner was
directed to show cause by 13.2.2007 and 6.3.2007 respectively. In its replies,
besides other grounds, the petitioner took the stand that once it had filed the
tax invoice then it should be considered as sufficient proof of the tax having
been paid on the sale of goods for the purpose of Section 8(1) of the Act
(Annexures P4/A & P4/B respectively). It is claimed that since the
limitation for the purposes of assessment was to expire on 31.3.2007,
therefore, the Assessing Authority - respondent No.2 without making any further
enquiry, with a pre-determined mind assessed the petitioner vide order dated
15.3.2007 (Annexure P5), and a demand to the tune of Rs.2,12,720/- has been
raised, which is subject matter of challenge in the instant petition.
5. The further
challenge has been made by the petitioner to the vires of Section 8(3) of the
Act read with Rule 20 of the Rules being ultra vires the Constitution of India
and, in particular, Article 14 thereof, as according to the petitioner the
conditions imposed by way of Section 8(3) of the Act read with Rule ibid are
arbitrary, unreasonable and not sustainable in law.
6. The respondents
in the joint written statement vehemently opposed the prayer of the petitioner.
It was stated that Section 8(3) of the Act was perfectly valid and did not
violate Articles 14 and 19(1)(g) of the Constitution of India. It was
specifically denied that the said provisions conferred any excessive power upon
the State Government to frame the Rules. It further states that vires of the
provisions of the above Section 8(3) of the Act and Rules 20(1) and 20(4) of
the Rules framed under the Act have been challenged by the petitioner to
bye-pass statutory remedies available to it which could legally be done by
availing the remedy of appeal against the order of assessment as provided under
Section 33 of the Act. It was further asserted that where a statute provided
remedies against the orders of the assessment, the Court should refrain from
entertaining writ petition against such orders.
7. The respondents
further demonstrated that sub-section (3) of Section 8 of the Act did not
declare certificate in Form VAT C-4 as a conclusive evidence for input tax and
the said provision, however, permits the authority to allow the claim only if
the authority was satisfied after making enquiry that the particulars contained
in the certificate were true and correct. It has further been mentioned that
once the petitioner has come to know about the fact that the tax has not been
paid by the selling dealers to the State, the petitioner could claim refund of
tax from its selling dealers. As regards the averments of the petitioner that
the scheme framed under the Act neither violated Section 19(1)(g) nor Article
14 of the Constitution of India and the allegation of the petitioner that
Section 8(3) of the Act conferred excessive power upon the State Government to
frame Rules was fallacious and misconceived as the Legislature in its wisdom
had conferred under Section 60 of the Act, the power to make Rules for carrying
out the purpose of the Act. Similarly, the power conferred under Rule 20 of the
Rules by the State Government under Section 60 of the Act was also not
excessive as it laid down the procedure for computation of input tax which the
legislature defined under Section 2(w) and for reduction under Section 3 (5) of
the Act which was the integral part of the scheme for carrying out the purpose
of the Act.
Finding:- no
liability can be fastened on the purchasing registered dealer on account of
non-payment of tax by the selling registered dealer in the treasury unless it
is fraudulent, or collusion or connivance with the registered selling dealer or
its predecessors with the purchasing registered dealer is established.
34. In view of the
above, it cannot be held that the provisions of Section 8(3) of the Act and the
sub-rules (1) and (4) of Rule 20 of the Rules are ultra-vires but the same
shall be operative in the manner indicated above. Consequently, the writ
petitions are partly allowed and assessment orders are set aside and cases are
remanded to the assessing authority to pass fresh assessment order in accordance
with law.
Punjab-Haryana High Court
M/S Gheru Lal Bal Chand vs The State
Of Haryana And Another on 23 September, 2011
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