ITC cannot be denied to the purchasers for non payment of tax by the suppliers – Delhi High Court
On Quest Merchandising India Pvt. Ltd. v. Government of NCT of Delhi [W.P.(C) 6093/2017 & CM No.25293/2017, W.P.(C) 4086/2013 & CM No.9620/2013, W.P.(C) 2106, 2383, 4904, 10708/2015, W.P.(C) 573, 4574, 4704, 4709, 4710, 4713/2016 & CM No.19649/2016 , W.P.(C) 4714, 4788/2016, W.P.(C) 6583, 11846/2016 & CM No.26973, 46676/2016, W.P.(C) 6804, 7388/2017 (High Court – Delhi)]
The Delhi High Court delivered a very good judgment in this case and along with other petitions on the admissibility of ITC on bona fide purchases where the sellers have not deposited the tax with the Government. Delhi High Court holds that the expression ”dealer or class of dealers” occurring in Section 9 (2) (g) of the DVAT Act should be interpreted as not including a purchasing dealer who has bona fide entered into purchase transactions with validly registered selling dealers who have issued tax invoices in accordance with Section 50 of the Act where there is no mismatch of the transactions in Annexures 2A and 2B. Unless the expression “dealer or class of dealers” in Section 9 (2) (g) is „read down‟ in the above manner, the entire provision would have to be held to be violative of Article 14 of the Constitution. The result of such reading down would be that the Department is precluded from invoking Section 9 (2) (g) of the DVAT to deny ITC to a purchasing dealer who has bona fide entered into a purchase transaction with a registered selling dealer who has issued a tax invoice reflecting the TIN number. In the event that the selling dealer has failed to deposit the tax collected by him from the purchasing dealer, the remedy for the Department would be to proceed against the defaulting selling dealer to recover such tax and not deny the purchasing dealer the ITC. Where, however, the Department is able to come across material to show that the purchasing dealer and the selling dealer acted in collusion then the Department can proceed under Section 40A of the DVAT Act.
To read the complete judgment 2017 Taxo.online 77
