UP VAT Act | Where Assessee Has Paid Far More Tax Than Input Tax Credit Claimed, Section 13(1)(f) Will Not Apply: Allahabad High Court

The Allahabad High has held that where assessee has paid far more tax than the input tax credit claimed, Section 13(1)(f) of the Uttar Pradesh Value Added Tax Act, 2008 will not apply.

Section 13(1) of the Uttar Pradesh Value Added Tax Act, 2008 provides conditions in which input tax credit can be claimed by an assesee holding a valid registration. Section 13(1)(f) of the Act provides that

“Notwithstanding anything to the contrary contained in this sub-section where goods purchased are resold or goods manufactured or processed by using or utilizing such where goods are sold, at the price which is lower than (i) purchase price of such goods in case of resale; or (ii) cost price in case of manufacture, the amount of input tax credit shall be claimed and be allowed to the extent of tax payable on the sale value of goods or manufactured goods.”

Respondent/assessee was issued show cause notice regarding deficiencies discovered during investigation for assessment year 2014-15. Since assesee's explanation was found unacceptable on issue of low selling price of goods, input tax credit of Rs.97,83,860.00, and final amount of Rs.1,14,67,143.00 was reversed under Section 13(1)(f) of the Uttar Pradesh Value Added Tax Act, 2008.

Allowing the appeal filed by the assesee, the first appellate authority quashed the disputed amount of Rs.70,76,786.00. Revenue preferred a revision before the High Court on grounds that benefit of input tax credit was available to the assesee only on goods purchased within the State of Uttar Pradesh if VAT was paid on them.

Relying on Sections 13(1) and 13(1)(f) of the Act of 2008 read with Rule 23(6) of the U.P. Value Added Tax Rules, 2008, counsel for revenue argued that benefit of input tax credit is limited to the total purchase of the VAT goods which is 2.53% of the total goods purchased by the assessee. For the remaining goods, he argued that the tax liability should be calculated at 5%.

The Court observed that the Tribunal had specifically held that the assesee had already deposited much more tax than the input tax credit which had been claimed by him. It was observed by the Tribunal that the assessee had claimed input tax credit of Rs.1,43,83,587/- against which tax of Rs.13,27,46,784/- was deposited on the sale of manufactured urea. Since the tax paid by the assesee was much more than input tax credit claimed, it was held that Section 13(1)(f) was not applicable on the assessee.

Perusing the record and the order of the Tribunal, Justice Shekhar B. Saraf held that

“Upon perusal of the documents, the finding of the Tribunal seems to be crystal clear and leaves no room for doubt. The assessee has paid far more tax than the ITC claimed, and accordingly, the rigours of Section 13(1)(f) of the Act would not be applicable to the assessee. There does not appear any need for interference in the order passed by the Tribunal.”

Accordingly, the revision filed by the department was dismissed.

Case Title: The Commissioner, Commercial Tax, U.P. Lucknow vs. S/S Cribhko Shyam Fertilizer Ltd. 2024 LiveLaw (AB) 77 [SALES/TRADE TAX REVISION No. - 87 of 2023]

Case citation: 2024 LiveLaw (AB) 77

Counsel for Revisionist: B.K. Pandey

Counsel for Opposite Party: Shubham Agrawal

Click Here To Read/Download Order