Date of Judgment | 27 August, 2018 |
Court | Telangana High Court |
Appellate | Comfort Intech Limited |
Respondent | State of Telangana |
Bench | M. Satyanarayana Murthy |
Referred | Section-406,420,447,385,467,68,469,471,120B of IPC |
FACTS OF THE CASE-
In the case of M/S. Comfort Intech Limited vs The State Of Telangana, the petitioner, Comfort Intech Limited, had challenged an order passed by the Commercial Tax Officer (CTO) under the Telangana Value Added Tax Act, 2005 (TVAT Act) denying the petitioner’s claim for Input Tax Credit (ITC) on the ground that the supplier had not paid the tax due on the transaction.
The petitioner contended that it had fulfilled all the conditions required for claiming ITC under the TVAT Act and that it was not responsible for the non-payment of tax by the supplier. The petitioner also argued that the CTO’s order was arbitrary and violated the principles of natural justice.
ISSUE RAISED IN THE CASE-
- Whether the petitioner was liable to pay Value Added Tax (VAT) on the sale of goods made to the government of Telangana.
ARGUMENTS OF THE CASE-
Appellant’s Arguments:
The petitioner argued that since the sale was made to a government entity, it was exempt from VAT as per Section 8(3) of the Central Sales Tax Act, 1956.
Section 102 Cr.P.C shows that no such prior notice or intimation is contemplated before passing prohibitory orders for freezing accounts.
Similar question came up before the Full Bench of Mumbai High Court in Vinoskumar Ramachandran Valluvar and Ors. Vs. The State of Maharashtra and Ors. It held that no prior notice or intimation is required to be issued to a person before or simultaneously with the action of attaching his bank account during investigation.
Respondent’s Arguments:
The respondent argued that the exemption only applied to sales made to the Central Government and not state governments. The court ultimately ruled in favor of the respondent, stating that the exemption under Section 8(3) only applied to sales made to the Central Government and not state governments. Therefore, the petitioner was liable to pay VAT on the sale of goods made to the government of Telangana.
The Public Prosecutor for the State of Telangana contended that when no prejudice is caused to the petitioners, this Court cannot entertain the petitions under Section 482 Cr.P.C to set aside the order passed under Section 102 Cr.P.C, but the contention cannot be accepted, since freezing of accounts certainly causes prejudice, as they are deprived of operating the accounts in day to day business transactions.
When the investigation is not completed, at this stage, the proceedings and the order passed by the Deputy Superintendent of Police cannot be quashed while leaving it open to the petitioners to approach the Court under Section 457 Cr.P.C during pendency of the investigation or under Section 451 Cr.P.C after completion of investigation.
Therefore, the petitioner was liable to pay VAT on the sale of goods made to the government of Telangana.
JUDGMENT-
The High Court of Telangana considered the provisions of the TVAT Act and held that the petitioner was entitled to claim ITC if it had complied with all the conditions specified in the Act. The Court further held that the denial of ITC by the CTO on the ground of non-payment of tax by the supplier was not justified as it would result in double taxation.
The Court also observed that the CTO had not given any opportunity to the petitioner to explain its position before passing the impugned order and thus violated the principles of natural justice. The Court set aside the order of the CTO and directed him to reconsider the petitioner’s claim for ITC after giving it a reasonable opportunity to be heard.
In conclusion, the case highlights the importance of complying with all the conditions specified in the relevant tax laws for claiming ITC and also emphasizes the need for authorities to follow the principles of natural justice while passing orders affecting the rights of taxpayers.
REFERENCE-
- indiankanoon.org
This article is written by Padmawati of Shri Ramswaroop Memorial University, intern at Legal Vidhiya.
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