Mahadev Enterprise Petitioner(S) v. State Of Gujarat & 1 (S)

Harsha Devani, J.:— By this petition under Article 226 of the Constitution of India, the petitioner has challenged the order dated 15th July, 2015 passed by the Gujarat Value Added Tax Tribunal (hereinafter referred to as the “Tribunal”) whereby the Tribunal has confirmed the additional liability raised by the revisional authority as well as the interest thereon.

2. The petitioner, a proprietary concern, is engaged in the business of trading in edible oil and oilseeds and is registered under the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the “GVAT Act”) as well as under the Central Sales Tax Act, 1956. It is the case of the petitioner that if it purchased goods from registered dealers of the State of Gujarat on payment of tax, the petitioner claimed input tax credit of tax paid on such purchases under section 11 of the GVAT Act. The input tax credit so claimed was adjusted against the output tax liability on sales made by the petitioner and the differential tax amount was paid by the petitioner into the Government treasury.

3. The petitioner's case was taken up for audit assessment for the year 2006-07 and the input tax credit claim of the petitioner was allowed after due verification of the tax invoices produced by the petitioner, which fact is even recorded in the assessment order passed under section 34(2) of the GVAT Act. As per the audit assessment order, there were nominal dues of Rs. 72/- against the petitioner.

4. On 8 November, 2012, the petitioner received a notice in Form 503 from the Deputy Commissioner of Commercial Tax, Circle 25, Gandhidham, proposing to revise the audit assessment order and disallow input tax credit on the ground that the registration certificate of M/s. Om Incorporation, who was one of the vendors of the petitioner, had been cancelled with retrospective effect.

5. The petitioner became aware about the fact that the registration certificate of M/s. Om Incorporation had been cancelled only after the revision proceedings were proposed to be initiated against the petitioner. The petitioner, therefore, filed an application under the Right to Information Act, 2005 (hereinafter referred to as the “RTI Act”) requesting for a copy of the order cancelling the registration of M/s. Om Incorporation as well as a copy of the assessment order passed in the case of Om Incorporation for the year 2006-07. Pursuant to such application, the petitioner was provided with copies of the order sought for by it. It is the case of the petitioner that from the order cancelling registration of M/s. Om Incorporation, it is clear that the registration had been cancelled on 1st July, 2010 because of non-filing of returns by the said dealer. Moreover, the registration had been cancelled only from 1 January, 2007 even though the said dealer was holding registration from 28 April, 2002. Also, on the website of the Commercial Tax Department, the effective date of cancellation of registration was being shown as 1 January, 2007.

6. While no proceedings were conducted pursuant to the above notice, on 7 January, 2013, another officer being the Deputy Commissioner of Commercial Tax, Audit Division-7, Rajkot, issued a revision notice in Form 503 on the same ground, that is, on the ground that the registration certificate of M/s. Om Incorporation had been cancelled with retrospective effect. In response thereto, the petitioner gave a written reply dated 9 February, 2013, enclosing therewith a copy of the registration cancellation order of M/s. Om Incorporation. It was contended by the petitioner that the registration certificate of the vendor had been cancelled much after the date of the transactions and hence, input tax credit could not be disallowed in view of the provisions of Section 11(5)(mmmm) of the GVAT Act. During the pendency of the revision proceedings, the petitioner filed another application under the RTI Act to inquire whether M/s. Om Incorporation had disclosed sales made to the petitioner in the returns filed under the GVAT Act for the period from 1 January, 2007 to 31 March, 2007. The Public Information Officer by a letter dated 5 June, 2013 furnished a copy of Form No. 201A filed by M/s. Om Incorporation to the petitioner, wherein it had clearly disclosed sales made to the petitioner.

7. It is the case of the petitioner that it was under a bonafide impression that the only controversy was whether the petitioner was entitled to input tax credit despite the fact that the registration certificate of the vendor namely, M/s. Om Incorporation had been cancelled with effect from 1 January, 2007 and that it was never alleged in the notice for revision in Form 503 that the genuineness of the purchases made from M/s. Om Incorporation was being doubted by the revisional authority. More so, because the input tax credit was sought to be disallowed only in respect of transactions with M/s. Om Incorporation after 1 January, 2007, that is, after the effective date of cancellation of registration certificate of that dealer. The input tax credit on purchases made from M/s. Om Incorporation prior to 1 January, 2007, but in the same year 2006-07, were not disputed and remained admissible even after passing of the revision order. Also, M/s. Om Incorporation had disclosed sales to the petitioner in the returns filed for the period from 1 January, 2007 to 31 March, 2007 and had accordingly been assessed to tax on such sales by the Jurisdictional Assessing Officer. Therefore, the reply given by the petitioner to the revision notice was under the bonafide belief that it has not been called upon to establish the genuineness of its transactions with M/s. Om Incorporation.

8. It is further the case of the petitioner that while the notice for revision did not allege that the transactions of the petitioner with M/s. Om Incorporation were not genuine and M/s. Om Incorporation had disclosed and had been assessed to tax on sales made by the petitioner, the revisional authority proceeded to pass the revision order against the petitioner disallowing the tax credit for purchases made from M/s. Om Incorporation during the period 1 January, 2007 to 31 March, 2007 by alleging that there was no sales made by M/s. Om Incorporation to the petitioner and that the registration of the vendor had been cancelled with effect from 1 January, 2007. Being aggrieved, the petitioner challenged the revision order dated 26 June, 2013 by filing a revision application under section 75 of the GVAT Act before the Tribunal. The petitioner also annexed the tax invoices, payment evidences as well as the documents obtained under the RTI Act, with the revision application and urged that the revision proceedings had been initiated based on extraneous material and not on the basis of the material available on record and hence, the revision order was without jurisdiction. By the impugned order, the Tribunal confirmed the disallowance of input tax credit on purchases made from M/s. Om Incorporation on the ground that they were only the billing transactions. Consequently, the Tribunal also confirmed the demand of interest but deleted the penalty imposed upon the petitioner.

9. Mr. Uchit Sheth, learned Advocate for the petitioner, invited the attention of the court to the provisions of section 75 of the GVAT Act to submit that under sub-section (1) thereof, the Commissioner is empowered to call for and examine the record of any order passed by any officer appointed under section 16 to assist him and to pass such order thereon as he thinks just and proper. It was submitted that in the present case, the revision proceedings have been initiated based on extraneous material which are not forming part of the assessment record. It was contended that it is well-settled that while reassessment is permissible on the basis of new material, revisional proceedings can be initiated only on the basis of the material on record. It was pointed out that the revising authority has clearly noted in the revision order that while the assessment order was passed on 14 February, 2011, the Commercial Tax Officer, Unit 5, Rajkot informed the Assessing Officer that the registration certificate of M/s. Om Incorporation had been cancelled and hence, the input tax credit on purchases made by the said dealer was required to be disallowed. It was based on such internal letter that the Jurisdictional Assessing Officer requested for revision of the assessment order and thereafter the Deputy Commissioner issued notice for revision. In support of such submission, the learned Advocate placed reliance upon the decision of this court in the case of The State of Gujarat v. Chelabhai Bhanabhai Prajapati, (1974) 33 STC 147, for the proposition that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. Reliance was also placed upon the decision of the Madras High Court in the case of P. Narayanasamy v. State Of Tamil Nadu, (1997) 104 STC 421, wherein the court had held that while exercising jurisdiction under section 34 of the Tamil Nadu General Sales Tax Act, 1959, the Joint Commissioner can revise the order passed by the authorities below only on the basis of the material available on record and cannot rely upon the extraneous materials which were not on record before the order was passed by the lower authorities.

10. Next, it was submitted that the confirmation of disallowance of input tax credit on the ground that the transactions were not genuine is beyond the scope of the notice for revision issued in Form 503. It was pointed out that the notice for revision was issued solely on the ground that the registration certificate of M/s. Om Incorporation had been cancelled with effect from 1 January, 2007 and hence, input tax credit was not admissible on purchases made subsequent to that date. The petitioner had made purchases from M/s. Om Incorporation for the entire year 2006-07, but the revision was proposed only in respect of the purchases made from 1 January, 2007. Therefore, the fact that the petitioner had made purchases from M/s. Om Incorporation was not in dispute and the input tax credit was proposed to be disallowed only on the ground that registration certificate of M/s. Om Incorporation had been cancelled. It was contended that the conclusion that the transactions of the petitioner with M/s. Om Incorporation were not genuine are absolutely without notice and, therefore, the order is without jurisdiction and in breach of the principles of natural justice. It was urged that the conclusion arrived at by the Tribunal that the petitioner had acted in collusion with M/s. Om Incorporation for evasion of tax is completely arbitrary and without any notice, inasmuch as, there is no such allegation either in the notice for revision or in the revision order. In support of such submission, the learned Advocate placed reliance upon the decision of this court in the case of State of Gujarat v. Virumal Santumal, [2014] 72 VST 403 (Guj), wherein the court was dealing with a case where revisional proceedings were taken under section 67 of the Gujarat Sales Tax Act, 1969. The court noted that, admittedly in the notice under Form 49 mention was made by the Commissioner only for taxing patasa and no other items. The court held that the final order passed by the Commissioner therefore, could not have travelled beyond such notice which would fall foul of requirement of rule 67 of the Gujarat Sales Tax Rules, 1970 providing reasonable opportunity to the dealer.

11. Alternatively, it was submitted that the Tribunal had erred in concluding that the purchases made by the petitioner from M/s. Om Incorporation were only billing transactions. It was submitted that the transactions were duly supported by tax invoices. The petitioner had also produced evidence of cheque payments made to the vendor M/s. Om Incorporation and M/s. Om Incorporation had disclosed sales made to the petitioner in the returns filed by it under the Value Added Tax Act and it had also been assessed to tax under the GVAT Act. It was submitted that these documents have been officially obtained by the petitioner by filing application under the RTI Act and hence, the conclusion arrived at by the Tribunal that the transactions were not genuine was perverse, contrary to facts, bad and illegal.

12. Next, it was contended that the purchases made by the petitioner from M/s. Om Incorporation were much prior to the date of the order cancelling its registration. Section 11(5)(mmmm) of the GVAT Act which provides for disallowance of input tax credit for the purchases after the publication of information about cancellation of registration of the vendor is not attracted and hence, the petitioner is entitled to the input tax credit on tax paid on purchases made from M/s. Om Incorporation prior to the date of publication of information of the cancellation of its registration. In support of such submission, the learned Advocate placed reliance upon the decision of the Supreme Court in the case of State Of Maharashtra Through The Secretary v. Suresh Trading Company, (1998) 109 STC 439 (SC), for the proposition that a purchasing dealer is entitled to rely upon the registration certificate of the selling dealer and that he cannot be penalised because of the cancellation of the registration certificate of the selling dealer.

13. In conclusion, it was urged that the petition deserves to be allowed and that the impugned order passed by the Tribunal deserves to be quashed and set aside.

14. Opposing the petition, Ms. Maithili Mehta, learned Assistant Government Pleader supported the impugned orders. It was submitted that while passing the revision order, the Deputy Commissioner has specifically observed that the petitioner had made purchases from M/s. Om Incorporation during the period 1 January, 2007 to 31 March, 2007 to the tune of Rs. 77,06,032/- and had claimed input tax credit on these purchases to the tune of Rs. 1,52,057/-. However, the registration certificate of M/s. Om Incorporation was cancelled with effect from 1 January, 2007. It was submitted that in terms of the provisions of the GVAT Act, more particularly, section 11(1)(a)(i), input tax credit can be allowed only if purchases are made from a registered dealer. It was submitted that in view of the fact that the registration certificate of M/s. Om Incorporation stood cancelled with effect from 1 January, 2007, in view of the provisions of section 11(1)(a)(i) of the GVAT Act, the petitioner is not entitled to claim input tax credit for the period after 1 January, 2007 to 31 March, 2007. The attention of the court was invited to the submissions made by the learned Government Representative before the Tribunal to point out that the business of M/s. Om Incorporation was closed for three years and it was a defaulter right from 1 January, 2007 and that notices sent to M/s. Om Incorporation in Form 503 as well as Form 104 by Registered A.D Post could not be served and those notices were returned with the postal remarks “not known”. It was pointed out that in the facts and circumstances of this case, since the transactions are not genuine and the petitioner has merely received bills without actual delivery of goods, its claim for input tax credit is not allowable. It was, accordingly, submitted that the input tax credit has rightly been disallowed and the Tribunal was wholly justified in upholding the same and that there is no warrant for interference by this court.

15. In rejoinder, Mr. Uchit Sheth, learned Advocate for the petitioner submitted that the purchase invoices were part of the assessment record and were even verified by the Assessing Officer before granting input tax credit which is specifically recorded in the assessment order. It was submitted that so far as weighment slips and incoming gate passes are concerned, no such documents were ever asked for in the revision notice or during the course of the revision proceedings. It was submitted that since the genuineness of the transactions were not doubted, the conclusion that there was no actual movement of goods is much beyond the scope of the revision notice. It was submitted that in view of the findings recorded in the revision order, the petitioner had produced evidence in support of the purchses before the Tribunal, which were brushed aside as ha having been subsequently created. It was submitted that the findings recorded by the Tribunal not being based upon the record before the Assessing Officer, the impugned order stands vitiated and the relief prayed for in the petition deserves to be granted.

16. The facts are not in dispute. The audit assessment came to be made in the case of the petitioner on 14 February, 2011 for the year 2006-07. Subsequently, the Deputy Commissioner issued a notice in Form 503 on 8 November, 2012 proposing to revise the audit assessment order by disallowing input tax credit on the ground of cancellation of registration certificate of M/s. Om Incorporation who was one of the vendors of the petitioner. It appears that no action was taken pursuant to the said notice. Thereafter, the Deputy Commissioner of Commercial Tax, Audit Division 5, Rajkot (hereinafter referred to as the “revisional authority”), issued revision notice in Form 503 on 7 January, 2013 on the same ground, that is, on the ground that the registration certificate of M/s. Om Incorporation has been cancelled with retrospective effect.

17. On behalf of the petitioner, a contention has been raised that the revisional proceedings being based on material extraneous to the record, the very initiation thereof is without jurisdiction. Since the question of jurisdiction goes to the root of the matter and touches the very authority of the Commissioner to exercise powers of revision, such question is required to be dealt with at the outset.

18. Section 75 of the GVAT Act which makes provision for “Revision” empowers the Commissioner of his own motion to call for the record of any order passed by any officer appointed under section 16 to assist him (hereinafter referred to as the “subordinate officer”) and pass such order thereon as he thinks just and proper. On a plain reading of the language employed in the section, it is clear that what the Commissioner can call for is the record of the order passed by the subordinate officer and to pass such order thereon as he thinks fit. In the facts of the present case, a perusal of the notice issued by the respondent in exercise of powers under section 75 of the GVAT Act shows that the petitioner has been called upon to show cause as to why the input credit on the purchases made by it from M/s. Om Incorporation whose registration has been cancelled ab initio should not be disallowed for the period 1 April, 2006 to 31 March, 2007. The record of the case reveals that the registration certificate of M/s. Om Incorporation has been cancelled on 1 July, 2010 with effect from 1 January, 2007. In the present case, it is an admitted position that when the original assessment order came to be made, the order cancelling the registration certificate of M/s. Om Incorporation did not form part of the record of the Assessing Officer. Evidently therefore, the proceedings under section 75 of the GVAT Act have been initiated on the basis of the material which did not form part of the record of order passed by the subordinate officer. In State of Gujarat v. Chelabhai Bhanabhai Prajapati (supra), on which reliance has been placed by the learned Advocate for the petitioner, this court, following the decision of the Supreme Court in State of Kerala v. K.M Cheria Abdulla and Co., (1965) 16 STC 875 (SC), held that the Tribunal was justified in holding that the Deputy Commissioner had acted beyond his jurisdiction in initiating revisional proceedings on certain materials which were not part of the record of the Assistant Commissioner of Sales Tax. In State of Kerala v. K.M Cheria Abdulla and Co. (supra), the Supreme Court held thus:

“5. This leads us to the question whether the revisional jurisdiction conferred under Section 12 of the Act enables the authority concerned to make a fresh enquiry after issuing notice to the dealer concerned and determine the question of assessment on merits. The Act provides for appeals in some cases and revisions in other cases. Under Section 11(1) of the Act any assessee objecting to an assessment made on him may, within 30 days from the date on which he was served with the notice of assessment appeal to such authority as may be prescribed; under Section 11(3), the Appellate Authority may, after giving the appellant an opportunity of being heard, pass such orders on the appeal as such authority may think fit. Under Section 12(2) of the Act, the revisional authority may suo motu “call for and examine the record of any order passed or proceeding recorded under the provisions of the Act by an officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit”. When the legislature confers a right of appeal in one case and a discretionary remedy of revision in another, it must be deemed to have created two jurisdictions different in scope and content. When it introduced the familiar concepts of appeal and revision, it is also reasonable to assume that the well-known distinction between these two jurisdictions was also accepted by the legislature. There is an essential distinction between an appeal and a revision. The distinction is based on differences implicit in the said two expressions. An appeal is a continuation of the proceedings, in effect the entire proceedings are before the Appellate Authority and it has power to review the evidence subject to the statutory limitations prescribed. But in the case of a revision, whatever powers the revisional authority may or may not have, it has not the power to review the evidence unless the statute expressly confers on it that power. That limitation is implicit in the concept of revision. Section 12(2) is no doubt wider in scope than Section 115 of the Code of Civil Procedure. Even so the revisional authority's jurisdiction is confined to the question of legality or propriety of the order of the regularity of the proceedings. The further limitation on that jurisdiction is that it can only exercise the same on the examination of the record of any order passed or proceedings taken by any authority. The section, therefore, not only limits the scope of its jurisdiction but also defines the material on the basis of which the said jurisdiction is exercised. The general expression that the authority “may pass such order as he thinks fit” must necessarily be confined to the scope of the jurisdiction. The revisional authority, therefore, cannot travel beyond the order passed or proceedings recorded by the inferior authority and make fresh enquiry and pass orders on merits on the basis of the said enquiry. If it is not construed in this manner, the distinction between appeal and revision would be effaced.”

19. Thus, it has been held in the above decision that the revisional authority cannot travel beyond the scope of the order or proceedings recorded by the inferior authority and make fresh enquiry and pass an order on merits on the basis of the said enquiry. In the present case, the very initiation of revisional proceedings being based upon material which is extraneous to the record of the order passed by the subordinate officer, the invocation of jurisdiction under section 75 of the Act itself stands vitiated, inasmuch as, the same is not based upon the record of the order passed by the officer appointed under section 16 of the Act.

20. Examining the case on merits, it may be germane to refer to certain statutory provisions. Section 11 of the Act makes provision for “Tax credit”. Sub-section (5) thereof provides that notwithstanding anything contained in the Act, tax credit shall not be allowed for purchases enumerated thereunder. Clause (mmmm) thereunder which is relevant for the present purpose reads thus:—

“(mmmm) made from a dealer after the name of such dealer had been published under sub-section (11) of section 27 or section 97”

21. Sub-section (11) of section 27 of the GVAT Act casts an obligation upon the Commissioner to publish the address of the dealers whose certificate of registration has been suspended or cancelled under the provisions of the Act. Section 97 of the Act provides for publication of information regarding dealers and other persons in public interest and provides that notwithstanding anything contained in section 92, if the Commissioner is of the opinion that it is necessary or expedient in the public interest to publish or disclose the names of any dealers or other persons and any other particulars relating to any proceedings under the Act in respect of such dealers and persons, he may publish or disclose or cause to be published or disclosed such names and particulars in such manner as may be prescribed. The reason behind enacting section 11(5)(mmmm) is clear. Under sub-section (1)(a) of section 11 of the GVAT Act, a registered dealer who has purchased taxable goods is entitled to tax credit equal to the amount of tax collected from the purchasing dealer by a registered dealer from whom he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period. Thus, input tax credit is available only in respect of goods purchased from a registered dealer. When a dealer bonafide purchases goods from another dealer who was granted registration under the Gujarat Value Added Tax Act, he would not be aware of the cancellation of his registration unless the same is duly published by the Commissioner under sub-section (11) of section 27 or section 97 of the Act. In the absence of any such publication, a dealer may not be aware of such cancellation and may bonafide purchase goods from such dealer. Therefore, with a view to ensure that a registered dealer who purchases goods from another registered dealer is not unduly prejudiced by the cancellation of the registration of the selling dealer, clause (mmmm) of sub-section (5) of section 11 of the GVAT Act provides that input tax credit shall not be allowed in respect of purchases made from a dealer after the name of the dealer is published under sub-section (11) of section 27 or section 97. In other words, ordinarily, input tax credit can be disallowed only after the name of the dealer is published in the manner prescribed in section 27(11) or section 97 of the Act. In the opinion of this court, in view of the provisions of Section 11(5)(mmmm) of the GVAT Act, even if the cancellation of registration of such selling dealer is retrospective in effect or is cancelled ab initio, insofar as the purchasing dealer is concerned, input credit cannot be denied to him till the date of the publication of the name of the dealer under section 27(11) or section 97 of the Act. That is not to say that in every case, the purchasing dealer would be entitled to tax credit on the purchases made from the dealer whose registration is subsequently cancelled. In case where the Department is in a position to establish that the purchases are not genuine or that the same are fictitious or otherwise, it may be permissible to disallow input credit on such purchases. However, merely because the registration of the selling dealer has been cancelled retrospectively, input tax credit cannot be disallowed except as provided under section 11(5)(mmmm) of the Act.

22. In the case of Madhav Steel Corporation v. State of Gujarat, (2014) 72 VST 318 (Guj), on which strong reliance is generally placed on behalf of the authorities under the GVAT Act, the court was dealing with a case wherein two parties viz., M/s. Shree Bhavani Ispat, Bhavnagar and M/s. Mangal Enterprise, from whom the appellant therein had purchased goods failed to establish the genuineness of their purchases and also failed to establish the genuineness of the sales made to the appellant therein. The appellant therein upon being called upon to establish the genuineness of the purchases from the said parties failed to do so. Thus, in that case, there were findings of fact to the effect that genuineness of the purchases made by the selling dealers was not established and the genuineness of the sale in favour of the appellant therein was also not established. It is in such circumstances that the court held that when the appellant/s had failed to provide any documentary evidence with regard to physical movement of the goods from the two parties namely, M/s. Shree Bhavani Ispat and M/s. Mangal Enterprise to the respective appellants/dealers, the sale transactions are not found genuine, and are found to be bogus, and are also found to be billing activities only, the Tribunal was justified in denying input tax credit claimed by the appellants/dealers. Thus, the above decision cannot ipso facto be applied to all cases where registration of the selling dealer has been cancelled to deny the purchasing dealer the benefit of input tax credit. To apply the decision of Madhav Steel Corporation (supra), findings of fact as regards the genuineness of transactions not having been established, have to be recorded.

23. In the facts of the present case, in the audit assessment order, no such finding regarding the transactions not being genuine have been recorded and the input tax credit has been allowed. The revisional proceedings are not only based on material which is extraneous to the record of the Assessing Officer, but the revisional authority without calling upon the petitioner to prove the genuineness of the purchases has recorded that documents like sale bills of M/s. Om Incorporation, L.R, weighbridge chits, entry gate pass etc. have not been produced and hence there does not appear to be any transfer of goods. The revisional authority has also observed that since the registration of M/s. Om Incorporation has been cancelled with effect from 1 January, 2007, the petitioner is not entitled to the tax credit in respect of purchases made thereafter.

24. It may be noted that the petitioner has purchased goods from M/s. Om Incorporation for the period prior to 1 January, 2007 also. However, the input tax credit has not been denied for such period but it is denied for the period after 1 January, 2007 to 31 March, 2007. In the opinion of this court, when the genuineness of the purchases have not been doubted for the period prior to 1 January, 2007, the same cannot be doubted for the subsequent period, without anything more, except that the registration of the selling dealer has been cancelled with effect from such date. The record of the case reveals that initially, the registration of M/s. Om Incorporation came to be cancelled by an order dated 1 July, 2010 with effect from 1 January, 2007. Subsequently, the registration of M/s. Om Incorporation was cancelled ab initio by an order dated 27 June, 2014. As noticed hereinabove, in view of the provisions of Section 11(5)(mmmm) of the GVAT Act, the input tax credit cannot be denied till the date when the Commissioner publishes the names of the dealer whose registration has been cancelled in the manner prescribed under sub-section (11) of section 27 and section 97 of the Act except where specific findings are recorded by the authorities under the GVAT Act regarding non-genuineness of the transactions, bogus sales and purchases, etc.

25. The Tribunal in the impugned order has recorded the following findings:—

12. We have considered the rival submissions and the facts of the case. We have also gone through the orders passed by the authorities below and the documents produced before this Tribunal. The written submissions made by the applicant, documents along with necessary details and various authorities or decisions were also taken into consideration. Certain departmental correspondences exchanged by the departmental officials, which are placed on record were also perused by this Tribunal. Various propositions of law made by Mr. Patel either orally or in written submission are to be appreciated in the context of facts on record. The facts of M/s. Om Incorporation which are on record and which are brought to the notice of the Tribunal clearly indicate that the said party is nothing but fraud and its main activity right from its inception was to issue only bills without delivery of goods. The very fact that the said dealer has discontinued its business prior to the transactions with the applicant and its where-abouts were not known itself indicates that after entering into such bogus transactions, the said party is virtually absconding. As per the report placed on record, more than Rs. 17 crores were outstanding against the said party. It is very unfortunate and serious lapse on the part of the departmental authorities that at the relevant time, the registration certificates of the said party were cancelled w.e.f 01/01/07 on the ground of non-filing of three consecutive returns, despite the fact that the very same officer has made proposal on 01/07/10 to cancel the registration certificate of M/s. Om Incorporation ab initio.

13. The documents produced by Mr. Patel clearly indicated that the same are not genuine and they are subsequently created. This Tribunal has dealt with this issue in great detailed in Revision Application No. 58 of 2013 in the case of Arvind Export Solvent Oil Ind. v. State of Gujarat and ultimately come to the conclusion that the transaction entered in the Om Incorporation are not genuine and the applicant has merely obtained bills from M/s. Om Incorporation. This Tribunal has also observed that the applicant has used its name as the department could not trace out the said party and on spot visit, it was found that said dealer has closed its business for the last three years.

14. In the above view of the matter without disputing the legal propositions canvassed by Mr. Patel in respect of his submissions and accepting the ratio laid down by the Hon'ble Court, we, however, hold after considering the facts of the present case that the transactions are not at all genuine, and the applicant has also acted in collusion with the said party for evasion of tax. We, therefore, confirm the order of the learned Revisional authority disallowing the claim of the applicant with regard to input tax credit on the purchases made from M/s. Om Incorporation during the period from 01/01/07 to 31/03/07. Since interest being consequential, the applicant is also liable to pay interest charged by the learned revisional authority.

15. Though the applicant is liable to pay the tax and interest as determined by the learned revisional authority on disallowance of input tax credit the applicant is not liable to pay penalty as per settled legal position discussed above while considering the submissions made by Mr. Patel on this issue. The Revisional authority cannot levy the penalty for the first time while passing revisional order.

26. Thus, while holding that the petitioner is not entitled to input tax credit, the Tribunal has placed reliance upon material extraneous to the record including departmental correspondence, some report placed on the record as well as its decision in the case of Arvind Export Solvent Oil Industries v. State of Gujarat, wherein it had come to the conclusion that the transactions entered into with M/s. Om Incorporation were not genuine. In that case, the Tribunal observed that the applicant in that case had used its name as the Department could not trace out the said party on spot visit. The findings recorded by the Tribunal regarding M/s. Om Incorporation being nothing but a fraud whose main activity right from the inception was to issue only bills without delivery of goods etc. is also based upon material produced by the respondents directly before the Tribunal. Besides, it is settled law that a previous decision can be relied upon for the legal proposition laid down therein, but the facts from another case cannot be borrowed or applied in another case. Reliance placed by the Tribunal on the findings recorded by it in the case of Arvind Export Solvent Oil Industries v. State of Gujarat on factual aspects for the purpose of holding the transactions between the petitioner and M/s. Om Incorporation to be non-genuine is contrary to the settled legal norms. Each matter has to be decided on its own facts and the Tribunal while deciding the case of one party cannot place reliance upon the facts which have come to its knowledge only in another proceeding and apply them to a third party who has no connection with those proceedings.

27. As discussed hereinabove, input tax credit cannot be denied to a party in the absence of the Department having established that the transactions in question are not genuine or that they are bogus etc. In the facts of the present case as emerging from the record, no such material has been brought on record by the respondent. In the facts of the present case, the revisional authority had initiated the revision proceedings by calling upon the petitioner to show-cause as to why the input tax credit on the purchases made by it from M/s. Om Incorporation for the period after 1 January, 2007 should not be disallowed. The petitioner, at no point of time, was called upon to establish the genuineness of such transactions or to produce any documentary evidence in support of such transactions. The revisional authority, without calling upon the petitioner to produce any such documents, had recorded a finding that the petitioner had not produced any documents in the nature of sale bills, L.R, weigh bridge chits, entry gate pass etc. to establish transfer of goods to it from M/s. Om Incorporation. The Tribunal has gone a step further and has placed reliance upon material produced by the respondent directly before it, that too, regarding M/s. Om Incorporation, and has recorded a finding that the transactions are not genuine and that the petitioner has acted in collusion with M/s. Om Incorporation for evasion of tax. In the opinion of this court, there was no justification for the Tribunal to record such findings of fact which were not based upon material forming part of the record of the order of the subordinate authority, but upon material produced by the respondent directly before the Tribunal.

28. Another aspect of the matter is that before the Tribunal, all aspects with regard to the scope of the revisional proceedings etc. had been canvassed by the learned Advocate for the petitioner. It was categorically stated by the petitioner that there was no dispute at all with regard to genuineness of purchase transactions and the petitioner had also produced documents in support thereof. However, such documents have been brushed aside by the Tribunal on the ground that they are not genuine and were subsequently created.

29. In the facts of the present case, when the authorities below have not called upon the petitioner to establish the genuineness of the transactions, in the opinion of this court, the Tribunal was not justified in brushing aside the documentary evidence produced by the petitioner by stating that the same had been subsequently created. Moreover, the Tribunal has noted that without disputing the legal propositions canvassed on behalf of the petitioner, it emerges that the transactions are not genuine and that the petitioner has acted in collusion with the said party for evasion of tax. One of the contentions raised by the petitioner before the Tribunal was on the question of invocation of jurisdiction under section 75 of the Act, which went to the root of the matter. The Tribunal, however, without disputing the legal propositions canvassed on behalf of the petitioner and recording any finding on the question of lack of jurisdiction on the part of the revisional authority, has confirmed the order passed by the revisional authority to the extent of the additional tax liability. When legal propositions are canvassed on behalf of a party before the Tribunal, more so, a proposition regarding lack of jurisdiction on the part of the concerned authority, which goes to the root of the matter, the Tribunal is duty bound to deal with the same and record a finding in respect thereof.

30. In the light of the above discussion, this court is of the view that the very initiation of the revisional proceedings was itself without jurisdiction, inasmuch as, the same was based upon material extraneous to the record of order of the officer appointed under section 16 of the Act to assist the Commissioner. Moreover, even on merits, for the reasons recorded hereinabove, the court is of the view that the impugned order passed by the Tribunal cannot be sustained.

31. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned order dated 15 July, 2015 passed by the Gujarat Value Added Tax Tribunal, Ahmedabad in Revision Application No. 67 of 2013 to the extent the same confirms the additional tax liability raised by the revisional authority and the interest thereon, is hereby quashed and set aside. It is held that the petitioner is entitled to input tax credit on tax paid on purchases made by it from M/s. Om Incorporation and is not liable to pay any tax or interest as per the revision order passed against it under the GVAT Act for the year 2006-07. Rule is made absolute accordingly.