UP VAT Act Act does not contemplate that if claim of Input Tax Credit (I.T.C.) is reversed the registration of a dealer could be cancelled in addition to reversal of I.T.C. By virtue of proviso to Section 14 of the UP VAT Act, the assessee would only be liable to pay interest at a rate of 15% per annum.

Raising of an incorrect claim of I.T.C. is not one of the grounds contemplated under Section 17 (11) for cancellation of registration. Sub-Clause 9 which is pressed into service, enables the authorities to cancel registration for any other ‘sufficient cause’. The term ‘sufficient cause’ is a word of significance and has to be construed as being of same genus, as occurring in clause (i) to (viii) of Section 17 (11), following the principles of ejusdem generis”, the Judge also observed.

Mere wrongful claim of I.T.C. would not be a sufficient cause to cancel the registration of dealer. Cancellation of dealer’s registration is a drastic step, which can be taken only for justifiable causes, as are permissible in law and not otherwise”, the Court also added.

FULL TEXT OF HIGH COURT JUDGMENT

Registration as dealer of assessee has been cancelled by the authorities invoking jurisdiction under Section 17 (11) (ix) of the U.P. Value Added Tax Act, for the reason that the assessee had wrongly claimed benefit of I.T.C., showing purchase of goods from M/s Shree Krishna Builders & Developers, Chandpur, Bijnor, whereas no such sale was made by the concerned developer. The benefit of I.T.C. was reversed and thereafter notice was issued for cancellation of registration certificate. After affording an opportunity of hearing, registration certificate has been cancelled and affirmed by the Tribunal. Thus aggrieved, the dealer is before this Court.

Learned counsel for the applicant submits that a wrongful claim of I.T.C would not constitute sufficient ground for cancellation of registration as dealer and at best the benefit of I.T.C. could be reversed, as has already been done herein.

Learned Standing Counsel, on the other hand, submits that jurisdiction under Section (17) (11) (ix) has rightly been
invoked and no interference is warranted.

From the materials placed, this Court finds that only ground taken for cancellation of registration as dealer is the alleged wrongful claim of I.T.C. by the revisionist. The I.T.C. is admissible by virtue of Section 13 of the Value Added Tax Act. In case claim of I.T.C. is found to be false or incorrect, then it can be reversed by invoking jurisdiction under Section 14 of the Act. Section 14 of the Act reads as under:-

“Section 14. Reverse Input Tax Credit:-

(1) Consistent with the provisions of this Act, the State Government may prescribe the circumstances in which and the goods in respect of which input tax credit shall be neither claimed nor allowed.

(2) Where, in respect of any goods, a dealer has already claimed input tax credit against the provisions of this Act
or the rules framed thereunder or has wrongly claimed input tax credit in respect of any goods, benefit of input tax
credit to the extent it is not admissible, shall stand reversed and such amount of reverse input tax credit shall be deducted from the amount of input tax credit already claimed by the dealer in the tax period in which event giving rise to reverse input tax credit has occurred:

PROVIDED that where event, giving rise to reverse input tax credit, comes to the notice of the dealer after the tax
return, for the tax period in which such event has occurred, has been submitted, the dealer shall be liable to pay such amount of reverse input tax credit within thirty days after the event comes to the notice of the dealer, along with simple interest at a rate of fifteen percent per annum for the period commencing on the date following the last date prescribed for submitting tax return of the tax period in which event has occurred and ending on the date on which amount has been deposited.”

The Act does not contemplate that if claim of I.T.C. is reversed the registration of a dealer could be cancelled in addition to reversal of I.T.C. By virtue of proviso to Section 14, the assessee would only be liable to pay interest at a rate of 15% per annum. The power to cancel registration of dealer is contained under Section 17 (11) of the Act, which reads as under:-

“17(11) The registering authority, after giving reasonable opportunity of being heard to the dealer, may cancel the
registration certificate with effect from the date-

(a) on which dealers’ liability for payment of tax has ceased; or

(b) on which the dealer has discontinued the business; or

(c) of order of cancellation where-

(i) the dealer has obtained registration certificate by fraud or by mis-representation of facts; or

(ii) the dealer has failed to furnish security or additional security, as the case may be; or

(iii) the dealer has transferred any prescribed form of declaration or certificate obtained by him to any person
against provisions of this Act or the rules made thereunder; or

(iv) the dealer has permitted some other person to carry on business in his name; or

(v) the dealer has issued any tax invoice to a dealer without making actual sale of goods; or

(vi) where a transporter or carrier or transporting agent or railway container contractor fails to file return or otherwise acts in contravention of the provisions of this Act or Rules made there under;

(vii) a person acts in contravention of provisions of section 43;

(viii) where a dealer has failed to pay the tax, penalty or other dues within three months of the date such tax, penalty or other dues become payable;

(ix) registration certificate has been cancelled for any other sufficient cause.

Various circumstances are specified in the Act which may lead to cancellation of registration. Raising of an incorrect claim of I.T.C. is not one of the grounds contemplated under Section 17 (11) for cancellation of registration. Sub-Clause 9 which is pressed into service, enables the authorities to cancel registration for any other ‘sufficient cause’. The term ‘sufficient cause’ is a word of significance and has to be construed as being of same genus, as occurring in clause (i) to (viii) of Section 17 (11), following the principles of ejusdem generis.

The grant of I.T.C., as well as its reversal is specifically dealt with under Section 13 and 14 of the Act. The consequence of wrongful claim of I.T.C. is specified. If the intent of legislature was to penalise dealer by having its registration cancelled, on account of raising of false claim of I.T.C., then such a course could have been provided for in the Act itself. This Court, therefore, is of the opinion that a mere wrongful claim of I.T.C. would not be a sufficient cause to cancel the registration of dealer. Cancellation of dealer’s registration is a drastic step, which can be taken only for justifiable causes, as are permissible in law and not otherwise.

In the instant case, it is claimed by revisionist that it has made certain purchases from M/s Shree Krishna Builders &
Developers , which is denied. It is for the authorities to find out whether the claim raised by the revisionist is wrong or that a false plea has been set up by M/s Shree Krishna Builders & Developers. Just because the developer firm has denied having sold goods to the revisionist, it can only result in reversal of I.T.C, but for such reason the registration cannot be cancelled. Attention of the Court is also invited to the fact that M/s Shree Krishna Builders & Developers has subsequently revised its return, and the sales made to the revisionist is duly reflected in its return.

For such reasons, this Court is of the opinion that cancellation of registration of the assessee, for the ground noticed earlier, would not be valid and the question of law posed for consideration is answered accordingly.

Revision stands allowed.

Order Date :- 13.04.2017