TRADE CIRCULAR
Date: 21/06/2012
No.VAT/MMB-2012/52/Adm-8
Trade Circular No. 8T of 2012
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Sub:
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Judgment of the Hon’ble Bombay High
Court in case of M/s, Mahalaxmi Cotton Ginning
Pressing and Oil Industries, Kolhapur .
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Gentleman/ Sir/Madam,
The claims of Input Tax
Credit [ITC] under the Maharashtfa Value Added Tax
Act, 2002 are allowed as per the provisions of section 48(2) and section 48(5)
of the MVAT Act. The section says that the Input Tax Credit [ITC] cannot be
granted unless the tax on the earlier stages has been received in to the
Government Treasury. For the financial year 2008-2009 onward, the verification
of Input Tax Credit [ITC] claim is being carried out electronically. The ITC
claim in annexure J2 of Form 704 is allowed to the extent of amount matched
with the supplier's sales figure of annexure Jl. The
ITC claim to the extent of unmatched data is being disallowed. The action of
the department to disallow the ITC claim on the basis of electronic matching of
data as well as Constitutional validity of section 48(2) and section 48(5) of
Maharashtra Value Added Tax Act, 2002 was challenged in number of Writ
Petitions before Bombay High Court.
The Hon' Bombay High
Court upheld the action of Sales Tax Department of rejecting the ITC claim on
the grounds of non-payment of tax by the seller as shown by the system in the
Writ Petition No. 33 of 2012 decided on 11th May 2012 in the case of
M/s Mahalaxmi Ginning and Oil Industries. The Court
also upheld the Constitutional validity of the section 48(5) of the MVAT Act.
The Court discussed and distinguished the decision of Punjab
and Haryana High Court in case of M/s Gheru Lal Bal
Chand.
In view of this, the
position of department regarding allowing/disallowing of Input Tax Credit Claim
is:-
- No Input Tax Credit claim shall be allowed unless the corresponding tax is paid by the selling dealer into the Government treasury.
- In the case of mismatch in the sales and purchases in electronic matching of annexure Jl and J2 of form 704, then to the extent of unmatched amount of tax, the ITC of the claimant dealer shall be denied.
- ITC claim shall not be allowed if the purchases are effected from hawala dealer and even though such hawala dealer has paid the taxes partially or fully as these are not genuine transactions.
This being the position
regarding Input Tax Credit,
the department will, however,
simultaneously undertake following actions:-
1. The
Sales Tax Department will identify the Defaulters namely, registered selling
dealers who have not paid the full amount of tax due in the Government Treasury
either by not filling their returns at all or by filing returns but riot paying
the full tax due [i.e. "short filing") or where returns are filed but
sales to the concerned dealers are not shown (i.e. "undisclosed
sales").
2. Wherever
possible, departmental authorities shall take all actions against the
defaulting dealers. At the end of each year a reconciliation of such tax
recovered from the selling dealer will be carried out and the credit of tax
which had been denied earlier will now be given to the purchasing dealer.
3. The
department will display a list of all non-filers of returns / short filers,
late filers period wise, from year 08-09 on the
website of the department. This list will be updated at the end of each month.
4. For
period from 2008-09 to 2010-11, after submission of Audit report in Form 704,
if dealer has revised his return for any of the contingencies, he will be
allowed to submit revised annexures Jl and J2 with the approval of the concerned officer.
5. For
the periods from 2008-09 up to 2010-11, the department will compile a list of
all cases where Input
Tax Credit has been disallowed for the
reasons of mismatch.
In these periods the dissallowance
of Input Tax Credit claims is mainly on following accounts -
a)
Selling dealer is non-filer of
returns.
b)
Selling dealer has not filed 704
though liable to do so.
c)
Selling dealer is not liable to
file 704.
a)
In case of non-filer / short
filer, all possible actions are to be taken against such defaulting dealer as
per the provisions of law as applicable.
b)
In case of the dealer who has not
filed 704, action to levy penalty and prosecution shall be initiated. Such
cases will be taken up for scrutiny by e-704 division in Mumbai and respective
offices in other places. The dealer will be asked to file audit report along
with annexures Jl and J2.
The information corresponding to Jl and J2 obtained
during desk audit shall be Unloaded on the system by the dealer with the
approval of concerned officer.
c)
Where the dealer has filed all the
returns and paid all the taxes as per returns and is not liable to file 704 ,
the Input Tax Credit claims against such selling dealer will be allowed on the
basis of results of Mahavikas utility developed for
this purpose, subject to such cross checks or sample checks as department may
deem fit.
6. On
receipt of the Form 704 and annexures Jl and J2 from all the dealers for the years 2011-12
onwards, a process will be run on the "MAHAVIKAS" system for match/mismatch
data of turnover and tax for all the dealers. The result of match/mismatch
along with details of unmatched shall be communicated to every dealer on his
email. Subsequently, if such defaults are made good, the system shall be
updated and the process will be re-run at the end of the year and the earlier
denied credit will be allowed to the purchasing dealer as refund or carry
forward such available refund.
This circular cannot be
made use of for legal interpretation of provisions of law as it is clarificatory in nature. If any member of the trade has any
doubt, he may refer the matter to this office for further clarification.
You are requested to bring the contents of this circular to the notice
of the members of your association.
Yours faithfully
(SANJAY BHATIA)
Commissioner of Sales
Tax,
Maharashtra State, Mumbai.
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