Law: Sales Tax Act, 1990

Section: 8(1)(ca), 8(1)(caa)

 Summary The High Court dismissed the Tax Department’s reference against the Tribunal’s order which had restored the taxpayer’s input tax adjustment. The Department alleged that input tax was inadmissible under Sections 8(1)(ca) and 8(1)(caa) of the Sales Tax Act, 1990. The Tribunal found that, at the relevant time, the supplier was duly registered and appeared on the Active Taxpayer List (ATL), and was blacklisted only subsequently. Relying on the Supreme Court judgment in Commissioner Inland Revenue v. M/s Gadoon Textile Mills, the Tribunal held that input tax could not be denied merely because the supplier was blacklisted later. The High Court further observed that neither the show-cause notice nor the Order-in-Original explained how Section 8(1)(caa) applied to the taxpayer’s case. Since no factual or legal basis for disallowance under Section 8(1)(caa) was established by the Department, the Tribunal committed no error in declining to independently formulate such grounds. Accordingly, the reference was dismissed. Tagline Input tax cannot be denied where the supplier was registered and on the Active Taxpayer List at the relevant time, and no reasoned case under Section 8(1)(caa) is made out. ORDER; Babar Sattar, J.:- This reference arises from a judgment of the Appellate Tribunal Inland Revenue dated 03.10.2024. Learned counsel for the tax department submitted that the taxpayer was issued a show-cause notice dated 29.03.2024 enquiring into why input tax adjustment ought not be disallowed under sections 8(1)(ca) and 8(1)(caa) of the Sales Tax Act, 1990. Through the Order-in-Original the input tax was disallowed on the basis of charges communicated through the show-cause notice. The Tribunal, however, set aside the Order-in-Original on the basis that at the relevant time the supplier was not blacklisted and was duly registered with the tax department and was on the active taxpayer list in such circumstance the input tax adjustment could not be disallowed…