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2016 (4) TMI 1309 - HC - VAT and Sales TaxValidity of assessment order - reversal of input tax credit - TNVAT Act - DEPB scheme - reversal of credit on the ground that the input availed for the goods sold without Form C had to be reversed and that as per Section 19(4) the input tax credit had to be availed over and above 3% on the transfer of goods to other State otherwise by way of sale. Can the Department deny the benefit of input tax credit for the duty paid by the petitioner on the purchase of DEPB licences when such licences are considered to be goods within the meaning of Section 2 (21) and the tax paid on the purchase of such licences are considered as input tax under Section 2(24) and also when the charging provisions in Section 3(3) clearly entitle a registered dealer to such a benefit? - Held that - From the scheme of Section 19(1) it appears that to become eligible for input tax credit the following conditions should be satisfied by a person (i) he should be a registered dealer; (ii) he must have paid or become obliged to pay a tax under this Act to the seller on the purchase of taxable goods; and (iii) such taxable goods on the purchase of which he paid or became liable to pay tax under the Act are also specified in the First Schedule. What the petitioner claims is an input tax credit on the amount of duty paid for the purchase of a DEPB licence. The claim of the petitioner is that a DEPB licence is also a good within the meaning of the expression goods under Section 2(21) - A look at Section 19(1) which provides for input tax credit shows that the entitlement for such credit is restricted only to the amount of tax paid or payable under the Act by the registered dealer to the seller on his purchases of taxable goods specified in the First Schedule. Therefore unless the claim for input tax credit relates to the tax paid or payable on the purchase of taxable goods specified in the First Schedule it is not possible to grant credit - DEPB licences do not even fall under any of the categories mentioned in Section 19(2). The case of the petitioner does not even fall under Sub-Section (3) or Sub-Section (4) of Section 19. Therefore our answer to the first question of law would be that the Department was right in denying the benefit of input tax credit in respect of the duty paid by the petitioner on the purchase of DEPB licences despite the fact that these licences constitute goods within the meaning of Section 2(21). DEPB licences do not even fall under any of the categories mentioned in Section 19(2). The case of the petitioner does not even fall under Sub-Section (3) or Sub-Section (4) of Section 19. Therefore our answer to the first question of law would be that the Department was right in denying the benefit of input tax credit in respect of the duty paid by the petitioner on the purchase of DEPB licences despite the fact that these licences constitute goods within the meaning of Section 2(21). Is the list mentioned in Clauses (i) to (vi) of Sub-Section (2) of Section 19 enumerative or exhaustive? - Held that - entitlement non-entitlement etc. are covered with reference to specifics in the other Sub-Sections of Section 19. It does not mean that the very entitlement to credit could be traced only to Sub-Sections (2) to (4) and the non-entitlement could be traced to Sub-Sections (5) to (10). If a dealer satisfies the essential conditions stipulated in Sub-Section (1) he is entitled to credit. Therefore we are of the considered view that Sub-Section (2) of Section 19 is enumerative and not exhaustive. Revision dismissed.
Issues Involved:
1. Denial of input tax credit for the duty paid on the purchase of DEPB licenses. 2. Whether the purposes mentioned in Clauses (i) to (vi) of Sub-Section (2) of Section 19 are enumerative or exhaustive. Issue-wise Detailed Analysis: 1. Denial of Input Tax Credit for DEPB Licenses: The petitioner, an importer and exporter of spices and chemicals, claimed input tax credit (ITC) for the purchase of DEPB (Duty Entitlement Pass Book) licenses during the assessment year 2007-08. The Assistant Commissioner (Commercial Taxes) issued a notice proposing to reverse the ITC on the ground that input availed for goods sold without Form 'C' had to be reversed and that ITC had to be availed over and above 3% on the transfer of goods to other states otherwise by way of sale. The Assessing Officer confirmed the reversal of ITC for DEPB licenses, which was upheld by the Appellate Deputy Commissioner and the Tamil Nadu Sales Tax Appellate Tribunal. The main question was whether the reversal of ITC on the purchase of DEPB licenses used for payment of import customs duty was in order. The Tribunal noted that DEPB licenses, though considered goods, were not covered by any of the Clauses of Sub-Section (2) of Section 19. The petitioner argued that DEPB licenses are goods under Section 2(21) and the tax paid on their purchase constitutes "input tax" under Section 2(24). However, the court held that the entitlement to ITC under Section 19(1) is restricted to the amount of tax paid or payable on the purchase of taxable goods specified in the First Schedule. DEPB licenses are not included in the First Schedule, and hence, the claim for ITC was not valid. The court further clarified that DEPB licenses, despite being goods, are distinct from the goods imported using those licenses. The petitioner did not satisfy the conditions under Section 19(1) for claiming ITC, as DEPB licenses were not specified in the First Schedule and no tax under the Tamil Nadu Value Added Tax Act was paid on these purchases. Therefore, the denial of ITC was upheld. 2. Enumerative or Exhaustive Nature of Section 19(2): The second issue was whether the purposes indicated in Clauses (i) to (vi) of Sub-Section (2) of Section 19 are enumerative or exhaustive. The court analyzed the scheme of Section 19, which provides ITC for purchases made for specific purposes within the state. Sub-Section (2) lists six purposes for which ITC can be claimed, such as resale within the state, use in manufacturing, and inter-state trade. The court concluded that Section 19 is a complete code in itself, covering entitlement, non-entitlement, and specifics of ITC. Sub-Section (2) is enumerative, not exhaustive, meaning it lists specific purposes but does not limit the general entitlement to ITC under Sub-Section (1). However, this conclusion did not benefit the petitioner, as the primary issue of ITC for DEPB licenses was already decided against them. Conclusion: The court dismissed the revision petition, holding that the petitioner was not entitled to ITC for the purchase of DEPB licenses and that Sub-Section (2) of Section 19 is enumerative. The denial of ITC was found to be in order, and the petitioner did not satisfy the necessary conditions for claiming ITC under the Tamil Nadu Value Added Tax Act, 2006.
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