9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (4) TMI 935 - HC - VAT and Sales TaxValidity of circular directing to reverse the credit to the extent of waste - TNVAT - Demand of VAT on the invisible loss of yarn emerging during manufacturing process - Refund was vat credit was claimed on export - Circular No.22/2011 dated 20.10.2011 - Held that - Head of the Department is entitled to give administrative instruction, which shall be binding on all his subordinates. The problem would arise only when certain subordinates without due application of mind mechanically apply the circular/guideline/instruction and proceed to take action unmindful of the factual and legal position. There might be cases where the administrative head will issue instructions to the subordinates for the day-to-day conduct of the affairs of the establishment. But in the instant case, the subordinate officers as well as the Commissioner are all authorities functioning under a taxation statute and each one of them exercising quasi judicial function. Therefore, even though the Commissioner may be the Head of the Department, the manner, in which a particular return is to be assessed or a refund has to be granted or refused cannot be issued in the form of guideline or instruction to the Assessing Officer. - assessing officer cannot be solely guided by the impugned guidelines and has to exercise his quasi-judicial powers. In any event there is no cause of action to challenge the impugned circular. Question of quashing the impugned circular is unnecessary in the light of the stand taken by the respondents that the impugned circular is not statutory and at best could serve as guideline. A note of caution is added by observing that no Assessing Officer or Adjudication Authority exercising powers under the VAT Act or Rules framed thereunder can blindly follow the circular while considering a return or refund claim. Accordingly the challenge to the impugned circular is held to be unnecessary since the circular is a non-statutory circular and is in the nature of guideline and the prayer for quashing the circular is rejected Whether Section 18 of the TNVAT Act is a Scheme by itself or whether the benefit to a dealer under Section 18 is subject to the conditions prescribed under Section 19(9) of the TNVAT Act - Held that - Section 18 of the VAT Act is not an independent provision, not a scheme by itself and forms part of the statute. Consequently, the Input tax credit or refund, which is claimed under Section 18 of the VAT Act is subject to restrictions and conditions under Section 19 of the Act. - Decision in the case of Ashoka Marketing Ltd., and another Vs. Punjab National Bank and others 1990 (8) TMI 393 - SUPREME COURT followed. Registered dealer, who claims for refund of the input tax under Section 18(2), which itself in the nature of credit has to first satisfy that the circumstances set out in Section 19(9) are not attracted. Therefore, it is not sufficient for the registered dealer to merely state or show that the goods were used in the manufacture and there is nothing more to be done by him and he would be entitled to the entire credit of the tax paid by him on the input by way of refund. The said contention cannot be accepted in the light of the discussion made above. Therefore whether it is a process loss or manufacturing loss or destruction or theft, loss while process loss or manufacturing loss or destruction or theft, loss while in storage, damage in transit or destruction at some intermediary stage of manufacture are to be established before the assessing officer by the dealer and to satisfy the assessing officer that loss of the goods purchased is not covered under any one or more of the contingencies under Section 19(9) of the Act. The Assessing Officers appear to be have been impulsive after issuance of the impugned guideline partly precipitated by the dealers since they did not avail opportunity granted by the Honourable Division Bench before whom they agreed to demonstrate their manufacturing process before their concerned Assessing Authority that there is no loss of material. Be that as it may, the earlier round of litigation did not decide the merits of the issue. Therefore, the same cannot be an embargo for the petitioners, who may be the members of the earlier writ petitioner association and in any event, there was no finding on the legal issues while deciding the earlier writ petitions or that matter in the Writ Appeal. Going by the object of the enactment, the Assessing Officer is bound to examine the refund claim under Section 18 in accordance with the procedure stipulated for availing input tax credit by applying Section 19 of the VAT Act and it is only then, the Authority can pass an order on a refund claim. Therefore, the processing of refund application under Form W is in effect akin to an assessment proceedings since the benefit which flows under claim in Form W, is in effect, the amount which the dealer avail as refund would be a credit if the transaction was not a zero rated sale. - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or adhoc basis stands set aside. However, liberty is granted to the concerned Assessing Officer to issue show cause notices to the petitioners clearly setting out the circumstances under which they propose to revise or call upon the petitioner to reverse refund sanctioned and after receiving their objections shall proceed in accordance with law. Section 18 of VAT Act is subject to the restrictions and conditions under Section 19 of VAT Act. Therefore, if in a given cases of wrong availment, Section 19 provides for reversal. Therefore, it is incorrect to state that once the refund is granted, reopening does not arise. Such interpretation is not in consonance with the scheme of the Act; more so, when what is given to the petitioner is concession or set-off. - Decided partly in favour of assessee.
Issues Involved:
1. Validity of Circular No.22/2011 dated 20.10.2011. 2. Whether Section 18 of the TNVAT Act is independent or subject to Section 19. 3. Requirements for a dealer to claim refund under Section 18(2) of the TNVAT Act. 4. Applicability of Section 19(9) to manufacturing loss. 5. Justification of adopting a uniform percentage as invisible loss by assessing authorities. 6. Availability of machinery under the TNVAT Act to reverse the refund granted. Detailed Analysis: 1. Validity of Circular No.22/2011 dated 20.10.2011: The impugned circular was admitted to be non-statutory and serves as a guideline for assessing officers. The court found no need to quash the circular since it does not have statutory force and is not binding on assessing authorities. The circular is intended to ensure proper processing of refund claims, but assessing officers must exercise their quasi-judicial powers independently. Therefore, the challenge to the circular is held to be unnecessary and the prayer for quashing it is rejected. 2. Whether Section 18 of the TNVAT Act is independent or subject to Section 19: Section 18 of the TNVAT Act, which deals with zero-rated sales and refunds, is not an independent provision. It is subject to the restrictions and conditions prescribed under Section 19 of the Act. The court held that input tax credit or refund claimed under Section 18 is contingent upon compliance with the conditions stipulated in Section 19. Therefore, the argument that Section 18 is an island by itself was rejected. 3. Requirements for a dealer to claim refund under Section 18(2) of the TNVAT Act: It is not sufficient for a dealer to merely show that the goods were used in the manufacture. The dealer must also satisfy the assessing authority that the claim is not hit by any restrictions or conditions under Section 19. The assessing authority must conduct a fact-finding exercise to ascertain the quantum of loss of the goods purchased vis-a-vis the goods manufactured and ensure that they do not fall within any of the restrictions in Section 19(9). 4. Applicability of Section 19(9) to manufacturing loss: The court held that the circumstances mentioned in Section 19(9) (i.e., theft, loss, destruction, or damage) do cover manufacturing loss. The dealer must establish that the circumstances set out in Section 19(9) are not attracted in their process of manufacture. The assessing authority must verify if the loss claimed is legitimate and not covered by the restrictions under Section 19(9). 5. Justification of adopting a uniform percentage as invisible loss by assessing authorities: The court found that adopting a uniform percentage for invisible loss is unjustified. Each assessment must be based on the individual facts and manufacturing process of the dealer. The assessing authority must independently verify the details provided in Form W and ascertain the actual loss. Therefore, all notices and orders adopting a uniform percentage for reversing input tax credit were set aside, with liberty granted to issue fresh show cause notices. 6. Availability of machinery under the TNVAT Act to reverse the refund granted: The court held that there is a mechanism under the TNVAT Act to reverse a refund if it was granted erroneously. The undertaking given by the dealer in Form W covers the correctness of the information furnished for verification. Therefore, the assessing authority can direct the reversal of the refund if it is found to be incorrect or erroneous. The contention that once a refund is granted, it cannot be reopened was rejected. Conclusion: The writ petitions were disposed of with the following key points: 1. The circular is non-statutory and serves as a guideline. 2. Section 18 is subject to Section 19 of the TNVAT Act. 3. Dealers must satisfy the assessing authority that their refund claims are not hit by any restrictions under Section 19. 4. Manufacturing loss falls under the restrictions of Section 19(9). 5. Uniform percentage for invisible loss is unjustified; individual assessment is required. 6. There is a mechanism to reverse erroneous refunds under the TNVAT Act.
|
