2019 (9) TMI 1569 - HC - VAT and Sales Tax

Liability of tax - manufacture of sheet metal components and effects sales to Hyundai Motor India Limited - section 3(2) of the Tamil Nadu Value Added Tax Act 2006 - Input tax credit - Section 19(2)(iv) of the Act - whether the provisions of Rule 6(3)(b) are mandatory such that the certificate mentioned therein is the only method by which a dealer/assessee could support his claim in terms of Section 3(2) of the Act? - HELD THAT - A perusal of the relevant statutory provision as well as Rule do not bring home the point that the production of an industrial input certificate is mandatory to avail the benefit of Section 3(2) of the Act. No doubt Rule 6(3)(b) refers to an industrial input certificate stating that such certificate ought to be procured by the purchaser from the seller. The Supreme Court in SODHI TRANSPORT CO. AND ANOTHER VERSUS STATE OF UP. AND ANOTHER (AND OTHER APPEALS AND WRIT PETITIONS) 1986 (3) TMI 303 - SUPREME COURT considered the provisions of the Uttar Pradesh State Sales Tax Act which contains provisions in parimateria with Section 70 of the Tamil Nadu Value Added Tax Act in fact even stricter since the phrase used therein is shall produce a transit pass interpreting the same to state that non-production of a transit pass was not fatal as the burden of establishing exit of the goods from the State would then revert back to the assessee who could well prove the same by reference to other supporting material. The presumption that the goods have not exited the State was thus rebuttable enabling the dealer to draw support of other materials in its possession in this regard. Non-production of a Declaration under section 6(3)(b) is not fatal to the claim of the assessee. Having said so the Assessing Authority has in the impugned order found that only a supporting statement was filed by the petitioner and had no actual particulars of transactions such as work order inward delivery challan quantity received and outward delivery challan were supplied. If at all the petitioner was of the view that its claim was in order the burden rested upon it to justify such claim with whatever material that it could furnish. Such factual particulars do not appear to have been filed. While holding that the Declaration in terms of Section 6(3)(b) is not the only evidence in support of the claim of the petitioner and that the petitioner is well entitled to produce any other supporting evidence as it may be in a position to this issue is remanded back to the Assessing Officer to be re-done after hearing the petitioner within a period of four weeks from the date of receipt of a copy of the order. Input Tax Credit - Section 19(2)(iv) of the Act - HELD THAT - This Court in the case of SARA LEATHERS VERSUS COMMERCIAL TAX OFFICER TAMBARAM I ASSESSMENT CIRCLE CHENNAI 2009 (10) TMI 848 - MADRAS HIGH COURT considered the claim of refund by an assessee. The petitioner therein had claimed refund that had been restricted by the Assessing Officer on the ground that the proper rate of tax in respect of the goods was much less than what had been remitted. The applicable statutory provision in that case was Section 18 dealing with zero-rating and upon consideration of the mater this Court has expressed the view that the right of input tax credit when the payment of tax per se is not disputed is absolute. If the Revenue were to be extended the discretion to either restrict the claim of refund or a claim of input tax credit when the payment of tax was itself undisputed then it would give rise to a case of unjust enrichment where having received the tax at a particular rate the claim of ITC in that regard was restricted. Evidently this cannot be so and for these reasons the second ground is allowed. Petition allowed.

Summary

Issues:
Challenge to assessment orders under Tamil Nadu Value Added Tax Act, 2006 for the periods 2006-07, 2007-08, and 2008-09.

Analysis:
1. The main issue in the Writ Petitions was the liability under section 3(2) of the Tamil Nadu Value Added Tax Act, 2006. The petitioner, engaged in manufacturing, argued that the requirement of an industrial input certificate under Rule 6(3)(b) was procedural, not mandatory, to claim Input Tax Credit (ITC) at 12.5%. Pre-assessment notices proposed to reverse credit, alleging excess ITC claimed by the petitioner.

2. The petitioner contended that Rule 6(3)(b) did not mandate the production of a certificate, citing Supreme Court judgments. The Additional Government Pleader argued that challenging the rule itself was necessary, not through a Writ Petition. The Court noted that the issue of certificate requirement arose from the assessment under challenge.

3. The Court analyzed the definition of industrial inputs and Rule 6(3)(b) which required a certificate for using industrial inputs in manufacturing taxable goods. The key issue was whether this certificate was mandatory to support a claim under Section 3(2) of the Act.

4. Referring to the Supreme Court case of M.A.Tulloch, the Court observed that while the rule mentioned a certificate, non-production did not vitiate the claim if other evidence supported it. The Court emphasized that the production of a certificate was not the sole method to establish eligibility for a reduced tax rate.

5. The Court drew an analogy with transit pass requirements, stating that non-production of a transit pass did not fatally affect the claim, and the burden shifted to the assessee to prove goods' exit from the State using other supporting material.

6. The Court held that non-production of the certificate was not fatal to the petitioner's claim, but noted the lack of specific transaction details in the petitioner's submissions. The issue was remanded back to the Assessing Officer for reevaluation.

7. Regarding the rate of tax issue, the Court upheld the petitioner's claim for Input Tax Credit based on the tax actually remitted, emphasizing that the right to ITC was absolute when the payment of tax was not disputed.

8. Ultimately, the Writ Petitions were allowed, with the second ground upheld, and the case was remanded to the Assessing Officer for further review within a specified period.