2016 (8) TMI 401 - HC - VAT and Sales Tax

Order of assessment Tamil Nadu Value Added Tax Act, 2006 - industrial valves iron and steel castings local sale, inter-state sale and export input tax credit preference of set off section 18 of TNVAT Act - Held that - when there is no specific Rule providing the manner in which the petitioner had to be assessed to tax, which is not open to the Assessing Authority to contend that the particular mode should be adopted or that the procedure adopted by the assessee is not rational and that the Assessing Authority cannot insist on the assessee adopting a particular method which would deny them the benefit of utilization of the balance available tax deferment in its entirety, and instead of paying tax. No procedure has been prescribed with regard to the method of preference of Set-off of input tax credit. Therefore, the procedure adopted is favorable to the assessee, more particularly, in the light of the object behind the VAT regime matter remanded appeal set aside.

Summary

Issues Involved:
1. Preference of Set-off of Input Tax Credit (ITC).
2. Method of ITC adjustment.
3. Jurisdiction and procedure for Set-off of ITC.
4. Compliance with statutory provisions under the TNVAT Act.

Detailed Analysis:

1. Preference of Set-off of Input Tax Credit (ITC):
The petitioner, a registered dealer under the TNVAT Act and CST Act, challenged the assessment orders for various years, focusing on the preference of Set-off of ITC. The petitioner argued that the preference of Set-off should prioritize ITC relating to export sales due to the "Zero Rated Sale" status under Section 18 of the TNVAT Act. The petitioner adopted a method where ITC was first set off against VAT liability, then CST liability, and the balance carried forward to the next year. The respondent, however, denied the balance ITC relating to export sales on the ground that the petitioner did not file Form-W. The court noted that Section 18 does not specify a method for preference of Set-off, thus requiring an examination of whether the petitioner's method was just and proper.

2. Method of ITC Adjustment:
The petitioner provided a detailed tabulated illustration for the assessment year 2007-2008, demonstrating their method of ITC adjustment. The petitioner claimed that their method was scientific and aligned with the objective of Input Tax Credit, which is to reduce the cascading effect of tax burden. The respondent contended that their method was scientific and necessary to ensure ITC adjustment within the 180-day period stipulated in Section 18(3) of the TNVAT Act. The court referenced the Andhra Pradesh High Court's decision in MAXWROTH PLYWOODS P. LTD. Vs. ASST. COMMR., which held that in the absence of a specific rule, the assessing authority cannot impose a method that denies the assessee the benefit of tax deferment.

3. Jurisdiction and Procedure for Set-off of ITC:
The court highlighted that the TNVAT Act does not prescribe a specific method for the preference of Set-off of ITC. The court agreed with the Andhra Pradesh High Court's view that the assessing authority cannot insist on a method that is not authorized by law and detrimental to the assessee. The court found that the petitioner's method of Set-off was favorable and aligned with the VAT regime's objectives. However, since the impugned order did not discuss this issue, the court remanded the matter to the assessing officer for re-evaluation.

4. Compliance with Statutory Provisions under the TNVAT Act:
The court emphasized the need for the assessing officer to comply with statutory provisions and ensure that the method of Set-off adopted by the petitioner is not contrary to the statute. The court directed the assessing officer to redo the assessment, considering the observations made and the decision of the Andhra Pradesh High Court. The court also referenced the decision in INTERFIT TECHNO PRODUCTS Vs. PRINCIPAL SECY., which provided guidelines for reopening assessments and emphasized the importance of verifying the dealer's claims against statutory restrictions.

Conclusion:
The court set aside the findings of the assessing officer regarding the preference of Set-off and remanded the matter for re-assessment. The assessing officer was directed to issue a notice to the petitioner, provide an opportunity for a personal hearing, and consider the court's observations and relevant case law. The court disposed of the writ petitions with no costs, closing the connected miscellaneous petitions.