2017 (8) TMI 1203 - HC - VAT and Sales Tax

Interpretation of statute - Refund of input tax credit - proviso to Section 19 (2) (ii) of TNVAT Act - Held that - the State is in the process of preferring Appeals by re-presenting the Appeal papers and the Appeals are yet to be numbered. The settled legal position being that, mere pendency of the Appeal without interim order will not amount to the grant of stay of the order passed by the Lower Court or Lower Forum. In the instant case, it appears that the Appeals filed by the State are yet to be numbered - similar issue decided in the case of M/s. Everest Industries Limited Versus The State of Tamil Nadu, The Deputy Commissioner (CT) (FAC) 2017 (3) TMI 279 - MADRAS HIGH COURT , where it was held that A plain reading of the provisions of sub-section (1) and sub-section (2) of Section 19 of the 2006 Act would show that, as long as specified goods, which suffer tax are used for any of the purposes set out in clauses (i) to (vi) of sub-section (2) of Section 19, the assessee should be able to claim the ITC, with a caveat in so far as clause (v) is concerned. The caveat being, the limitation, which is encapsulated in the proviso to Section 19(2) of the 2006 Act - respondent are directed to consider the petitioner s letter/representation, dated 04.07.2017 - petition allowed by way of remand.

Summary

Issues:
1. Interpretation of proviso to Section 19(2)(ii) of TNVAT Act.
2. Claiming input tax credit (ITC) under TNVAT Act and Central Sales Tax Act.
3. Refund of reversed ITC.
4. Application of court decision in M/s. Everest Industries Ltd.'s case.
5. Pending Appeals by the State against previous decisions.

Detailed Analysis:
1. The judgment involved a crucial issue of interpreting the proviso to Section 19(2)(ii) of the Tamil Nadu Value Added Tax (TNVAT) Act. The Court analyzed the provisions of Section 19, emphasizing that a dealer is entitled to claim ITC for tax-suffered inputs purchased within the State from a registered dealer. The proviso limits ITC to 3% of tax for specific purposes, particularly in the context of Inter-State Trade or Commerce. The Court clarified that the proviso's limitation applies only to certain clauses of Section 19(2) and not to all purposes outlined in the section, highlighting the importance of correct interpretation to avoid adverse impacts on manufacturers.

2. The petitioner, a registered dealer under TNVAT Act and Central Sales Tax Act, sought a Writ of Mandamus to direct the respondent to consider their representation for refunding reversed ITC. The petitioner referenced a previous court decision in M/s. Everest Industries Ltd.'s case, urging the application of the same principles to their situation. The Court acknowledged the petitioner's reliance on the earlier decision and the need to address the issue of reversed ITC in line with legal interpretations.

3. The Court considered the submissions of both parties regarding the refund of reversed ITC. The petitioner argued that the reversal of ITC was not justified based on the court's previous decision. On the other hand, the respondent opposed the relief sought, citing pending Appeals by the State against similar cases. The Court noted the importance of addressing the issue promptly and ensuring compliance with legal principles to avoid undue financial burden on the petitioner.

4. In light of the pending Appeals by the State and the need for timely resolution of the petitioner's claim, the Court disposed of the Writ Petition by directing the respondent to consider the petitioner's representation for refund within eight weeks. The Court emphasized the importance of following legal precedents, such as the decision in M/s. Everest Industries Ltd.'s case, to ensure fair treatment and adherence to the law. The judgment highlighted the significance of prompt action and compliance with court directives in matters concerning tax credits and legal interpretations.