2018 (7) TMI 1355 - HC - VAT and Sales Tax

Input Tax Credit on Capital Goods - Section 19(3)(b) of the TNVAT Act - denial of credit on the ground that the claim was made after the expiry of the time stipulated in Section 19(11) of the TNVAT Act which states that input tax has to be claimed before the end of the financial year or before 90 days from the date of purchase whichever is later. Held that - Section 19(3)(a) of the TNVAT Act speaks about the entitlement of an assessee for credit in respect of purchases of capital goods. The entitlement is as per the manner prescribed under the TNVAT Rules viz. Rule 10(4). Section 19(3)(b) of the TNVAT Act speaks about deduction of such input tax credit that may be allowed to be liable after the commencement of commercial production and over a period of three years in the manner as prescribed. After the expiry of three years the unavailed credit shall lapse to the Government - Rule 10(4)(b) of the TNVAT Rules prescribes the manner in which the credit shall be allowable after commencement of commercial production and over a period of three years. The Rule states a dealer shall be entitled to avail up to 50% of the credit in the same financial year and the balance credit before the end of the third financial year. A registered dealer who has purchased capital goods shall be allowed input tax credit in terms of Rule 10(4) provided he gives an intimation within 30 days from the date of commencement of commercial production and the tax leviable shall be not more than 50% in the same financial year and the balance before the end of the third financial year. Thus Section 19(3) read with Rule 10(4) of the TNVAT Rules speaks only about the entitlement. Section 19(11) does not carve out any distinction between the type of goods purchased by the dealer on which there is a claim for input tax credit but refers to any transaction of taxable purchase in any month. Thus if a dealer fails to claim input tax credit in respect of any transaction of taxable purchases in any month the legislature has given time to the dealer to make the claim before the end of the financial year or before 90 days from the date of purchase whichever is later. Section 19 of the TNVAT Act being a complete code by itself cannot be truncated in the manner sought to be done by the petitioner - The prescription under Rule 6 of the TNVAT Rules is mandatory which the dealer has to comply with. Therefore such maintenance of input tax adjustment account can have no impact on the time limit prescribed in the statute for claiming input tax credit. Thus the distinction which has to be borne in mind is that Section 19(3) deals with entitlement and Section 19(11) deals with availment which prescribes not only a procedure but also an outer time limit. Thus the interpretation given by the respondent in the impugned order is perfectly valid and legal. Petition dismissed - decided against petitioner.

Summary

Issues Involved:
1. Validity of the denial of input tax credit (ITC) on capital goods under Section 19(11) of the Tamil Nadu Value Added Tax (TNVAT) Act.
2. Interpretation of Sections 19(3) and 19(11) of the TNVAT Act.
3. Compliance with procedural requirements under Rule 10(4) of the TNVAT Rules.
4. Applicability of Section 19(11) to capital goods.

Issue-wise Detailed Analysis:

1. Validity of the Denial of ITC on Capital Goods under Section 19(11) of the TNVAT Act:
The petitioner challenged the denial of ITC on capital goods for the years 2011-12 and 2012-13, arguing that the claim was made within the permissible period under Section 19(3) of the TNVAT Act. The respondent contended that the claim was time-barred under Section 19(11), which requires ITC claims to be made before the end of the financial year or within ninety days from the date of purchase, whichever is later. The court upheld the respondent's decision, stating that Section 19(11) applies to all taxable purchases, including capital goods.

2. Interpretation of Sections 19(3) and 19(11) of the TNVAT Act:
The petitioner argued that Section 19(3) of the TNVAT Act, which allows ITC on capital goods over a period of three years, is a standalone provision and should not be subjected to the time limit in Section 19(11). The court rejected this argument, stating that Section 19(11) does not distinguish between types of goods and applies to all taxable purchases. The court emphasized that Section 19 is a complete code and cannot be compartmentalized.

3. Compliance with Procedural Requirements under Rule 10(4) of the TNVAT Rules:
The petitioner claimed to have complied with Rule 10(4) by intimating the commencement of commercial production within thirty days. However, the respondent disputed the receipt of such intimation. The court found that the petitioner failed to provide sufficient evidence of compliance with Rule 10(4), which is a mandatory requirement for claiming ITC on capital goods.

4. Applicability of Section 19(11) to Capital Goods:
The petitioner contended that Section 19(11) should not apply to capital goods, as they are governed by a separate provision under Section 19(3) and Rule 10(4). The court disagreed, stating that Section 19(11) applies to all ITC claims, including those on capital goods. The court noted that Section 19(3) deals with entitlement, while Section 19(11) deals with the procedure and time limit for claiming ITC.

Conclusion:
The court dismissed the writ petitions, upholding the respondent's decision to deny ITC on capital goods for being time-barred under Section 19(11) of the TNVAT Act. The court emphasized that Section 19 is a complete code, and the time limit in Section 19(11) applies to all ITC claims, including those on capital goods. The petitioner failed to comply with the mandatory procedural requirement under Rule 10(4) of the TNVAT Rules.