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2020 (2) TMI 680 - HC - VAT and Sales TaxReversal of proportionate Input Tax Credit - credit of tax paid on purchase of Duty Entitlement Passbook (DEPB) - section 19 of the Tamil Nadu VAT Act, 2006 - HELD THAT - It may be mentioned that an Assessing Officer cannot rely on clarifications and instructions of his superior as has been done in the present case - If assessing officers were follow such clarifications of their superior, their orders would be arbitrary. As such, such assessment cannot be completed based on clarifications as such exercise would amount to assessment by circular contrary to the view taken by the Honourable Supreme Court in ORIENT PAPER MILLS LTD. VERSUS UNION OF INDIA 1968 (5) TMI 15 - SUPREME COURT . As an assessing officer, the respondent ought to independently come to a conclusion whether the provisions of the Tamil Nadu VAT Act, 2006 were to be invoked in the facts and circumstances of the case or not - Therefore, initiation of proceedings vide notices dated 15.6.2015 prima facie appears to be ill conceived and proceeds on a wrong assumption of jurisdiction by the respondent. DEPB qualifies as goods within the meaning of the Sales Tax laws and its sale is exigible to tax. DEPB scrips/licence is liable to tax at the rate prescribed under Entry 70 of Part B of the 1st Schedule of the Tamil Nadu VAT Act, 2006 - Since DEPB scrips/license is liable to tax at the rate prescribed under Entry 70 of Part B of the 1st Schedule of the Tamil Nadu VAT Act, 2006, the petitioner was entitled to input tax credit in terms of Section 19(1) of the Tamil Nadu VAT Act, 2006. It must be remembered that DEPB Scrips were given by the Joint Director of General of Foreign Trade as an export incentive to an exporter under the Export Import Policy. Instead of giving cash refund on exports, the Central Government through the Minsitry of Commerce Trade gave it in the form of credit of duty in the DEPB Scrips/licence which could be used for discharging the Customs duty at the time of import of goods. Such DEPB Scrips/licence could be either used by the exporter himself in whose name such scrips/licence were issued as an export incentive or it can be sold in the open market to be purchased by person like the petitioner like REP Licence. Petition dismissed.
Issues Involved:
1. Reversal of Input Tax Credit (ITC) on Duty Entitlement Passbook (DEPB) purchases. 2. Eligibility of DEPB as "goods" under the Tamil Nadu VAT Act, 2006. 3. Applicability of the decision in Sha Kantilal Jayanthilal vs. State of Tamil Nadu. 4. Interpretation of Section 19 of the Tamil Nadu VAT Act, 2006. 5. Binding nature of clarifications issued by the Commissioner of Commercial Taxes. 6. Availability of alternate remedy by way of appeal. Detailed Analysis: 1. Reversal of Input Tax Credit (ITC) on Duty Entitlement Passbook (DEPB) Purchases: The petitioner challenged the orders directing the reversal of proportionate ITC availed on the tax borne while purchasing DEPB. The respondent argued that as per the clarification by the Commissioner of Commercial Taxes, no ITC is eligible on the purchase of DEPB under Section 19(2)(i) of the Tamil Nadu VAT Act, 2006. The petitioner contended that the decision of the Delhi High Court in Jagriti Plastics Ltd vs. Commissioner of Trade and Taxes supports their claim for ITC on DEPB purchases. 2. Eligibility of DEPB as "Goods" under the Tamil Nadu VAT Act, 2006: The court acknowledged that DEPB qualifies as "goods" within the meaning of Section 2(21) of the Tamil Nadu VAT Act, 2006, as established by the Supreme Court in Yasha Overseas vs. Commissioner of Sales Tax. Therefore, DEPB is liable to tax under the provisions of the Tamil Nadu VAT Act, 2006, and the petitioner was entitled to ITC in terms of Section 19(1). 3. Applicability of the Decision in Sha Kantilal Jayanthilal vs. State of Tamil Nadu: The Division Bench in Sha Kantilal Jayanthilal held that DEPB licenses are not goods specified in the First Schedule of the Tamil Nadu VAT Act, 2006, and hence, ITC cannot be availed on VAT paid on DEPB purchases. The court in the present case was bound by this decision and found that DEPB licenses do not fall under the categories mentioned in Section 19(2) of the Act. 4. Interpretation of Section 19 of the Tamil Nadu VAT Act, 2006: Section 19(1) provides for ITC on the amount of tax paid or payable on purchases of taxable goods specified in the First Schedule. Section 19(2) allows ITC for the purchase of goods made within the state from a registered dealer for specific purposes such as resale, manufacturing, or processing. The court noted that there is no one-to-one relationship between the credit availed and its utilization, and the intention is not to restrict the use of ITC. 5. Binding Nature of Clarifications Issued by the Commissioner of Commercial Taxes: The court held that assessing officers cannot rely on clarifications and instructions from their superiors, as this would lead to arbitrary assessments. The clarification dated 25.7.2007 by the Commissioner of Commercial Taxes has no binding force under the Tamil Nadu VAT Act, 2006, as such powers can only be exercised by an Advance Ruling Authority under Section 48A. 6. Availability of Alternate Remedy by Way of Appeal: The respondent argued that the petitioner has an alternate remedy by way of an appeal before the Additional Deputy Commissioner. The court acknowledged this but proceeded to examine the merits of the case due to the binding nature of the Division Bench decision in Sha Kantilal Jayanthilal. Conclusion: The court dismissed the writ petitions, holding that the petitioner is not entitled to ITC on the purchase of DEPB licenses as per the decision in Sha Kantilal Jayanthilal. The court emphasized that the decision of the Division Bench is binding, and any reconsideration of the issues raised would require a reference to a Full Bench. Consequently, the connected miscellaneous petitions were closed, and no costs were awarded.
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