2020 (2) TMI 683 - HC - VAT and Sales Tax

Adjustment of input tax credit for making pre-deposit - fulfilment of condition under 2nd proviso to Section 51 (wrongly mentioned as 52 in the prayer of the Writ Petitions) of the Tamil Nadu Value Added Tax Act, 2006 - HELD THAT - Input Tax Credit is not intended for being utilised for payment of pre-deposit. At the same time, as per Section 19(18) of the TNVAT Act, 2006, excess input credit, if any, after adjustment under Sub-Section shall be carried forward for the next year or refunded in the manner as may be prescribed. As per Rule 10(10)(b) of the Tamil Nadu Value Added Rules, 2007, in case where Input Tax Credit as determined by the Assessing Officer for any registered dealer, for a year, exceeds the tax liability for that year, it may be adjusted and the excess Input Tax Credit may be adjusted against any arrears of tax or any other amount due from him. If there are no arrears under the Act, or after adjustment there is still an excess of Input Tax Credit, Assessing Authority shall serve Form P upon such dealer. Rule 11 of the aforesaid Rule contemplates the issue of reference of such amounts - excess Input Tax Credit is to be refunded back if after adjustment there is balance available. Therefore, it is evident that if the amount of credit can be refunded, they can also be adjusted towards pre-deposit of the tax liability for the purpose of Section 51 of the TNVAT Act, 2006. The contention of the petitioner that for the purpose of pre-deposit under Section 51 of the TNVAT Act, 2006 an assessee can utilise the excess Input Tax Credit provided accepted, the aforesaid Input Tax Credit itself is not the subject matter of the dispute or where any notice has been issued to deny such tax credit - To deny such right would amount to improper denial of right of appeal to an assessee - petition allowed.

Summary

Issues:
- Interpretation of Section 51 of the Tamil Nadu Value Added Tax Act, 2006 regarding pre-deposit for appeals.
- Whether adjustment of Input Tax Credit is permissible for pre-deposit under Section 51.
- Legal validity of utilizing excess Input Tax Credit for pre-deposit.
- Comparison with provisions of Central Excise Act, 1944 regarding pre-deposit.

Analysis:
The petitioner sought direction to adjust Input Tax Credit for pre-deposit under the 2nd proviso to Section 51 of the TNVAT Act, 2006. The petitioner aimed to use 25% of tax from available Input Tax Credit, but the appeals were returned, citing the need for cash pre-deposit based on a previous court decision. The petitioner argued that the cited case was different as it involved disputed Input Tax Credit, unlike the present case. The petitioner contended that Section 51 does not restrict pre-deposit to cash only and that Input Tax Credit, once validly availed, should not face limitations.

The Government Advocate for the respondents argued that Section 51 mandates cash pre-deposit and cited the same court decision to support the cash-only pre-deposit requirement. The court considered both parties' arguments and examined the relevant provisions of the TNVAT Act, specifically Section 19 regarding Input Tax Credit. The court noted that excess Input Tax Credit can be carried forward or refunded as per the Act and Rules, indicating the possibility of adjusting such excess credit for pre-deposit.

Referring to decisions under the Central Excise Act, the court highlighted instances where pre-deposit through credit adjustment was allowed by various High Courts. Notably, the court mentioned specific cases from Jharkhand, Allahabad, Karnataka, and Gujarat High Courts recognizing the validity of pre-deposit through credit adjustment. The court emphasized that Input Tax Credit can be utilized for pre-deposit unless it is the subject of dispute or denial by tax authorities.

Based on the discussion and precedents, the court accepted the petitioner's argument, allowing the use of excess Input Tax Credit for pre-deposit under Section 51. The court concluded that denying this right would impede an assessee's appeal rights. Consequently, the Writ Petitions were allowed, with no costs imposed, and related Miscellaneous Petitions were closed.