2021 (7) TMI 25 - HC - VAT / Sales Tax

Input tax credit - transactions occurred prior to the issue of amendment in the Tamil Nadu Act - petitioners mainly contended that the amendment was effected by way of rectification of an anomaly and therefore, cannot be construed as a new policy - HELD THAT - The issue involved in these Writ Petitions were already dealt with elaborately by the Madurai Bench of the Madras High Court in TVL. BHARATH TRADERS VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE COMMERCIAL TAX OFFICER, SOUTH AVANI MOOLA STREET CIRCLE, MADURAI 2019 (8) TMI 1699 - MADRAS HIGH COURT . Further, the respondent department has also not preferred any further appeal challenging the said judgment and therefore, the judgment became final and the said benefit is to be extended to all these petitioners - It was held in the said case that Since the substitution in the present case only seeks to set right an anomaly it necessarily has to be effective from the date of inception of the Act itself, retrospectively. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to notices dated 27.07.2016 and 14.12.2016, challenge to assessment orders, extension of input tax credit benefit for transactions prior to amendment in Tamil Nadu Act 5 of 2015.

Analysis:
The core issue in the Writ Petitions is whether the benefit of input tax credit should be extended to transactions that occurred before the amendment in the Tamil Nadu Act 5 of 2015. The petitioners argued that the amendment rectified an anomaly and should not be considered a new policy, thus the benefit of Input Tax Credit should cover transactions before the amendment.

The petitioners relied on a judgment by the Madurai Bench of the Madras High Court in a batch of Writ Petitions, where it was held that the benefit of ITC should be extended to transactions with unregistered dealers as well, not just registered dealers, following an amendment in 2015. The Court noted that the amendment corrected an anomaly and should be effective retrospectively from the inception of the Act itself.

The Court examined the provisions of Section 8 of the CST Act, particularly sub-sections (1) and (2), to understand the purpose of the substitution and determine its retrospective application. It was highlighted that the benefit of ITC was initially restricted to transactions with registered dealers but was broadened in 2015 to include transactions with unregistered dealers as well.

The Court concluded that restricting the benefit of ITC only from the date of substitution would lead to discrimination against transactions under Section 8(2) for the prior period. Since the amendment corrected an anomaly without any specific reason or logic, it was deemed to be effective retrospectively from the inception of the Act itself.

Based on the precedent set by the cited judgment, the Court allowed the Writ Petitions, quashed the impugned orders, and extended the benefit of input tax credit to cover transactions prior to the amendment in the Tamil Nadu Act 5 of 2015. No costs were awarded, and connected Miscellaneous Petitions were closed.