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2021 (9) TMI 84 - HC - VAT and Sales TaxReversal of Input Tax Credit - inputs are purchased inside the State of Tamil Nadu - stock transfer for job work and conversion to a factory of the petitioners located outside the State of Tamil Nadu, but brought back to Tamil Nadu for sale on payment of VAT - constitutional validity of Section 19 (2) (ii) of the VAT Act 2006 - HELD THAT - The issues raised in the present writ petition are no more resintegra as the Hon'ble Division Bench of this Court struck down Section 19 (2) (ii) of the VAT Act 2006, in the case of Patina Gold Ornaments Pvt.Ltd., vs. Assistant Commissioner (CT), Park Road Circle, Erode and Another 2017 (10) TMI 185 - MADRAS HIGH COURT where it was held that the respondents cannot retain ITC on goods purchased within the State, by invoking provision of section 19(4) of the 2006 Act to the extent of rate of tax provided therein, ie., three per cent (which was the rate provided therein at the relevant point of time), as that would make the relief inefficacious since the subject goods, i.e., bullion / wornout jewellery on which tax credit was sought by the writ petitioner was imposed at the rate of one per cent. The impugned order of Assessment is set aside and the respondents are directed to adjudicate the issues by affording opportunity to the writ petitioner and pass fresh Assessment Order by following the procedures as contemplated - Petition allowed.
Issues:
1. Challenge to Assessment Order dated 30.04.2015 regarding reversal of Input Tax Credit. 2. Validity of Section 19(2)(ii) of the Tamil Nadu Value Added Tax Act, 2006. 3. Remand of matters for fresh consideration by Competent Authorities regarding mismatch issues. Analysis: Issue 1: Challenge to Assessment Order The petitioner, a partnership firm, challenged the reversal of Input Tax Credit based on provisions of Section 19(2)(ii) and Section 19(4) of the Tamil Nadu Value Added Tax Act, 2006. The High Court referred to a previous judgment where Section 19(2)(ii) was declared invalid, allowing ITC for units despatching raw materials outside the state for conversion and sale within Tamil Nadu. The Court also held that respondents cannot retain ITC on goods purchased within the state at a different tax rate. The writ petition was allowed, parties to bear their own costs. Issue 2: Validity of Section 19(2)(ii) of the VAT Act 2006 The High Court declared Section 19(2)(ii) of the VAT Act 2006 as bad in law, emphasizing that the location of the manufacturing unit outside Tamil Nadu should not be a basis for denying ITC. The judgment highlighted that denial of ITC based on the manufacturing unit's location is unjustifiable. The Court also rejected the retention of ITC by respondents on goods purchased within the state at a different tax rate, emphasizing the inefficacy of such action. Issue 3: Remand for Fresh Consideration on Mismatch Issues Regarding mismatch issues, the Court remanded matters for fresh consideration by Competent Authorities. The Court referenced a judgment emphasizing the statutory requirement for claiming ITC, which includes producing original invoices from the selling dealer. The Court highlighted the need for a fair procedure in cases of mismatch, criticizing the one-way approach of assessing officers. The judgment called for a centralized mechanism to deal with mismatch cases efficiently, citing the procedures in other states like Maharashtra as more reasonable. The writ petitions were allowed, impugned orders set aside, and matters remanded for fresh consideration. In conclusion, the High Court allowed the writ petition, set aside the impugned assessment order, and directed the respondents to adjudicate based on principles laid down in relevant judgments. The Court emphasized fair procedures and the need for a centralized mechanism to handle mismatch cases effectively, ensuring a thorough enquiry and opportunity for dealers to present their case.
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