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2021 (10) TMI 481 - HC - VAT and Sales TaxInput Tax Credit - inter-state trade or commerce - credit reversed or not allowed by the respondent revenue / assessing authority on the ground of applying proviso to Section 19(2) (ii) (vi) of the TNVAT Act - HELD THAT - Where the issue has been settled as early as in the year 2017 in M/S. EVEREST INDUSTRIES LIMITED VERSUS THE STATE OF TAMIL NADU, THE DEPUTY COMMISSIONER (CT) (FAC) 2017 (3) TMI 279 - MADRAS HIGH COURT that proviso in question cannot be made applicable to the category of dealers industries or manufacturers like the petitioners and therefore, they are entitled to get full credit of ITC. Therefore, such a reversal is not possible by applying the said proviso by deducting 3 percent. This Court feels that, all these impugned orders are liable to be interfered with, as that was passed only by making application applying the proviso to Section 19(2) (ii) (vi) of the TNVAT Act - Petition allowed.
Issues involved: Application of proviso to Section 19(2) of the TNVAT Act on ITC availed by dealers/manufacturers for inputs used in manufacturing industries.
Analysis: 1. Issue of Proviso Application: The petitioners, registered dealers under the TNVAT Act, claimed ITC for inputs used in manufacturing industries. The revenue authority reversed or disallowed the ITC under the proviso to Section 19(2) of the TNVAT Act, inserted by an amendment in 2013. The proviso limited ITC to three percent of tax for specific purposes, mainly applicable to inter-state trade. However, it was erroneously applied to cases falling under category (ii) where dealers/manufacturers used goods as inputs for manufacturing within the State. This led to the reversal of claimed ITC, resulting in challenged assessment orders. 2. Precedent Reference: The petitioners relied on a previous judgment in M/s. Everest Industries Limited case, where it was held that manufacturers using taxed inputs in manufacturing processes should receive full credit for the tax paid on those inputs. The judgment established that the proviso should only apply to specific circumstances and not to all categories of dealers or manufacturers. The respondents also acknowledged the applicability of this precedent to the current cases. 3. Judicial Decisions: The judge referred to a similar case, Tvl. Jupiter Industries vs. State of Tamil Nadu, where a comparable issue was addressed, and a similar decision was reached. The judge emphasized that the proviso should not be applied to dealers or manufacturers like the petitioners, entitling them to full ITC without a deduction of three percent. The judge concluded that the impugned orders based on the incorrect application of the proviso should be quashed, allowing the writ petitions. 4. Court's Decision: Considering the settled position established by the Everest Industries case in 2017, the judge ruled that the proviso should not be applied to dealers or manufacturers using inputs in manufacturing processes. Consequently, the judge quashed the impugned orders, allowing the writ petitions and directing the return or adjustment of any tax amounts paid by the petitioners. The judge emphasized that the incorrect application of the proviso necessitated interference with the assessment orders, leading to their quashing. 5. Final Orders: The judge decided to quash the impugned orders, allowing all writ petitions due to the incorrect application of the proviso under Section 19(2) of the TNVAT Act. The judge also addressed specific payment issues in one of the petitions, directing the return or adjustment of the tax amount paid by the petitioner. No costs were awarded, and the miscellaneous petitions were closed, concluding the legal judgment.
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