2024 (3) TMI 268 - HC - GST

Transitional credit - Petition is a works contractor - TDS was transitioned under Section 140 of the TNGST Act, 2017, along with the purchase tax paid by the petitioner, which was availed as Input Tax Credit - Transition of Tax Deducted at Source (TDS) under Section 13 of the TNVAT Act, 2006, on Works Contract. Transition of ITC validly availed - HELD THAT - On perusing the records, there is also no doubt that the petitioner was entitled to ITC on Section 12(2) of the TNVAT Act, 2006. To that extent, there is merits in the submission of the petitioner - If ITC was validly availed by the petitioner on purchase tax paid by the petitioner under Section 12(1) of the TNVAT Act, 2006 and same was remaining un-utilized, the petitioner was entitled to transition the same under Section 140 of the TNGST Act, 2017 as transitional credit - The petitioner is therefore justified in assailing the impugned Assessment Order although the limitation to file an appeal had expired long back. Transition of Tax Deducted at Source (TDS) under Section 13 of the TNVAT Act, 2006, on Works Contract - HELD THAT - There is no scope for transmitting the credit under Section 140 of the TNGST Act, 2017. Section 140 of the TNGST Act, 2017 is applicable only to ITC - the provisions of the TNVAT Act, 2006 mandates adjustment of the amount so deducted at source and paid by the employer who engages the services of the works contractor. If indeed there was deduction of tax at source by the person who engaged the services of the petitioner, such amount was to be adjusted towards the tax liability of the petitioner. Thus, surplus ITC after adjustment of the tax liability is to be refunded to the petitioner after assessment under Rule 10(A) and 10(B) of TNVAT Rules, 2007. Excess of ITC remaining unutilized after such adjustment was to be refunded back to the petitioner if where there were no arrears of tax under the Act from the petitioner. If this was followed, there would have been surplus of ITC which was to be either refunded back to the petitioner or allowed to be transitioned under Section 140 of the TNGST Act, 2017. The petitioner therefore deserves a chance to defend the case as the impugned Assessment Order has been passed during the period when the country was under semi-lock down mode. If the VAT-TDS had indeed remained unutilized for discharging tax liability under TNVAT Act, 2006, there should be a fresh adjustment of the amount out of VAT-TDS towards tax liability of the petitioner and thereafter ITC which would have remained unutilized ought to have allowed to be transitioned under Section 140 of the Act or refunded to the petitioner under Section 54 of the TNGST Act, 2017 read with TNVAT Act, 2006. This issue would thereafter require a proper re-consideration. Therefore, these writ petitions are allowed by way of remand.

Issues Involved:

1. Validity of the impugned Assessment Order and consequential demand notice.
2. Entitlement of the petitioner to transition the Input Tax Credit (ITC) under Section 140 of the TNGST Act, 2017.
3. Procedural fairness and adherence to principles of natural justice.
4. Jurisdictional and statutory compliance issues.
5. Adjustment and refund of Tax Deducted at Source (TDS) under the TNVAT Act, 2006.

Summary:

1. Validity of the Impugned Assessment Order and Demand Notice:
The petitioner challenged the impugned Assessment Order dated 27.04.2021 for the Assessment Year 2017-2018 and the consequential demand notice dated 21.06.2023. The petitioner argued that the order was passed without following the principles of natural justice and should be quashed.

2. Entitlement to Transition ITC:
The petitioner, a Works Contractor, contended that the tax deducted at source (TDS) under Section 13 of the TNVAT Act, 2006, and the purchase tax paid were transitioned under Section 140 of the TNGST Act, 2017, as ITC. The court found merit in the petitioner's claim that ITC on purchase tax paid under Section 12(1) of the TNVAT Act, 2006, if validly availed and unutilized, could be transitioned under Section 140 of the TNGST Act, 2017.

3. Procedural Fairness and Natural Justice:
The petitioner claimed not to have received the third notice dated 22.01.2021, which was critical for the assessment. The court acknowledged the necessity for procedural fairness and adherence to the principles of natural justice, emphasizing that the impugned order was passed during the peak of the Covid-19 pandemic, which could have affected the petitioner's ability to respond.

4. Jurisdictional and Statutory Compliance:
The court referred to multiple precedents, including the Hon'ble Supreme Court's decision in Glaxo Smith Kline Consumer Health Care Limited, which emphasized that the High Court should exercise restraint in entertaining writ petitions if an alternative efficacious remedy is available. However, the court also recognized that the statutory appeal period could not be strictly applied due to the pandemic.

5. Adjustment and Refund of TDS:
The court highlighted that the provisions of the TNVAT Act, 2006, mandate the adjustment of TDS towards the tax liability of the petitioner. Any surplus ITC after such adjustment should be refunded or allowed to be transitioned under Section 140 of the TNGST Act, 2017. The court found that the TDS was wrongly transitioned and utilized, which should have been refunded under Section 54 of the TNVAT Act, 2006.

Conclusion:
The court allowed the writ petitions by way of remand, quashing the impugned Assessment Orders. The cases were remanded back to the respondent with directions to:
- Allow transitional credit of purchase tax paid if validly availed and unutilized.
- Re-do the assessment by adjusting TDS and refunding any surplus ITC.
- Ensure procedural fairness and adherence to principles of natural justice.

Order:
The impugned Assessment Orders are quashed, and the cases are remanded for reconsideration with specific directions to the Assessing Officer. The connected Miscellaneous Petitions are closed with no cost.

← Previous Next →