2024 (6) TMI 1242 - HC - GST

Transition of input tax credit lying unutilized in its VAT returns - Section 140 of the respective GST enactments - HELD THAT - The credit that was availed by the petitioner under the provisions of the TNVAT Act, 2006 was to be allowed subject to the petitioner complying with the requirements of Section 140 of the TNGST Act, 2017 read with Rule 117 of the TNGST Rules, 2017. The credits that are availed under the provisions of the TNVAT Act, 2006 are indefeasible in nature. In this connection, reliance placed on the decision of the Hon'ble Supreme Court in COLLECTOR OF CENTRAL EXCISE, PUNE VERSUS DAI ICHI KARKARIA LTD. 1999 (8) TMI 920 - SUPREME COURT , wherein, the Hon'ble Supreme Court while dealing with the provisions of the Central Excise Rules, 1944 in the context of CENVAT Credit Rules/MODVAT Credit Rules, held that once the credit is validly availed, it is indefeasible unless provided to lapse under the law and that credits availed under the provisions of the erstwhile Central Excise Act, 1944 and Central Excise Rules, 1944 are indefeasible and are intended to reduce the cascading effect of the tax to benefit the consumers. The provisions of Section 54 of the TNGST Act, 2017 also do not provide for the refund of such unutilized input tax credit that was not transitioned under Section 140 of the TNGST Act, 2017. Be that as it may, the petitioner cannot be made to suffer if the credit was validly availed. The impugned order can be set aside for verification as to whether the petitioner had validly availed input tax credit under the provisions of the TNVAT Act, 2006 and the credit availed by the petitioner satisfied the requirements of Section 19 of the TNVAT Act, 2006 read with relevant Rules - Petition allowed partly.

Summary

Issues:
1. Challenge to impugned order dated 27.12.2023 for Assessment Year 2017-2018 and Notification No. 09/2023-Central Tax, dated 31.03.2023.
2. Transition of unutilized input tax credit under TNVAT Act, 2006 to respective GST enactments.
3. Validity of availing input tax credit under TNVAT Act, 2006 straightway in monthly returns without following prescribed procedure under TNGST Act, 2017.
4. Indefeasibility of input tax credit availed under TNVAT Act, 2006.
5. Refund of unutilized input tax credit not transitioned under Section 140 of TNGST Act, 2017.
6. Setting aside impugned order for verification of valid availing of input tax credit under TNVAT Act, 2006.

Analysis:
1. The petitioner challenged an order and a notification related to Assessment Year 2017-2018. The petitioner initially challenged the notification but later withdrew that prayer.
2. The dispute arose during the transition from TNVAT Act, 2006 to GST enactments in 2017. The petitioner claimed entitlement to transition unutilized input tax credit from TNVAT Act to GST enactments as per Section 140.
3. The petitioner directly reflected VAT credit in monthly GST returns without following prescribed procedures, leading to denial of credit utilization by tax authorities.
4. The court emphasized the indefeasibility of credits availed under TNVAT Act, 2006, citing a Supreme Court decision on Central Excise Rules.
5. The judgment highlighted that unutilized credits must be refunded if not allowed for tax discharge under GST Acts unless provided for lapsing.
6. The impugned order was set aside for verification of valid availing of input tax credit under TNVAT Act, 2006, directing the tax authority to examine original invoices for credit transition under Section 140 of TNGST Act, 2017. The court stressed that procedural errors should not deny credit if entitlement is established.
7. The judgment partially allowed the writ petition with observations on the importance of rules as handmaids of justice, not its mistress, referring to a Supreme Court decision on sales tax refund procedures. No costs were awarded, and connected petitions were closed.