2015 (5) TMI 31 - HC - VAT and Sales Tax

Inputs loss during production - Held that - Following decision of Interfit Techno 2015 (4) TMI 935 - MADRAS HIGH COURT - Decided in favour of assessee. Going by the object of the enactment, the Assessing Officer is bound to examine the refund claim under Section 18 in accordance with the procedure stipulated for availing input tax credit by applying Section 19 of the VAT Act and it is only then, the Authority can pass an order on a refund claim. Therefore, the processing of refund application under Form W is in effect akin to an assessment proceedings since the benefit which flows under claim in Form W, is in effect, the amount which the dealer avail as refund would be a credit if the transaction was not a zero rated sale. - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or adhoc basis stands set aside. However, liberty is granted to the concerned Assessing Officer to issue show cause notices to the petitioners clearly setting out the circumstances under which they propose to revise or call upon the petitioner to reverse refund sanctioned and after receiving their objections shall proceed in accordance with law. Section 18 of VAT Act is subject to the restrictions and conditions under Section 19 of VAT Act. Therefore, if in a given cases of wrong availment, Section 19 provides for reversal. Therefore, it is incorrect to state that once the refund is granted, reopening does not arise. Such interpretation is not in consonance with the scheme of the Act; more so, when what is given to the petitioner is concession or set-off. - Decided partly in favour of assessee.

Summary

Issues:
1. Writ petition filed for certiorarified mandamus regarding inputs loss during production.
2. Interpretation of Section 18 and Section 19 of TNVAT Act.
3. Assessing Authority's duty in evaluating refund claims under Section 18(2).
4. Validity of uniform percentage for invisible loss and reversal of input tax credit.
5. Dealer's undertaking in Form W and remedies for erroneous refunds.

Analysis:

The writ petition sought a writ of certiorarified mandamus to challenge the respondent's records regarding inputs loss during production. The petitioner requested to quash the records related to the issue and direct the respondent to reevaluate the matter as per the directions issued by the Court in a previous case. The Court referred to a previous judgment in a related case where it was held that the impugned circular was non-statutory and in the nature of a guideline, rejecting the prayer to quash it. The Court clarified that Section 18 of the TNVAT Act is not an independent provision but subject to other provisions, including Section 19. It emphasized that a dealer claiming a refund under Section 18(2) must prove that the claim complies with the restrictions and conditions under Section 19. The Assessing Authority is required to conduct a fact-finding exercise to determine the quantum of loss and ensure the claim is not restricted by Section 19.

Furthermore, the Court ruled that Assessing Authorities cannot apply a uniform percentage for invisible loss and reverse input tax credit without proper justification. Any notices issued for reopening or reversing credit based on adhoc percentage were set aside. Assessing Officers were directed to issue appropriate show cause notices, inviting objections before taking any action. The judgment highlighted that the dealer's undertaking in Form W is crucial for verification by the Assessing Officer, emphasizing that Section 18 is not an independent provision but subject to the restrictions of Section 19. The Court disposed of the writ petition accordingly, with no costs imposed, and closed the connected miscellaneous petitions.

In conclusion, the judgment clarified the interplay between Sections 18 and 19 of the TNVAT Act concerning refund claims and Assessing Authority's duties. It emphasized the need for a detailed evaluation of claims, the inadequacy of applying uniform percentages for losses, and the importance of complying with procedural requirements for refunds. The ruling provided clarity on the legal framework governing refund claims under the TNVAT Act, ensuring a fair and thorough assessment process for dealers seeking refunds.