2015 (10) TMI 1730 - HC - VAT and Sales Tax

Reversal of input tax credit - Assessee contends that when the issue raised before the Assessing Officer was on an interpretation of a circular issued by the Joint Commissioner and also covered by another decision in favour of one of the group companies, there was no necessity for the appellants to go to the appellate authority and exhaust all statutory remedies - Held that - When the issue raised before the Assessing Officer was on an interpretation of a circular issued by the Joint Commissioner and also covered by another decision in favour of one of the group companies, there was no necessity for the appellants to go to the appellate authority and exhaust all statutory remedies - based upon the orders passed by the High Court on 17.7.2013 in a batch of writ petitions upholding the Constitutional validity of Section 19(20) and also based upon the representations of the association of manufacturers and traders, the Commissioner has directed in his circular that the provisions of Section 19(20) have nothing to do with the levy of tax on the discount, which has to be dealt with independently as per the provisions of the Act - Assistant Commissioner (CT) in Surapattu Assessment Circle had granted the benefit of the circular to one of the sister concerns. - Appellants is entitled to by-pass the alternative remedy of appeal - Matter remanded back - Decided in favour of assessee.

Issues involved:
Challenge to orders of assessment based on interpretation of circular and different treatment of group companies by assessing officers.

Analysis:
The judgment by the Madras High Court involved multiple writ appeals by different legal entities challenging orders passed by the learned Judge in their respective writ petitions. The appellants collectively challenged the reversal of input tax credit on trade discounts and other discounts received. The respondent issued individual notices proposing the reversal and subsequently called the appellants for an inquiry, leading to separate orders against them. The appellants contended that they were not required to exhaust statutory remedies of appeal as the issue involved interpretation of a circular and a decision in favor of a group company. They relied on a circular by the Commissioner of Commercial Taxes regarding Section 19(20) of the Tamil Nadu Value Added Tax Act, 2006, which outlined steps for the reversal of input tax credit.

The Commissioner's circular clarified that the provisions of Section 19(20) were distinct from the levy of tax on discounts, which should be dealt with independently. Notably, a sister company of the appellants had benefitted from the circular for certain assessment years. The appellants argued that different assessing officers within the same group of companies should not take divergent views. The Court acknowledged this contention, allowing the appellants to bypass the alternative remedy of appeal due to the unique circumstances. Despite the general principle of not allowing bypassing of appeal remedies, the Court found it unnecessary in this case where the circular benefit was claimed, and different treatment of group companies was evident.

In their objections to the notices, the appellants had highlighted the differing treatment of group companies, which the respondent did not consider in the impugned orders. Consequently, the Court set aside the orders and remitted the matter back to the respondent for fresh consideration. The respondent was directed to consider the Commissioner's circular and the assessment orders of the benefiting sister company before passing fresh orders within six weeks. The writ appeals were allowed, the orders of the learned Judge were set aside, and the impugned assessment orders were also set aside. No costs were awarded, and the related miscellaneous petitions were closed as per the judgment by the Madras High Court.

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