2016 (12) TMI 371 - HC - VAT and Sales Tax

Rejection of Refund of the ITC u/s 18 of the TNVAT Act, 2006 - making moulds for the manufacture of valves - Held that - In Sara Leathers vs. Commercial Tax Officer, Tambaram I Assessment Circle, Chennai 2009 (10) TMI 848 - MADRAS HIGH COURT , this Court considered the scope of Section 18 of the TNVAT Act with particular reference of Section 18(2) of the TNVAT Act and pointed that Section 18(2) of the TNVAT Act is emphatic in its wording, the dealer referred to therein to claim a refund is one who had paid the tax on purchase of those goods that are exported and such consumed goods used in the manufacture of other goods which are exported and are specified under sub-section (1) and in the said case, the petitioner was held to be entitled to the total refund. Thus, the respondent should consider the petitioner s case based on the stand taken by them that the raw materials purchased by them are used in the manufacture of other goods that are exported as specified in sub-section (1) of Section 18. This aspect having not been considered, the matter requires re-consideration. Appeal allowed by way of remand.

Summary

Issues:
Challenge to rejection of refund claim under Section 18 of TNVAT Act for input tax credit for the year 2013-2014 on making moulds for manufacture of valves.

Analysis:
The petitioner, a registered dealer engaged in manufacturing alloy steel castings, challenged the respondent's order rejecting their claim for refund of input tax credit under Section 18 of the TNVAT Act for the year 2013-2014 related to making moulds for valves. The petitioner claimed they purchased consumables for making moulds used in manufacturing valves and other exported products. The respondent issued a show cause notice stating that since the moulds were not exported, the petitioner was not entitled to a refund. The petitioner submitted objections, arguing that the goods were used in manufacturing steel alloy castings sold under TNVAT Act and CST Act, and input tax credit was adjusted to output tax. The respondent did not examine whether sub-section (2) of Section 18 of the TNVAT Act applied to the petitioner's case, solely focusing on the lack of export of moulds.

In Sara Leathers vs. Commercial Tax Officer, Tambaram I Assessment Circle, Chennai, the Court emphasized the wording of Section 18(2) of the TNVAT Act, stating that a dealer who paid tax on goods used in manufacturing exported goods is entitled to a refund. The Court held in that case that the dealer was entitled to a total refund. The Court directed the respondent to consider the petitioner's case based on the claim that raw materials were used in manufacturing goods specified in sub-section (1) of Section 18, which had not been considered previously, necessitating re-consideration.

The Court allowed the writ petition, setting aside the impugned order and remanding the matter to the first respondent for fresh consideration. The first respondent was directed to provide the petitioner with a personal hearing, conduct an inspection of the petitioner's factory after advance notice, understand the manufacturing process, and make a decision in accordance with the law. No costs were awarded, and the connected miscellaneous petition was closed.