2017 (9) TMI 133 - HC - VAT and Sales Tax

Interpretation of statute - Reversal of Input tax credit u/s 19(2)(v) and 19(5)(c) of the TNVAT Act - with regard to the proposed reversal of input tax credit under Section 19(2)(v), the petitioner placed reliance upon the decision of this Court in the case of Everest Industries Limited v. State of Tamil Nadu and another 2017 (3) TMI 279 - MADRAS HIGH COURT - Held that - In the said decision, it has been held that a plain reading of the provisions of sub-sections (1) and (2) of Section 19 of the TNVAT Act would show that, as long as specified goods, which suffer tax are used for any of the purposes set out in clauses (i) to (vi) of sub-section (2) of Section 19, the dealer should be able to claim the input tax credit, with a caveat in so far as clause (v) is concerned encapsulated in the proviso to Section 19(2) of the TNVAT Act, and therefore, the limitation provided in the proviso would apply only vis-a-vis the purpose specified in clause (v) and not qua other purposes set out in clauses (i) to (iv) and (vi) of Section 19(2) of the TNVAT Act - the finding rendered by the respondent with regard to reversal under Section 19(2)(v), as made in the impugned order, has to be set aside. With regard to reversal under Section 19(5)(c), the petitioner has given factual explanation and their case is, immediately after manufacture, the value cannot be ascertained, as the market is fluctuating and only after the manufacture is completed, the value of the manufactured goods could be ascertained. But the petitioner has furnished all the other values. Further, the petitioner has also furnished the details of the closing stock value as on the relevant date item-wise and only the value that was not furnished is for the manufactured goods, which according to the petitioner could not be done immediately. This aspect has not been properly dealt with by the respondent while completing the assessment and the reason assigned for not considering the Stock-cum-Production Statement is not tenable. Therefore, the reversal made under Section 19(5)(c) also calls for interference. The matter is remitted to the respondent for fresh consideration who shall take note of the observations of this Court in the decision made in Everest Industries Limited s case (supra), apply the same to the petitioner s case and redo the assessment under Section 19(2)(v) and also under Section 19(5)(c) of the TNVAT Act - appeal allowed by way of remand.

Summary

Issues:
Challenge to order of assessment under TNVAT Act and CST Act for the year 2014-2015; Reversal of input tax credit under Sections 19(2)(v) and 19(5)(c) of TNVAT Act; Interpretation of judgment in Everest Industries Limited v. State of Tamil Nadu case; Compliance with court directions; Fresh consideration of assessment by the respondent.

Analysis:
The petitioner, a registered dealer under TNVAT Act and CST Act, challenged an assessment order for the year 2014-2015 proposing to reverse input tax credit. The respondent issued a notice based on a previous direction, proposing reversals under Sections 19(2)(v) and 19(5)(c) of the TNVAT Act. The petitioner objected, citing a judgment in Everest Industries Limited v. State of Tamil Nadu case, emphasizing the applicability of input tax credit provisions. The respondent, however, proposed a contrary view, attempting to circumvent the Everest Industries Limited judgment, which the court found unacceptable. The court reiterated that the Everest Industries Limited decision binds the respondent until modified or reversed. The respondent's interpretation was deemed invalid, emphasizing the specific limitation in the proviso to Section 19(2)(v) of the TNVAT Act.

The court held that the respondent's findings on reversal under Section 19(2)(v) were incorrect and needed to be set aside in line with the Everest Industries Limited judgment. Regarding reversal under Section 19(5)(c), the petitioner explained the challenges in determining value immediately after manufacture, which the respondent failed to consider adequately. The court found the reasons for not considering the Stock-cum-Production Statement untenable, requiring interference with the reversal under Section 19(5)(c) as well.

Consequently, the court allowed the writ petition, setting aside the impugned order and remitting the matter to the respondent for fresh consideration. The respondent was directed to apply the principles of the Everest Industries Limited case in reassessing under Section 19(2)(v) and Section 19(5)(c) of the TNVAT Act within twelve weeks. The petitioner was granted the opportunity to provide additional documents or objections, with no costs imposed, and the connected miscellaneous petition was closed.