2017 (9) TMI 1360 - HC - VAT and Sales Tax

Adjustment of the input tax credit - refund of input tax credit - time limitation - The petitioner s specific case is that they have been making the claim in Form No.1 within the period prescribed under Section 19(11) of the State Act and hence, the respondent was not justified in issuing the show cause notices proposing to reverse the input tax credit on the ground that the claim was not made within 180 days as per Section 18 of the State Act. Held that - it is admitted that the appeal is yet to be numbered and it is still in the SR stage - The settled legal position is that mere pendency of an appeal would not amount to stay of a judgment or order. In the instant case, the appeal is yet to be numbered - the decision in the case of M/s. Everest Industries Limited Versus The State of Tamil Nadu, The Deputy Commissioner (CT) (FAC) 2017 (3) TMI 279 - MADRAS HIGH COURT , where it was held that 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 clause (i) to (iv) and (vi) of Section 19(2) of the 2006 Act. The impugned assessment orders are set aside in so far as the rejection of the petitioner s objections with regard to adjustment of input tax credit - Matter is remanded back to redo the asessment - petition allowed partly by way of remand.

Summary

Issues:
Challenge to assessment orders for the years 2011-12 to 2015-16, rejection of objections regarding adjustment of input tax credit, claim for refund of input tax credit, reliance on specific court decisions, pending appeal against Everest Industries Limited decision.

Analysis:

The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, challenged assessment orders for multiple years. The primary issues revolved around the rejection of objections related to the adjustment of input tax credit and the claim for refund of reversed input tax credit. The Assessing Officer failed to provide adequate reasons for rejecting the petitioner's objections, leading to the orders being set aside due to lack of justification.

Regarding the claim for refund, the petitioner contended that they had followed the prescribed procedures and timelines under the State Act, emphasizing their entitlement to the input tax credit. The petitioner also cited previous court decisions, such as R.K.Knits and Xomox Sanmar Limited cases, to support their position on the matter. These cases highlighted the importance of considering the legality and rationality of the assessment methods employed by the authorities.

In analyzing the legal precedents, the court referenced the Andhra Pradesh High Court's decision in Maxworth Plywoods Private Limited case to underscore the necessity of a lawful and rational approach in assessing tax liabilities. The court emphasized that in the absence of specific rules governing the assessment process, the authorities cannot impose arbitrary methods that disadvantage the taxpayer, reinforcing the principle of tax deferment benefits and procedural fairness.

The court found that the Assessing Officer had disregarded the petitioner's arguments and failed to engage with the legal principles outlined in the cited judgments. Consequently, the court set aside the findings related to the adjustment of input tax credit and directed a reassessment by considering the petitioner's submissions and the relevant legal decisions.

Moreover, the court acknowledged the pending appeal against the Everest Industries Limited decision but clarified that until the appeal was formally numbered, the original judgment remained in force. As a result, the court partially allowed the writ petitions, setting aside the assessment orders concerning the adjustment of input tax credit and granting the petitioner the opportunity to claim a refund based on the Everest Industries Limited decision.

In conclusion, the court remitted the matter back to the respondent for reassessment in line with the directives provided, including a three-month timeline for compliance. The judgment highlighted the importance of adhering to legal principles, providing reasoned justifications for decisions, and ensuring procedural fairness in tax assessments.