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2020 (6) TMI 682 - HC - VAT and Sales TaxReversal of ITC - alleged invisible loss - validity of circular dated 20.10.2011 - HELD THAT - Since the notice issued is relating to the assessment year 2012-13, the second respondent / Assessing Officer shall decide the issue afresh, after issuing show cause notice to the petitioner 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. Such notice be issued by the second respondent within a period of four weeks from the date of receipt of a copy of this order. The second respondent shall consider the same and pass appropriate orders, on merits and in accordance with law, after affording due opportunity of personal hearing to the petitioner, within a period of four weeks therefrom.
Issues:
Challenge to circular dated 20.10.2011 and notice dated 20.02.2014 regarding ITC reversal for invisible loss for assessment year 2012-13. Analysis: The petitioners challenged a circular and a notice issued by the respondents regarding the reversal of Input Tax Credit (ITC) for an alleged invisible loss. The issue was covered by a previous decision of the court in Interfit Techno Products Ltd. v Principal Secretary/ Commissioner of Commercial Taxes, where it was held that the circular in question was non-statutory and served as a guideline. Section 18 of the TNVAT Act was discussed, emphasizing that claiming a refund under this section required satisfying the Assessing Authority that the claim was not restricted by Section 19 of the Act. The court ruled that Assessing Authorities cannot adopt a uniform percentage for invisible loss and reverse ITC without proper justification. The Assessing Officer was directed to issue appropriate show cause notices, allowing the petitioners to present objections before any further action. The court dismissed one writ petition while allowing another, directing the Assessing Officer to decide the issue afresh after receiving objections from the petitioner. The judgment clarified that the circular in question was non-statutory and acted as a guideline. It highlighted the importance of satisfying the Assessing Authority that the refund claim was not restricted by Section 19 of the VAT Act. The court emphasized that Assessing Authorities cannot apply a uniform percentage for invisible loss without proper justification and directed them to issue show cause notices before taking any action. One writ petition was dismissed, while another was allowed, with the Assessing Officer instructed to reconsider the issue after receiving objections from the petitioner. The court's decision was based on the interpretation of relevant provisions of the TNVAT Act and previous case law. It emphasized the need for Assessing Authorities to conduct a fact-finding exercise to determine the validity of refund claims under Section 18(2) and ensure compliance with Section 19 restrictions. The judgment provided clarity on the process to be followed by the Assessing Officer in such cases, including issuing show cause notices, considering objections, and making decisions based on merits and in accordance with the law. The court's ruling aimed to ensure a fair and thorough assessment of refund claims related to invisible losses, protecting the rights of the petitioners while upholding the provisions of the VAT Act.
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