2021 (4) TMI 1170 - HC - VAT and Sales Tax

Adjustment of input tax credit against tax liability - Rule 10(10(b) of the Tamil Nadu Value Added Tax Rules, 2007 - Disallowance of adjustment of the input tax credit amounting to ₹ 23,31,952/- from the petitioner s online monthly return of February 2014 towards the arrears of the tax liability for the Assessment Year 2011-12. Adjustment of input tax credit against tax liability - HELD THAT - Credit will be allowed to be adjusted against tax liability under Central Sales Tax Act , 1956 only if a dealer produced Form C prescribed in the Central Sales Tax (Registration and Turnover) Rules, 1957 - only if credit is available as per Rule 10(9)(a) of the Tamil Nadu Value Added Tax Rules, 2007 read with Section 9(5) of the Tamil Nadu Value Added Tax Act, 2006 as in force w.e.f. 01.01.2001, it can be adjusted / utilized for discharging tax liability under Central Sale Tax Act, 1956 under Rule 5(3-A) of the Central Sales Tax (Tamil Nadu) Rules, 1957 - the petitioner was entitled to adjust the input tax credit only if such credit was available under the Section 19 of the Tamil Nadu Value Added Tax Act, 2006. Both the petitioner and the respondent have not brought to the attention of the Court about the fate of assessment order passed under Tamil Nadu Value Added Tax, 2006 for the aforesaid assessment year as to whether credit was allowed to the petitioner under Section 19 of the said Act. Therefore, there are no merits in the present writ petition in absence of such vital information. If there was any zero rated sale during the subsequent years, it can only be refunded in accordance with the law to the petitioner. There is no scope for adjustment for past liabilities - Therefore, if the petitioner was otherwise entitled to such refund under Section 18 of the Tamil Nadu Value Added Tax, 2006, instead of refunding the amounts to the petitioner, such amount may be allowed to be set-off against the tax liability in view of the peculiar situation arising out of subsequent development and transition to a different tax regime under the GST Laws with effect from 01.07.2017. The petitioner is allowed to file an appeal against the impugned orders within a period of thirty days from date of receipt of a copy of this order before the appellate authority - petition dismissed.

Summary

Issues Involved:
1. Validity of adjustment of Input Tax Credit (ITC) against tax liability under the Central Sales Tax Act, 1956.
2. Justification of disallowing adjustment of ITC amounting to ?23,31,952/- due to non-filing of a proper refund claim within the stipulated time under Section 18(3) of the Tamil Nadu Value Added Tax Act, 2006.

Detailed Analysis:

1. Validity of Adjustment of Input Tax Credit (ITC):
The petitioner challenged the impugned orders dated 31.07.2014 and 25.09.2014, claiming that the adjustment of ITC against tax liability under the Central Sales Tax Act, 1956 is permissible under Rule 10(10)(b) of the Tamil Nadu Value Added Tax Rules, 2007. The respondent argued that the petitioner had an alternate remedy before the Deputy Appellate Commissioner and that the ITC claimed had lapsed due to non-compliance with the time frame stipulated under Section 19(11) of the TNVAT Act, 2006. The court noted the contradiction between Section 19(5)(c) and Section 19(2)(v) of the TNVAT Act, 2006, with the former restricting ITC on inter-State sales unless Form C is filed. The court referenced the decision in TVS Motor Co. Ltd. v. State of Tamil Nadu, which upheld the conditions for availing ITC as a concession. The court concluded that the petitioner was entitled to adjust ITC only if such credit was available under Section 19 of the TNVAT Act, 2006.

2. Justification of Disallowing Adjustment of ITC Amounting to ?23,31,952/-:
The respondent disallowed the adjustment of ITC amounting to ?23,31,952/- from the petitioner’s online monthly return of February 2014 towards the arrears of tax liability for the Assessment Year 2011-12, citing non-compliance with Section 18(3) of the TNVAT Act, 2006, which mandates that ITC should be claimed within 180 days from the date of making zero-rated sales. The petitioner argued that it had adjusted the ITC towards its tax liability and was not claiming a refund. The court observed that the scheme of the TNVAT Act and Rules requires a one-to-one correlation between ITC and its utilization. It was noted that the petitioner’s adjustment of ?23,31,952/- was not permissible under the scheme of the Act and Rules. The court suggested that if the petitioner was entitled to a refund under Section 18 of the TNVAT Act, 2006, such amounts could be allowed to be set-off against tax liability due to the transition to the GST regime.

Conclusion:
The court dismissed the writ petition but allowed the petitioner to file an appeal against the impugned orders within thirty days. The appellate authority was directed to decide the case on merits within three months. It was clarified that there would be no waiver from the mandatory pre-deposit of the disputed tax liability, but unutilized ITC under the TNVAT Act, 2006, not transitioned under GST law, may be adjusted towards the mandatory pre-deposit.