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2015 (4) TMI 935 - HC - VAT and Sales TaxValidity of circular directing to reverse the credit to the extent of waste - TNVAT - Demand of VAT on the invisible loss of yarn emerging during manufacturing process - Refund was vat credit was claimed on export - Circular No.22/2011 dated 20.10.2011 - Held that:- Head of the Department is entitled to give administrative instruction, which shall be binding on all his subordinates. The problem would arise only when certain subordinates without due application of mind mechanically apply the circular/guideline/instruction and proceed to take action unmindful of the factual and legal position. There might be cases where the administrative head will issue instructions to the subordinates for the day-to-day conduct of the affairs of the establishment. But in the instant case, the subordinate officers as well as the Commissioner are all authorities functioning under a taxation statute and each one of them exercising quasi judicial function. Therefore, even though the Commissioner may be the Head of the Department, the manner, in which a particular return is to be assessed or a refund has to be granted or refused cannot be issued in the form of guideline or instruction to the Assessing Officer. - assessing officer cannot be solely guided by the impugned guidelines and has to exercise his quasi-judicial powers. In any event there is no cause of action to challenge the impugned circular. Question of quashing the impugned circular is unnecessary in the light of the stand taken by the respondents that the impugned circular is not statutory and at best could serve as guideline. A note of caution is added by observing that no Assessing Officer or Adjudication Authority exercising powers under the VAT Act or Rules framed thereunder can blindly follow the circular while considering a return or refund claim. Accordingly the challenge to the impugned circular is held to be unnecessary since the circular is a non-statutory circular and is in the nature of guideline and the prayer for quashing the circular is rejected Whether Section 18 of the TNVAT Act is a Scheme by itself or whether the benefit to a dealer under Section 18 is subject to the conditions prescribed under Section 19(9) of the TNVAT Act - Held that:- Section 18 of the VAT Act is not an independent provision, not a scheme by itself and forms part of the statute. Consequently, the Input tax credit or refund, which is claimed under Section 18 of the VAT Act is subject to restrictions and conditions under Section 19 of the Act. - Decision in the case of Ashoka Marketing Ltd., and another Vs. Punjab National Bank and others [1990 (8) TMI 393 - SUPREME COURT] followed. Registered dealer, who claims for refund of the input tax under Section 18(2), which itself in the nature of credit has to first satisfy that the circumstances set out in Section 19(9) are not attracted. Therefore, it is not sufficient for the registered dealer to merely state or show that the goods were used in the manufacture and there is nothing more to be done by him and he would be entitled to the entire credit of the tax paid by him on the input by way of refund. The said contention cannot be accepted in the light of the discussion made above. Therefore whether it is a process loss or manufacturing loss or destruction or theft, loss while process loss or manufacturing loss or destruction or theft, loss while in storage, damage in transit or destruction at some intermediary stage of manufacture are to be established before the assessing officer by the dealer and to satisfy the assessing officer that loss of the goods purchased is not covered under any one or more of the contingencies under Section 19(9) of the Act. The Assessing Officers appear to be have been impulsive after issuance of the impugned guideline partly precipitated by the dealers since they did not avail opportunity granted by the Honourable Division Bench before whom they agreed to demonstrate their manufacturing process before their concerned Assessing Authority that there is no loss of material. Be that as it may, the earlier round of litigation did not decide the merits of the issue. Therefore, the same cannot be an embargo for the petitioners, who may be the members of the earlier writ petitioner association and in any event, there was no finding on the legal issues while deciding the earlier writ petitions or that matter in the Writ Appeal. Going by the object of the enactment, the Assessing Officer is bound to examine the refund claim under Section 18 in accordance with the procedure stipulated for availing input tax credit by applying Section 19 of the VAT Act and it is only then, the Authority can pass an order on a refund claim. Therefore, the processing of refund application under Form W is in effect akin to an assessment proceedings since the benefit which flows under claim in Form W, is in effect, the amount which the dealer avail as refund would be a credit if the transaction was not a zero rated sale. - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or adhoc basis stands set aside. However, liberty is granted to the concerned Assessing Officer to issue show cause notices to the petitioners 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 shall proceed in accordance with law. Section 18 of VAT Act is subject to the restrictions and conditions under Section 19 of VAT Act. Therefore, if in a given cases of wrong availment, Section 19 provides for reversal. Therefore, it is incorrect to state that once the refund is granted, reopening does not arise. Such interpretation is not in consonance with the scheme of the Act; more so, when what is given to the petitioner is concession or set-off. - Decided partly in favour of assessee.
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