2021 (3) TMI 896 - MADRAS HIGH COURT - CST, VAT & Sales Tax

Head Note / Extract:
Exemption in terms of Entry 65/Schedule A of TNVAT Act - turnover from sale of rice bran oil less than ₹ 5.00 crores - forfeiture of tax in terms of Section 40(2)(ii) - reversal of input tax credit - HELD THAT:- The Central Excise Act 1944 permits the issuance of Notifications in terms of Section 37B of that enactment. There is not, in my view, any discernible distinction between an exemption offered under Notification (as is the case under Central Excise law) or under the Schedule to the Act (as in the case before me. The crux of the matter remains that the assessee must have freedom to choose whether or not it wishes to avail of the benefit offered The exemption available under Entry 65/Schedule A is an option that has not been availed by the present petitioner and I see no legal flaw in the choice made. The petitioner will have to sink or sail on the basis of the decision taken by it, qua exemption. In this case, the petitioner has, while eschewing exemption, claimed ITC on purchases. The respondent, while rejecting the claim for ITC has fortified the tax collected in terms of Section 41 of the TNVAT - The grant of credit is conditional upon the status of a dealer as ‘taxable’, and hence a dealer falling outside the ambit of taxability was not extended the benefit of ITC, which is a concession under the statute, as seen from a reading of the charging section, Section 3, read with Section 19, dealing with Input tax credit. The feature of input tax credit is what gives value added taxes their main economic characteristic, that of neutrality. The full right to deduction of input tax through the supply chain, with the exception of the final consumer, ensures neutrality of the tax, whatever be the nature of the product, the structure of the distribution chain and the technical means used for its delivery, either via brick and mortar establishments, physical delivery or the Internet. This is a measure of avoiding the ills of cascading taxes. To deny the petitioner the benefit of ITC by thrusting an exemption not claimed by it, upon it, will be contrary to the scheme of the enactment. Petition allowed.