2007 (8) TMI 659 - HC - VAT and Sales Tax

Input tax credit on the goods purchased from outside the State - Held that - The contention of the petitioner cannot be countenanced in law in view of the specific provision under section 19(5)(b) of the Act. Rule 10(3)(b)(i) refers to the purchase of goods other than capital goods which have been effected on the first seller in the State and therefore rule has to be read as a whole and 10(3)(b)(iv) cannot be read in isolation. The object of the enactment is if a dealer purchases goods within the State of Tamil Nadu and pays tax to another registered dealer then he is entitled to take the input credit of the tax paid or payable under this Act and not intended to permit the dealer to avail input credit in respect of tax on the goods brought into the State by purchase effected from outside the State. Thus the petitioner is not entitled to avail input tax credit on the goods purchased from outside the State. No infirmity or illegality in the assessment order of the respondent and therefore the writ petition is liable to be dismissed and accordingly dismissed. However it is open to the petitioner to make an application seeking refund of excess payment or adjustment of the tax paid under section 19(17) and (18) of the Tamil Nadu Value Added Tax Act 2006 to the authorities and on receipt of such application the competent authority shall consider the same and pass appropriate orders on merits and in accordance with law.

Summary

Issues:
1. Disallowance of input tax credit for inter-State purchases.
2. Interpretation of relevant provisions under the Tamil Nadu Value Added Tax Act, 2006 and Rules.
3. Validity of the assessment order and writ petition challenging the same.

Analysis:
1. The petitioner, a registered dealer under the Tamil Nadu Value Added Tax Act, reported a closing stock value of Rs. 12,96,478.98 with an input tax credit amount of Rs. 1,60,709.76. The respondent, however, granted credit only for Rs. 72,646, disallowing the rest for inter-State purchases. The petitioner objected, citing tax-suffered goods under the Tamil Nadu General Sales Tax Act, 1959, but the assessing officer relied on Section 19(5)(b) to disallow the claim for inter-State purchases, leading to the final determination of input tax credit at Rs. 72,646.

2. The petitioner argued that Rule 10(3)(b)(iv) of the Tamil Nadu Value Added Tax Rules, 2007 should allow the input tax credit since local tax was already paid on the entire stock value. However, the court held that Section 19(5)(b) explicitly disallows credit on goods brought from outside the State. The court emphasized that Rule 10(3)(b)(i) applies to purchases within the State, and Rule 10(3)(b)(iv) cannot be interpreted in isolation. The objective is to allow credit only for tax paid within the State, not for goods brought from outside.

3. The court found no illegality in the assessment order and dismissed the writ petition. The petitioner was advised to seek refund or adjustment under specific provisions of the Act. The judgment clarified that the petitioner was not entitled to claim input tax credit on goods purchased from outside the State, emphasizing the legislative intent behind the relevant provisions.

In conclusion, the court upheld the assessment order, highlighting the restrictions on claiming input tax credit for inter-State purchases under the Tamil Nadu Value Added Tax Act, 2006. The judgment emphasized the importance of interpreting the rules in conjunction with the Act's provisions to determine the eligibility for input tax credit, ultimately dismissing the writ petition while providing guidance on seeking refund or adjustment through proper channels.