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M/s. Dennis Steels Pvt Ltd., Represented by its Director, Sholly Dennis Versus The Commercial Tax Officer Arakkonam Assessment Circle Arakkonam, Vellore District

Reversal of Input Tax Credit on the estimated invisible loss of input used in the course of manufacture as per Section 19(5)(ii) of the TNVAT Act. - Reversal of credit towards interstate sales without C forms - Held that:- The Assessing Officer did not embark a fact finding exercise to ascertain the quantum of loss of the goods which were purchased on which the tax was paid vis-a-vis the goods manufactured from and out of the goods purchased. No endeavor was made in this regard. Therefore, this .....

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- Dated:- 13-6-2016 - Mr. JUSTICE T.S.SIVAGNANAM For the Petitioner : Mr. R. Kumar For the Respondent : Mr. Manokaran Sundaram, A.G.P., ORDER Heard Mr.R.Kumar, learned counsel appearing for the petitioner and Mr.Manokaran Sundaram, learned Additional Government Pleader appearing for the respondent and with the consent of the either side, the writ petition itself is taken up for final disposal. 2.The petitioner is a registered dealer under the provisions of the Tamil Nadu Value Added Tax Act, 20 .....

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9 under the provisions of the TNVAT Act by proceedings dated 28.02.2014 and the input tax credit was reversed with regard to wastage of scrap iron in the process of manufacture at 3% and on inter-state sales without C forms at 4%. 3. The petitioner filed a writ petition before this Court in W.P.No.11424/2014 challenging the reversal of Input Tax Credit on the estimated invisible loss of input used in the course of manufacture as per Section 19(5)(ii) of the TNVAT Act. In the said Writ Petition, .....

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he Assessing Officer ascertained the quantum and loss of goods was considered and it was held as follows: 63. In the result, (1)... (2)... (3) For the reasons assigned, it is not sufficient for a dealer claiming refund under Section 18(2) of the Act to show that he has paid input tax on the goods purchased; that those goods are used in the manufacture and nothing more but there is duty upon the dealer to satisfy the Assessing Authority that the claim is not hit by any of the restrictions or cond .....

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d as to whether the representation made by the dealer is justified and is not hit by any of the restrictions and conditions contained in Section 19 and in particular Section 19(9) of the VAT Act. (4) It is held that the Assessing Authorities are not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversi .....

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tage while calculating the invisible loss of the inputs. Therefore, the Assessing Officer was required to go into the manufacturing process which may require inspection of the factory premises to see the nature of activity done by them. 5. After the writ petition was disposed of, the respondent had issued a notice dated 28.09.2015 for which the petitioner had submitted their reply on 16.11.2015. Thereafter, the respondent proposed to consider the same. In the show cause notice, apart from the is .....

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anufacture at 4%. However, there is no reasoning assigned as to how 4% has been adopted and it is only a adhoc estimation which was frowned upon by this Court in the earlier order. 6. So far as the reversal of ITC on purchase of Furnace Oil is concerned, the petitioner's case is that in their manufacturing activity, the Furnace Oil is an essential input material for melting the scrap. It is used as an input for manufacture and it is not damaged in transit or destroyed. The petitioner referre .....

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ich reads as inputs damaged in transit or destroyed before manufacturing , it was submitted that from the above wording it is clear that reversal of ITC should be made if the inputs are damaged in transit or destroyed before manufacture and the Annexure-III should be read along with Section 19(9) and in their case, the inputs were not destroyed before manufacture. 8. The respondent while considering the said issue has referred to a decision in the case of M/s.Perfect Wheels (P) Ltd., Gurgoan v. .....

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gment has held that the petitioner is not entitled to any relief and therefore the reversal of Input Tax Credit on Furnace Oil is confirmed. As already noticed, there is also a direction to reverse ITC towards inter-state sales without C forms. Thus, three issues arise for consideration, namely, 1. Invisible loss in the process of manufacture 2. Reversal of ITC on purchase of Furnace Oil used as fuel 3. Reversal of ITC towards inter-state sales without C forms 10. With regard to the first issue, .....

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the goods purchased. No endeavor was made in this regard. Therefore, this Court has to necessarily interfere with the said finding with regard to the invisible loss in the process of manufacture which has now been fixed by the Assessing Officer at 4%. Therefore, the said question is decided in favour of the petitioner and the finding is set aside. 11. So far as the second issue regarding the usage of Furnace Oil as fuel, the same has been decided against the petitioner by referring to the decis .....

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of goods as per serial no.67 of the first schedule to Tamil Nadu Value Added Tax Act, which describes industrial inputs which includes consumables. Therefore, it is the case of the petitioner that the Furnace Oil is a consumable. 12. That apart, it is pointed out that Annexure 12 has only recently being amended and given effect to from 29.01.2016 which refers to inputs damaged during intermediary stage of manufacture and this entry was not there prior to 29.01.2016. Hence, these issues have to b .....

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