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2016 (8) TMI 401 - MADRAS HIGH COURT

2016 (8) TMI 401 - MADRAS HIGH COURT - [2016] 94 VST 409 (Mad) - Order of assessment Tamil Nadu Value Added Tax Act, 2006 - industrial valves iron and steel castings local sale, inter-state sale and export input tax credit preference of set off section 18 of TNVAT Act - Held that: - when there is no specific Rule providing the manner in which the petitioner had to be assessed to tax, which is not open to the Assessing Authority to contend that the particular mode should be adopted or .....

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hind the VAT regime matter remanded appeal set aside. - W.P.Nos.24402 to 24404 of 2014 & 24405 to 24407 of 2014 & 24488 to 24491 of 2014 - Dated:- 1-8-2016 - T. S. Sivagnanam, J. For the Petitioner : Mr. N. Murali For the Respondent : Mr. Manokaran Sundaram ORDER Heard Mr.N.Murali, learned counsel appearing for the petitioner in all Writ Petitions and Mr.Manokaran Sundaram, learned Additional Government Pleader, appearing for the respondent in all Writ Petitions. 2. The petitioner, who is a .....

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2014, several issues were raised, challenging the impugned assessments. However, in the light of the decision of this Court in the case of INTERFIT TECHNO PRODUCTS Vs. PRINCIPAL SECY. reported in (2015) 81 VST 389 (Mad), all those issues stood answered by the said decision and this position is clearly admitted by the learned counsel for the petitioner. Thus, the only issue which survives for consideration in all these Writ Petitions pertain to preference of Set-off. 4. The following facts would .....

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2008-09, 2010-11, 2011-12 and 2012-13. 4.2 The petitioner has export sales, during the year and the same has been categorized as "Zero Rated Sale" under Section 18 read with Section 2(44) of Tamil Nadu Value Added Tax Act, 2006 (in short "TNVAT Act"). The petitioner claimed ITC on its purchases and since, there were different types of sale such as Local, Inter-state and Export, the adjustment of ITC was done on the same month of the purchases in respect of the above said sal .....

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der viz., (i) Local Sale (Set-off against VAT liability) (ii) CST Sale (Set-off against CST liability) (iii) Balance ITC carry forward to the next year Though the above method was adopted by the petitioner, the respondent made the Set-off in the following manner relating to local and CST sale:- (i) Local sale (Set-off against VAT liability) (ii) CST sale (Set-off against CST liability) and (iii) Balance ITC in relating to export sale was denied on the ground that the petitioner did not file Form .....

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of adjustment of ITC relating to Zero Rated Sale i.e., within 180 days from the date of accrual and such credit (upto 31.03.2010) and 180 days from the date of making Zero Rated Sale (from 01.04.2010). It is further submitted that after exhausting the proportionate ITC in export the other apportionment of proportionment ITC may be set-off against CST / local sale. Further, the learned counsel submits that Section 18 as well as Rule 11 of the TNVAT Rules do not specify any separate procedure rega .....

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d earlier and this is given effect through the concept of Input Tax Credit. Input Tax Credit is given only to ameliorate the cascading effect of tax burden and by virtue of Section 3(3), the tax payable by the registered dealer shall be reduced in the manner prescribed, the extent of tax paid on his purchase of goods specified in Part-B or Part-C, inside the State to the registered dealer, who sold the goods to him. Thus, Input Tax Credit is creature of statue. It is submitted that by applying t .....

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essment year 2007-2008 in respect of the petitioner in W.P.No.24402 to 24407 of 2014. For better appreciation the same is quoted herein below:- "AS PER PETITIONER TOTAL ELIGIBLE ITC Zero Rated Sales 59,60,726 CST Sales 64,08,193 VAT Sales 9,09,400 TOTAL ELIGIBLE ITC 1,32,78,320 Stage 1 The above ITC on Zero Rated Sales was adjusted first Against VAT Sales VAT liability ITC on Zero Rated Sales available 59,60,726 Less: VAT Liability (21,09,027) Balance ITC on Zero Rated Sales available 38,51 .....

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AT Available 9,09,400 BALANCE ITC CARRY FORWARDED TO NEXT YEAR 14,10,525 *** AS PER DEPARTMENT Total Eligible 1,32,78,320 Adjusted out of VAT ITC 9,09,400 Adjusted out of export ITC 11,99,627 Total 21,09,027 (21,09,027) Adjusted out of CST ITC 64,08,193 Adjusted out of export ITC 33,50,575 Total 97,58,768 (97,58,768) To be reversed 14,10,524 ***" 7. The learned counsel for the petitioner submitted that the procedure adopted by the petitioner is scientific and sub serves the object for which .....

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of Set-off has contended as follows:- "J. The method of Set-off of ITC adopted by the respondent is scientific and flawless. K. If the preference of Set-off is first given to the export sales, it will take an indefinite period for the complete adjustment of ITC since the petitioner has not been claiming refund. The adjustment of ITC will never be made within the period of one hundred and eighty days enshrined in Section 18(3). Such a situation would not have been envisaged while the provisi .....

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quot; 9. After elaborately hearing the learned counsel for the parties and perusing the materials available on record, the undisputed position is that the Section 18 of the TNVAT Act does not prescribe the method of preference of Set-off of ITC. Therefore, in the absence of any statutory provision with regard to method of preference, it has to be seen as to whether the procedure adopted by the petitioner is just and proper and sub serves the object behind the Act or whether the action of the res .....

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9;s (therein) case was that adopting any other method would result in they not being able to avail of the tax deferment benefits, as the period stipulated for tax deferment came to an end by March, 2007. However, the Assessing Officer issued a notice proposing that Input-Tax Credit should be adjusted first against the output tax payable by the petitioner's (therein) manufacturing unit, and the balance alone should be utilized for adjustment against the output tax payable on their trading act .....

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ution of India no tax can be levied or collected except by authority of law and in the absence of a procedure, similar to the one adopted by him, being prescribed by law it is not open to the assessing authority to contend that a particular mod should be adopted, or that the procedure adopted by the assessee is not rational. It is the petitioner's case that the method of adjustment of input tax against the output tax payable, adopted by them would enable them to avail of the benefit of the b .....

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turing activity of the petitioner and the balance against their trading activity, is neither a method authorized by law nor can such a method be forced on the assessee as it is to their detriment. The assessment order must, to this limited extent, be set-aside." 10. On a reading of the above judgment, it shows that the Court considered the issue and found that when there is no specific Rule providing the manner in which the petitioner had to be assessed to tax, which is not open to the Asse .....

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present case and unless and until the respondent is able to clearly demonstrate that the procedure adopted by the petitioner is contrary to the Statute, then the question would be as to why the petitioner should not be permitted to adopt the preference of Set-off as done by them in the Returns for the relevant assessment years. Even in the contentions raised by the respondent as set out above, the respondent does not dispute the fact that under Section 18 of the TNVAT Act, no procedure has been .....

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Assessing Officer, as there were other issues for consideration. Since the other issues have now been settled in the light of the decision in the case of INTERFIT TECHNO PRODUCTS Vs. PRINCIPAL SECY. (referred to supra), the respondent should redo the assessment with regard to the presence of Set-off and examine as to whether the procedure adopted by the petitioner is just and proper. While doing so, the respondent shall also take into consideration the observation made by this Court in the prec .....

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as follows:- "61. In the light of the above conclusion, the decision relied on by the learned counsel for the petitioner in the case of Binani Industries Limited Vs. Assistant Commissioner of Commercial Taxes VI Circle, Bangalore and Others [2007] 6 VST 783 (SC) with regard to reopening of the assessment does not render assistance to the case of the petitioners. Accordingly Question No.6 is answered against the petitioners. 62. In the result, (1) the challenge to the impugned circular is he .....

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t 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 conditions contained under Section 19 of the VAT Act. In this regard, it is essential for the Assessing Authority to embark upon the fact finding exercise to ascertain the quantum of loss of the goods which were purchased on which tax was paid vis-a-vis the goods manufactured from a .....

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