TMI Blog2017 (3) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... se (v) and not qua other purposes set out in clause (i) to (iv) and (vi) of Section 19(2) of the 2006 Act - The fact that, the proviso, on account of erroneous interpretation by the Revenue, was causing difficulties for the manufacturers, is exemplified by the Statement of Objects and Reasons which was set forth, at the time of introduction of Act 5 of 2015. Petition allowed - decided in favor of petitioner. - W.P.No.7969 of 2014 - - - Dated:- 6-2-2017 - Rajiv Shakdher, J. W.P.No.7969 of 2014 and M.P.Nos.1 2 of 2014 W.P.Nos.10585, 10586 of 2014 and M.P.Nos.1,1 of 2014 W.P.No.38233 of 2015 and M.P.No.1 of 2015 W.P.No.43402 of 2016 and W.M.P.No.37260 of 2016 W.P.No.44188 of 2016 and W.M.P.No.38033 of 2016 W.P.No.722 of 2017 and W.M.P.No.762 of 2017 W.P.No.1230 of 2017 and W.M.P.Nos.1166 1167 of 2017 W.P.No.1268 of 2017 and W.M.P.No.1191 of 2017 W.P.No.1388 of 2017 and W.M.P.Nos.1304 1305 of 2017 W.P.No.1880 of 2017 and W.M.P.No.1873 of 2017 For the Petitioner : Mr.R.L.Ramani, Mr.B.Raveendran, Mr.J.Arokhiaraj, Mr.N.Murali, Mr.R.Raghavan, Mr.Adithya Reddy, Mr.P.Rajkumar, Mr.N.Prasad, Mr.N.Sriprakash and N.Prasad, Mr.N.Prasad For the Respondent : Mr.S.Kanmani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale to the dealers in other States. 6.4 This apart, goods are also dispatched by way of stock transfer to petitioner's sales depots both, within and outside the State. 6.5 Therefore, the petitioner avers that, insofar as Inter-State sale of its goods is concerned, such transactions attract a concessional rate of tax, that is, a rate of 2%, under the 1956 Act, when, they are supported by declarations made in Form 'C' and, in cases, where such declarations, are not furnished, since these sales would then fall under Section 8(2) of the 1956 Act, they are made to suffer tax at the rate applicable under the 2006 Act. 6.6 The petitioner claims that all along, in consonance with the provisions of the 2006 Act, in particular, Section 19(2)(ii) of the 2006 Act, it was claiming Input Tax Credit (ITC) in respect of inputs, which had suffered tax, as they were being used in manufacturing the final product, i.e., Asbestos cement sheets/Hi-tech cement sheets. 6.7 The petitioner claims that, this position continued to obtain, even after the insertion of the proviso to Section 19(2) of the 2006 Act. 6.8 It may be pertinent to note that, the proviso to Section 19(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of inter-state trade or commerce falling under sub-section (2) of Section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956). In this proviso, the phrase 'used in manufacture' found place. When it is an admitted fact for sales under Section 8(2) of the CST Act, 1956 amendment to Section 19(2)(v) in which sales under Section 8(1) of CST Act 1956 involved is also having the same meaning and ITC to be allowed in excess of three percent for such sales is applicable in all nature of purchases. Separate proviso is not called for in this regard. It has been pointed out that disposal and manufacture are held from various nature of purchases not only from local purchases for reversal of ITC on entire sales. 9.1 Accordingly, ITC amounting to ₹ 1,30,139/- was sought to be reversed, which was, followed by a notice of demand issued on the same date i.e., 06.02.2014. 10. The petitioner, being aggrieved by the same, has preferred the instant writ petition, i.e., W.P.No.7969 of 2014 qua order dated 06.02.2014. 11. Before I proceed further, I may also indicate that the proviso to Section 19(2) of the 2006 Act was deleted by Act 5 of 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 19(2), with regard to availment of ITC, applies, only to the tax suffered inputs purchased, within the State from a registered dealer, but used for the purpose set out in Clause (v) of Section 19(2), that is, for sale in the course of Inter-State Trade or Commerce, falling under Sub-Section (1) of Section 8 of the 1956 Act. 14.4 The argument being that, ITC would be available no sooner the tax suffered inputs are used in the manufacture and/or processing of goods. In other words, the argument is that the limitation contained in the proviso to Section 19(2) applies to traders and not to manufacturers. 15. On the aspect of the retrospective impact of deletion of the proviso to Section 19(2) of the 2006 Act, I must indicate that, an argument, albeit, in the alternate, was also advanced in that regard on behalf of the petitioners. This argument was advanced, on account of the fact that the proviso to Section 19(2) of the 2006 Act was deleted by virtue of the Act 5 of 2015. Therefore, in a sense, the amendment brought about by Act 28 of 2013 would, if at all, impact the petitioners only between the period, when the proviso to Section 19(2) was brought into force and its de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .28 of 2013; the precursor to Act No.28 of 2013. 16.4 The relevant extract of the Statement of Objects and Reasons, on which, Mr.Annamalai sought, to place reliance, is set forth hereafter : Statement of Objects and Reasons In a manufacturing State like Tamil Nadu, the size and the scale of Inter-State transactions are consistently on the rise. Over the years, the increase in input tax credit accumulation on Inter-State transactions under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (Tamil Nadu Act 32 of 2006) has resulted in reduced tax collection to the State. The increase in the volume of Inter-State transactions adversely and continuously affect revenue collections under the Value Added Tax consequent on the gradual reduction of rate of Central Sales Tax from 4% to 2% and also due to increase in the tax rates under the said Tamil Nadu Act 32 of 2006 from 4% to 5% and from 12.5% to 14.5%. In order to have certain degree of control over the accumulation of input tax credit, the Government have decided to increase the rate of input tax credit reversal from 3% to 5% on Inter-State transfer otherwise than by way of sale and also to make a new provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant part of Section 19 of the 2006 Act, is extracted hereunder, in order to appreciate the nuances of the arguments advanced on behalf of the assessees and the Revenue : 19.Input tax credit. (1) There shall be input tax credit of the amount of tax paid or payable under this Act, by the registered dealer to the seller on his purchases of taxable goods specified in the First Schedule: Provided that the registered dealer, who claims input tax credit, shall establish that the tax due on such purchases has been paid by him in the manner prescribed. (2) Input tax credit shall be allowed for the purchase of goods made within the State from a registered dealer and which are for the purpose of _ (i) re-sale by him within the State ; or (ii) use as input in manufacturing or processing of goods in the State; or (iii) use as containers, labels and other materials for packing of goods in the State; or (iv) use as capital goods in the manufacture of taxable goods. (v) sale in the course of Inter-State trade or commerce falling under sub-section (1) of Section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956). (vi) agency trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant extract of the Statement of Objects and Reasons would show that insertion of the proviso to Section 19(2) of 2006 Act had led to the manufacturing industries located in the State of Tamil Nadu, becoming less competitive as compared to their counterparts in the neighbouring States. The relevant part of the Statement of Objects and Reasons, which sheds light on this aspect of the matter is extracted hereunder, for the sake of convenience: In the Budget Speech for the year 2015-2016, among others, the following announcements were made:- (i) Input tax credit reversal imposed at the rate of 3 per cent on the Inter-State sale of goods as per proviso to Section 19(2)(v) of Tamil Nadu Value Added Tax Act, 2006, which was introduced with effect from 11-11-2013 will be withdrawn henceforth to make the manufacturing industries in Tamil Nadu more competitive with their counterparts in the neighbouring States. (emphasis is mine) 22. Furthermore, since, I have come to the conclusion that the proviso to Section 19(2) would apply only qua that purpose which is engrafted in clause (v) of the very same Section, in my view, the alternate argument advanced on behalf of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s apply to themselves does not denude them of the power of exercising jurisdiction under Article 226 of the Constitution, even where statutory remedy is available to a litigant. (See ABL International Ltd. V. Export Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 553). 26. Thus, for the reasons given above, I am of the opinion that the captioned matters were fit cases, in which, jurisdiction was rightly exercised. Therefore, this argument of Mr.Annamalai cannot be accepted. Thus, for the foregoing reasons, I am inclined to set aside the impugned order dated 06.02.2014. Accordingly, W.P.No.7969 of 2014 is allowed. 27. As indicated right at the out set, counsels were agreed that the decision reached in W.P.No.7969 of 2014 could be applied to other writ petitions, as well, since, except for the dates and events and quantum of ITC involved, the issue, discussed above, was common to each one of them. 28. Resultantly, having regard to the conclusion reached in W.P.No.7969 of 2014, I am inclined to allow the other writ petitions as well. The impugned orders in each of the writ petitions are set aside. Accordingly, the writ petitions Nos. 7969 of 2014, 10585 and 10586 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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