The Madras High Court held that the benefit of Input Tax Credit (ITC) can be extended in respect of transactions that occurred prior to the issue of amendment in the Tamil Nadu VAT Act.
The petitioner, M/s.Nezone Tubes Limited raised the core issue of whether the benefit of the input tax credit is to be extended in respect of the transactions that occurred prior to the issue of amendment in the Tamil Nadu Act 5 of 2015.
Mr.V.Sundareswaran, appearing on behalf of the petitioner mainly contended that the amendment was effected by way of rectification of an anomaly and therefore, it cannot be construed as a new policy. Thus, the benefit of Input Tax Credit granted pursuant to the amendment is to be extended so as to cover the transactions that took place prior to the insertion of the amendment.
The Senior Counsel contended that the issue involved in this writ petition was already dealt with elaborately by the Madurai Bench of this Court in a batch of Writ Petitions led by W.P.(MD). No.15103 of 2015 and the order was pronounced on 30.08.2019. Further, the respondent Department has also not preferred any further appeal challenging the said order and therefore, the order became final and the said benefit is to be extended to the petitioner herein.
The Government Advocate for the respondent could not be able to object to the said contentions raised on behalf of the writ petitioner.
The single bench of Justice S.M.Subramaniam observed that Section 8(1) of the CST Act provides the benefit of concessional rate of tax, upon production of a statutory Declaration form, to an interstate transaction with a registered dealer, and relating to specified goods. Section 8(2) stipulates that an interstate transaction with an unregistered dealer shall be visited with the same rate of tax as applicable to a domestic transaction involving identical goods. While Section 19(2)(v) extended input tax credit in respect of the transaction under Section 8(1), the same benefit was unavailable to the identical transaction with an unregistered dealer, taxable in terms of Section 8(2) of the CST Act. Though the benefit of ITC was initially restricted as an inducement to dealers to transact with registered dealers alone, Legislature has broadened, in its wisdom, the grant of benefit of ITC to transactions with unregistered dealers as well, albeit in 2015. Having taken such a decision in principle, there is no rhyme or reason to restrict the benefit only from the date of substitution. Such restriction would discriminate against transactions under Section 8(2) for the prior period, apart from leading to a dichotomy in the manner in which transactions in terms of Section 8(2) pre and post-April 1, 2015, are assessed to tax.
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