The Madras High Court recently set aside an Order passed by the Respondent Assistant Commissioner (State Taxes) rejecting the claim of Input Tax Credit (ITC) under Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act), citing the pendency of a Supreme Court decision on a similar matter.
The Petitioner, Tvl.Elgi Equipments Limited had filed a Writ before the High Court challenging an order by the Respondent passed pursuant to the order of remand by the appellate authority in Value Added Taxes (VAT) appeal.
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N.Prasad, representing the Petitioner contended such a rejection to be based off an erroneous interpretation of Section 19(5)(c) of the TNVAT Act and that the matter had already been covered by a ruling of the same Court which relied on the decision in Commercial Taxes Department vs. M/s. Everest Industries Limited (2017) wherein it was held:
“In taxing matters, whenever a levy or demand is made without authority of law, the court would be within its power to set aside the same, because any illegality cannot be perpetuated on technicalities. Further, as per the provisions of the TNVAT Act, Section 84 empowers rectification of orders within five years from the date of any order passed by the assessing officer. It is settled law that the error contemplated therein is not just factual, but also legal error.”
In Everest, the Madras High Court had ruled that ITC claims should be adjudicated based on substantial compliance rather than procedural technicalities, preventing an undue burden on taxpayers, and that a restrictive interpretation of Section 19(2)(ii) is untenable.
Additional Government Pleader TNC. Kaushik represented the Revenue.
The single-judge Bench of Justice Mohammed Shaffiq observed that the Madras High Court, on a prior occasion had dealt with Section 19(2)(v) of the TNVAT Act, 2006 and dismissed the case, observing that the subject matter had been awaiting judgment by the Supreme Court.
Observing precedence, the present Writ Petition was dismissed by the High Court averring that the impugned order cannot be sustained insofar as it invokes Section 19(5)(c) of the TNVAT Act, 2006, while keeping the door open for the Revenue to pursue the matter following the decision of the Supreme Court.
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