The Madras High Court observed that Section 19(9) of the Tamil Nadu Value Added Tax Act, (TNVAT Act) would not get attracted to manufacturing/invisible loss and directed to pass denovo order within 60 days.
The petitioner, M/s. Aruna Alloy Steel Private Limited has challenged the assessment order for the assessment year 2008-09 till 2013-2014. The dispute was about the denial of input tax credit on input lost in the course of manufacture as an invisible loss. The department had earlier issued a circular dated 20.10.2011. The circular was the subject matter of a challenge before the Division Bench in a batch of Writ Petition lead case being Eastman Exports Global Clothing (P) Ltd. The Division Bench has considered the circular issued by the Commercial Tax Department and has passed the final order on 28.02.2023.
The bench held that “Sections 19(2)(ii) and 19(9) of the TNVAT Act, precedents dealing with manufacturing/invisible loss and the rules of construction referred above we find that Section 19(9) of the TNVAT Act would not get attracted to manufacturing/invisible loss which is inevitable and inherent part of manufacture and thus covered by Section 19(2)(ii) of the TNVAT Act. However, this would not preclude the assessing authority from enquiring if the claim of use of input in manufacture is genuine or otherwise.”
Justice C Saravanan set aside the impugned orders and the cases are remitted back to the respondent to pass denovo order within a period of 60 days duly considering the decision rendered by the Division Bench in Eastman Exports Global Clothing (P) Ltd and the decision in M/s.GBR Metals Pvt Ltd Vs. The Assistant Commissioner (CT). Mr.S.Karunakar appeared on behalf of the petitioner and Mr.J.K.Jeyaseelan appeared for the respondent.
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