M/S Maris Spinners LTD., Unit vs. The State Of Tamil Nadu

Held

The Court held that the proviso inserted by the Tamil Nadu Value Added Tax (Fifth Amendment) Act, 2013, to Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006, restricts the quantum of Input Tax Credit (ITC) allowed when goods purchased within the State are sold in the course of inter-state trade or commerce against a 'C' declaration form. The Court found that the impugned assessment orders did not consider previous decisions of the High Court and that the amendment does not affect the right of a manufacturer to claim ITC on goods used as inputs in manufacturing or processing within the State. Therefore, the reversal of ITC by the revenue authorities was deemed incorrect. The Court quashed the impugned orders. However, acknowledging that a similar issue is pending before the Supreme Court in SLP(Civil) Diary No.5815 of 2023 etc., the Court granted liberty to the revenue authorities to restore their claim based on the outcome of the Supreme Court's decision. The ratio decidendi is that the amendment restricting ITC for inter-state sales does not apply to manufacturers using goods as inputs for their manufacturing process within the State.

Facts

The petitioners, M/s.Maris Spinners Limited Unit II and M/s.R.V. & Sons, are manufacturers of goods in Tamil Nadu. They challenged assessment orders passed by the Assistant Commissioners of Commercial Taxes for specific periods in 2013-2014 and 2014-2015. These orders directed the petitioners to pay balance tax amounts due to the reversal of Input Tax Credit (ITC). The reversal was based on Section 2(1) of the Tamil Nadu Value Added Tax (Fifth Amendment) Act, 2013, which amended Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006. The disputed amounts are Rs.79,056/- and Rs.3,20,976/- for Maris Spinners Limited, and Rs.1,87,961/- for R.V. & Sons. The petitioners contended that the amendment, particularly the proviso inserted, should not apply to manufacturers.

Key Issues

1. Whether Section 2(1) of the Tamil Nadu Value Added Tax (Fifth Amendment) Act, 2013, which inserted a proviso to Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006, is applicable to manufacturers who use tax-suffered goods as inputs in their manufacturing or processing activities within the State. Petitioner's arguments: The petitioners argued that they are manufacturers and the amendment, which restricts ITC on inter-state sales, is applicable only to traders and not to manufacturers. They relied on previous High Court decisions in similar cases, including M/s.Everest Industries Limited vs. The State of Tamil Nadu and W.P.No.41264 of 2016, where the revenue's appeals were dismissed. Revenue's arguments: The revenue contended that while a similar issue was decided by this Court, an appeal was preferred in W.A.No.1260 of 2017, which was partly allowed. Furthermore, a Special Leave Petition (SLP) has been filed before the Supreme Court in SLP(Civil) Diary No.5815 of 2023 etc., where an interim stay was granted against the High Court's judgment.