Immanuel And Co. vs. The Commissioner Of Commercial Taxes

Held

The Court held that the transitional credit claimed by the petitioner for Tax Deducted at Source (TDS) under the previous regime is eligible to be carried forward to the GST regime as input tax credit under Section 140 of the TNGST Act. The Court found that the issue was squarely covered by its previous order in a batch of writ petitions (W.P.Nos.9991 of 2019 etc.) dated 26.02.2021. In that order, the Court had elaborately discussed that any deduction made towards anticipated tax liability assumes the character of tax and does not fluctuate based on its holding as credit or adjustment against tax liability. The Court also noted that the substituted Rule 9 (effective from 29.01.2016) and a circular issued on TDS clarified the position that the deposit and amount referred to in Section 13 were of the nature of tax. The Court rejected the respondents' contention that the writ petition was not maintainable due to the availability of an appeal remedy, especially since a Writ Appeal against the earlier order was also dismissed. Consequently, the impugned order was quashed, and the writ petition was allowed. The ratio decidendi is that TDS amounts paid under the previous regime are eligible for transitional credit under Section 140 of the TNGST Act, and principles of natural justice must be followed.

Facts

The petitioner, Tvl.Immanuel & Co, a business engaged in engineering contracts, sought to quash an order dated 07.06.2020 passed by the Assistant Commissioner (ST), Tuticorin-3 Assessment Circle. The petitioner claimed unavailed credit of Rs.1,28,37,268/- paid during the earlier regime, comprising Rs.8,30,365/- on purchases and Rs.1,20,06,903/- on Tax Deducted at Source (TDS). This credit was carried forward to the new GST regime through TRAN-1. The respondent issued a notice alleging no excess carry forward ITC as of 30.06.2017 and proposed to disallow the transitional credit. The petitioner contended that the credit claimed through TRAN-1, relating to TDS, was eligible for carry forward under Section 140 of the Tamil Nadu Goods and Service Tax Act. The petitioner's grievance was that the impugned order confirmed the proposal without considering the reply and without granting a personal hearing, violating principles of natural justice.

Key Issues

1. Whether the transitional credit claimed by the petitioner for Tax Deducted at Source (TDS) under the previous regime is eligible to be carried forward to the Goods and Services Tax (GST) regime as input tax credit, under Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017? Petitioner's arguments: The petitioner argued that the TDS amount paid under the previous regime constitutes tax and is eligible for carry forward as transitional credit under Section 140 of the TNGST Act. They relied on a previous order of the High Court in a batch of writ petitions (W.P.Nos.9991 of 2019 etc.) which dealt with a similar issue. The petitioner also contended that the impugned order was passed in violation of the principles of natural justice as no personal hearing was granted. Respondents' arguments: The respondents argued that the writ petition was not maintainable as the petitioner had an alternative remedy of appeal before the concerned Appellate Authority. They reiterated the contentions raised in their counter affidavit.