Tvl. Bharathi Traders vs. The Commissioner Of Commercial

Held

The Court held that the respondents erred in effecting the reversal of input tax credit. The Court found that the issue was squarely covered by a previous order in W.P.Nos.15130 of 2015 etc. Batch (Bharath Traders vs. The Commissioner of Commercial Taxes and Another). The Court reasoned that while Section 8(1) of the CST Act provided for concessional tax rates upon production of a 'C' Form, and Section 8(2) stipulated the original tax rate for transactions with unregistered dealers, Section 19(2)(v) of the TNVAT Act initially extended ITC only to transactions under Section 8(1). However, the amendment in 2015 broadened this benefit to include transactions under Section 8(2). The Court concluded that there was no logical reason to restrict this benefit only from the date of substitution (01.04.2015), as it would discriminate against prior period transactions under Section 8(2). The Court found that the legislature corrected an anomaly in 2015 by bringing transactions under Section 8(2) within the beneficial sweep of Section 19(2)(v), and this correction should be effective retrospectively from the inception of the Act. Consequently, the impugned order was quashed.

Facts

The petitioner, Tvl. Bharath Traders, is challenging an order dated 27.04.2018 passed by the Commercial Tax Officer, Madurai. The case pertains to the assessment year 2011-12. The petitioner reported inter-state taxable sales of Rs. 58,42,886/-. Of this, Rs. 11,57,696/- was without 'C' Form declaration, and the rest was with 'C' Form. The petitioner paid tax at the concessional rate under Section 8(1) of the CST Act for 'C' Form transactions and at the original rate under Section 8(2) for those without 'C' Form. The petitioner also reversed input tax credit (ITC). However, the respondent issued a notice proposing to reverse ITC in respect of inter-state sales not covered by 'C' Form, for which ITC had been claimed. The impugned order imposed both tax and penalty, stating that inter-state sales not covered by 'C' Forms are not eligible for ITC.

Key Issues

1. Whether the provisions of Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006, as amended by the Tamil Nadu Value Added Tax Act (Amendment Act, 2015), are retrospective and apply to earlier periods of assessment, or prospective, applying only from 01.04.2015? Petitioner's contention: The petitioner argued that the amendment to Section 19(2)(v) of the TNVAT Act, 2006, which extended the benefit of ITC to inter-state transactions whether covered by 'C' Form or not, should be applied retrospectively. They relied on the principle that amendments made to correct anomalies should be effective from the inception of the Act. Revenue's contention: The revenue's argument is not explicitly detailed in the judgment, but their counter-affidavit referred to statutory provisions to sustain the impugned order, implying they contended for a prospective application of the amendment or that the original order was correct based on the law then applicable.