Tvl. Bharath Traders vs. The Commissioner Of

Held

The Court held that the amendment to Section 19(2)(v) of the CST Act, which extended the benefit of Input Tax Credit (ITC) to inter-state sales to unregistered dealers, was intended to rectify an anomaly and should be given retrospective effect from the inception of the Act. The Court reasoned that there was no specific justification provided by the revenue for restricting the benefit only from the date of substitution in 2015. Such a restriction would lead to discrimination against transactions under Section 8(2) for the period prior to the amendment and create an illogical dichotomy in tax assessment. Therefore, the amendment was deemed to correct an anomaly and necessarily had to be effective from the date of the Act's inception. The issue framed for resolution was answered in favour of the petitioners.

Facts

The petitioners, various traders, challenged proceedings issued by Commercial Tax Officers. The core of the dispute revolves around the eligibility for Input Tax Credit (ITC) on inter-state sales made to unregistered dealers. The petitioners contend that Section 19(2)(v) of the relevant Act, as amended, should be applied retrospectively to include transactions with unregistered dealers, thereby entitling them to ITC. The tax periods in dispute vary across the petitions, with some dating back to 2008-09 and others to 2012-13. The impugned orders were passed by various Commercial Tax Officers and Assistant Commissioners (CT) across different assessment circles in Tamil Nadu.

Key Issues

1. Whether Section 19(2)(v) of the Central Sales Tax (CST) Act, which was amended to extend Input Tax Credit (ITC) benefits to inter-state sales to unregistered dealers, should be applied retrospectively from the inception of the Act or only from the date of the amendment (2015)? Petitioner's arguments: The petitioners argued that the amendment to Section 19(2)(v) was a legislative correction of an anomaly. They contended that the benefit of ITC should be available for all periods, including those prior to the 2015 amendment, as the amendment merely clarified existing legislative intent. They asserted that restricting the benefit only from 2015 would create a dichotomy in tax assessment and discriminate against transactions that occurred before the amendment. Revenue's arguments: The judgment does not explicitly record the arguments made by the revenue. However, the implicit contention of the revenue would be that the amendment is prospective and applies only from the date it came into force.