Bharat Heavy Electricals vs. The Asistant Commissioner (CT)

Held

The Court rejected the petitioner's primary contention regarding the interpretation of Section 2(11) of the Tamil Nadu Value Added Tax Act, 2006. It held that the definition of 'capital goods' is restricted to activities and equipment used within the State for manufacturing, processing, packing, or storing goods, as per the prevailing view of a Division Bench in M/s. Schwing Stetter (India) Private Ltd. However, the Court accepted the petitioner's alternate contention concerning ITC eligibility. Citing the Supreme Court's decision in TVS Motor Company Limited, the Court held that dealers making sales exclusively to other State Governments should be entitled to the benefit of ITC, even without Form 'C', provided a certificate from the recipient State Government is obtained. Consequently, the impugned assessments were set aside and remitted back to the Assessing Officer for re-doing, specifically to consider the petitioner's alternate contention on ITC eligibility in light of Section 19(5)(c) of the Act and the Supreme Court's ruling.

Facts

Bharat Heavy Electricals Limited (BHEL), the petitioner, filed five writ petitions challenging assessment orders passed by the Assistant Commissioner (CT) for the periods 2007-2008 to 2011-2012 under the Central Sales Tax Act, 1959. The primary challenge was to the interpretation of Section 2(11) of the Tamil Nadu Value Added Tax, 2006, which defines 'capital goods'. BHEL contended that the definition should extend to inter-state transactions, not just those within the state. An alternate contention was raised regarding the eligibility of Input Tax Credit (ITC) on inter-state sales to other State Government Departments and Public Sector Undertakings, relying on a Supreme Court judgment.

Key Issues

1. Whether Section 2(11) of the Tamil Nadu Value Added Tax Act, 2006, defining 'capital goods', should be interpreted to include inter-state transactions for the purpose of concessional tax rates? The petitioner argued for a broader interpretation, while the respondent implicitly relied on the existing definition. 2. Whether Input Tax Credit (ITC) is eligible on inter-state sales to other State Governments, considering Section 19(5)(c) of the Act? The petitioner relied on the Supreme Court judgment in TVS Motor Company Limited, arguing that such sales should be treated as sales to registered dealers, entitling them to ITC. The respondent did not raise serious objections to this alternate contention.