Bhima Jewellery vs. The Commercial Tax Officer

Held

The Court held in favour of the petitioners on both issues. Regarding the purchase tax, the Court found that the petitioner's methodology of remitting purchase tax by setting it off against available ITC from the preceding month was acceptable. This methodology had previously been approved by the Commissioner of Commercial Taxes, and the assessing authority's rejection of it was deemed erroneous. The Court stated that the petitioner had remitted the purchase tax, and the dispute was only about the set-off methodology, which was valid. On the second issue concerning ITC reversal for goods sent outside for job work, the Court relied on the Division Bench judgment in Patina Gold Ornaments Pvt. Ltd. Vs. Assistant Commissioner (CT), Erode, which held that ITC need not be reversed merely because goods purchased are sent temporarily outside the State for job work. Consequently, Section 19(2)(ii) of the 2006 Act was declared invalid to the extent it denied ITC in such circumstances. The Court also declared Section 19(2)(ii) and Section 19(4) unconstitutional, following the Patina Gold decision. All writ petitions were allowed.

Facts

The petitioners, Bhima Jewellery and M/s. Arasu Jewels, filed multiple writ petitions challenging assessment orders and seeking declarations regarding the constitutionality of certain provisions of the Tamil Nadu Value Added Tax Act, 2006. The core dispute involved the disallowance or recovery of Input Tax Credit (ITC) on bullion and raw materials purchased within Tamil Nadu, sent outside the state for manufacture into jewellery, and then brought back and sold within the state. One petitioner also challenged the methodology of remitting purchase tax by setting it off against available ITC from the preceding month. The tax authorities, represented by Commercial Tax Officers and Assistant Commissioners, were the respondents.

Key Issues

1. Whether the methodology adopted by the petitioner for remitting purchase tax, by setting it off against available ITC from the preceding month, is valid, considering the respondent's contention that purchase tax under Section 12(2) was not paid in the month of purchase in the Form I submitted. This issue turns on the interpretation and application of Section 12(2) of the Tamil Nadu Value Added Tax Act, 2006. 2. Whether Input Tax Credit (ITC) availed on bullion and raw material purchased within Tamil Nadu, sent outside the state for manufacture into finished jewellery, and subsequently brought back into the state for sale, can be disallowed or recovered, particularly in light of Section 19(2)(ii) of the Tamil Nadu Value Added Tax Act, 2006. This issue also involves the constitutional validity of Section 19(2)(ii) and Section 19(4) of the Act, with the petitioner arguing they violate Articles 14, 19(1)(g), 301, and 304(a) of the Constitution. Petitioner's arguments: The methodology for purchase tax set-off was approved by the Commissioner of Commercial Taxes. The denial of ITC for goods sent outside for job work and returned is illegal and unconstitutional, as supported by a Division Bench judgment. The revenue's arguments: Purchase tax was not paid in the month of purchase as required. The revenue did not expressly state arguments regarding the ITC issue in the provided text, but their actions of disallowing/recovering ITC indicate opposition.