Bharath Heavy Electricals LTD. vs. The Assistant Commissioner

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 relied on a Division Bench judgment in M/s. Schwing Stetter (India) Private Ltd vs. The Commissioner of Commercial Taxes, Chennai, which held that the definition of 'capital goods' is restricted to transactions within the State and that the benefit of concessional tax rates is available only for intra-state manufacture. However, the Court accepted the petitioner's alternate contention concerning Input Tax Credit (ITC) eligibility for inter-state sales to other State Governments, as per the Supreme Court's ruling in TVS Motor Company Limited vs. State of Tamil Nadu. The Court reasoned that this alternate claim was reasonable in light of the Supreme Court's decision and that the revenue did not raise serious objections. Consequently, the impugned assessment orders were set aside and remitted back to the Assessing Officer for re-doing, with a specific direction to consider the petitioner's alternate claim under Section 19(5)(c) of the Act. The petitioner was directed to appear before the Assessing Authority with supporting materials. The Court noted that assessment circles have been merged due to the GST regime and directed the appropriate authority to ensure the proceedings are conducted as ordered.

Facts

Bharat Heavy Electricals Limited (BHEL), the petitioner, filed five writ petitions challenging assessment orders passed by the Assistant Commissioner (CT) for the periods 2009-2010 to 2013-2014 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. Subsequently, BHEL raised an alternative contention regarding Input Tax Credit (ITC) eligibility, citing a Supreme Court judgment in TVS Motor Company Limited vs. State of Tamil Nadu. This alternative contention focused on inter-state sales to other State Government Departments and Public Sector Undertakings.

Key Issues

1. Whether Section 2(11) of the Tamil Nadu Value Added Tax Act, 2006, defining 'capital goods', should be interpreted to include transactions that have taken place inter-state, thereby allowing the benefit of concessional tax rates for such transactions? Petitioner's argument: The petitioner argued that the definition of 'capital goods' should be extended to cover equipment and activities used or taking place outside the State of Tamil Nadu, not just within it, to avail concessional tax benefits on inter-state transactions. Revenue's argument: The judgment does not explicitly record the revenue's argument on this specific issue, but it notes that a Division Bench had previously rejected this contention. 2. Whether Input Tax Credit (ITC) is available on inter-state sales made exclusively to other State Governments, in light of the Supreme Court's decision in TVS Motor Company Limited vs. State of Tamil Nadu? Petitioner's argument: The petitioner relied on the Supreme Court's judgment in TVS Motor Company Limited, which read down Section 19(5)(c) of the Act to allow ITC for dealers making sales exclusively to other State Governments, even without a 'C' Form, provided a certificate from the receiving State Government is obtained. Revenue's argument: The Special Government Pleader did not raise serious objections to the consideration of this alternate contention.