M/S. Suryabalaji Steels PVT. vs. The Principal Secretary/

Held

The Court held that the challenge to the impugned circular was unnecessary as it was non-statutory and merely a guideline, thus rejecting the prayer to quash it. It was clarified that Section 18 of the TNVAT Act is not a standalone provision but is subject to other provisions, including Section 19. A dealer claiming refund under Section 18(2) must not only show payment of input tax on purchased goods used in manufacture but also satisfy the Assessing Authority that the claim is not hit by restrictions under Section 19. The Assessing Authority must conduct a fact-finding exercise to ascertain the quantum of loss and whether it falls within Section 19 restrictions, particularly Section 19(9). The Court found that Assessing Authorities were not justified in uniformly adopting a percentage for invisible loss and calling upon dealers to reverse ITC. Consequently, notices and consequential orders reversing ITC based on uniform or ad-hoc percentages were set aside. Liberty was granted to the Assessing Officer to issue fresh show cause notices, clearly stating the circumstances for proposing to reverse ITC, and to proceed in accordance with law after inviting objections. The ratio is that the reversal of ITC for invisible loss requires a specific fact-finding exercise by the Assessing Authority, and uniform application of percentages is impermissible.

Facts

The petitioner, M/s. Suryabalaji Steels Pvt. Ltd., filed four writ petitions challenging assessment orders passed by the Commercial Tax Officer (FAC), Pudukottai-I, for the periods 2010-11, 2011-12, 2012-13, and 2013-14, dated March 19, 2014. The core issue in these petitions pertained to the reversal of input tax credit (ITC) claimed by the petitioner for burning loss/invisible loss. The petitioner sought a writ of certiorari to quash these impugned proceedings. The respondents were the Principal Secretary/Commissioner of Commercial Taxes and the Commercial Tax Officer.

Key Issues

1. Whether the impugned assessment orders, which reversed input tax credit for burning loss/invisible loss, are legally sustainable under the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act)? (Mixed question of law and fact, concerning Sections 18 and 19 of the TNVAT Act). Petitioner's contention: The petitioner argued that the reversal of ITC for burning loss/invisible loss was arbitrary and illegal. They relied on the decision in Interfit Techno Products Ltd. Vs. Principal Secretary / Commissioner of Commercial Taxes, which dealt with similar issues. Revenue's contention: The respondents, represented by the Government Advocate, did not record any specific arguments beyond concurring with the petitioner that the issue had been decided by this Court in the Interfit Techno Products Ltd. case. They did not present independent arguments or cite specific provisions to justify the impugned orders.