Tvl Palani Tamilnadu Irumbu vs. The Assistant Commissioner

Held

The Court allowed the Writ Appeal in part, setting aside the order of the Single Bench. The Court found that the clarification issued by the VAT Cell dated 29.08.2007, and the subsequent Single Bench order in W.P.Nos.6255 and 6256 of 2010, were squarely applicable to the facts of the present case. The Court noted that the petitioner had remitted tax in Form-I on 22.04.2008, prior to the amendment of Section 3(4) of the TNVAT Act. Although the petitioner did not inform the assessing authority within the stipulated 7 days after the amendment, the Court held that the principle laid down in the clarification and the earlier Single Bench order, which stated that an assessee is eligible for input tax credit for purchases made from the beginning of the year when their turnover exceeds Rupees Fifty Lakhs, should be applied. The Court directed the appellant to furnish details of the turnover exceeding Rupees Fifty Lakhs along with supporting materials to the respondent within four weeks. The respondent was then directed to consider the clarification and pass appropriate orders within eight weeks thereafter. The ratio decidendi is that a binding clarification on input tax credit eligibility, issued prior to a statutory amendment, should be considered even if the subsequent statutory notice period for informing the authority was not strictly adhered to, provided the tax was remitted earlier.

Facts

The appellant, Tvl.Palani Tamilnadu Irumbi Vanigam, challenged an order dated 25.05.2011 passed by the Assistant Commissioner (CT)-II(FAC), Palani, under Section 27 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act). This order revised the assessment, determining the total and taxable turnover at Rs.58,37,819/- and levying tax and penalty of Rs.7,50,796/-. The appellant's writ petition challenging this order was dismissed by a Single Bench on 08.07.2011, citing the availability of an alternative remedy. The present Writ Appeal is filed against this dismissal. The appellant's primary contention is that input tax credit was wrongly denied for the entire year, despite remitting tax in Form-I on 22.04.2008, which was prior to a statutory amendment effective from 18.06.2008.

Key Issues

1. Whether the appellant/writ petitioner is entitled to input tax credit for the entire year, considering they remitted tax in Form-I on 22.04.2008, prior to the substitution of Section 3(4) of the TNVAT Act by Tamil Nadu Act 49 of 2008 with effect from 18.06.2008, and despite not informing the assessing authority in writing within 7 days of their turnover exceeding Rupees Fifty Lakhs as per the amended provision? Petitioner's arguments: The petitioner contends that they remitted tax in Form-I on 22.04.2008, before the amendment to Section 3(4) of the TNVAT Act. They rely on a clarification issued by the VAT Cell dated 29.08.2007, which states that an assessee is eligible for input tax credit for purchases made from the beginning of the year even if their turnover crosses Rupees Fifty Lakhs mid-year. They also cite a Single Bench order in W.P.Nos.6255 and 6256 of 2010, which held that this clarification is binding on the assessing authority. Respondent's arguments: The respondent argues that as per the substituted Section 3(4) of the TNVAT Act, the petitioner was obligated to inform the assessing authority within 7 days of their turnover reaching Rupees Fifty Lakhs, which they failed to do. Consequently, input tax credit could only be provided within 90 days of receipt of such communication, which also did not happen. The respondent also supports the Single Judge's decision to direct the petitioner to avail the alternative remedy.