Prop., M/S. Divya Naga Sai Agenciesguntur Dist vs. Dy. Commercial Tax Officer-I, Narsaraopet Division, Ap And3 Ot

Held

The Court, while disposing of the Writ Petition, did not definitively rule on the petitioner's entitlement to ITC. Instead, it adopted a procedural approach based on the Gujarat High Court's judgment in S.A.Himnani Distributors Pvt. Ltd. The Court permitted the petitioner to seek the benefit of input tax credit after the Insurance Company adjudicates and pays compensation for the loss suffered due to the fire accident. Upon the petitioner furnishing proof of the insurance adjudication and payment, the assessing authority is directed to examine their claim for ITC in accordance with the law. The Court's decision hinges on the principle that if compensation is received, ITC should be adjusted to avoid double benefit, as observed in the Gujarat High Court's ruling. The issue of whether ITC was available prior to Section 13(3)(k) was not directly decided but implicitly deferred pending insurance settlement.

Facts

The petitioner sought a writ of mandamus to declare the action of the first respondent in rejecting their claim for input tax credit (ITC) on purchases of goods destroyed by fire as arbitrary and illegal. The assessment order dated 30.01.2017 disallowed ITC to the extent of Rs.3,80,843/- under Section 13(1) of the Andhra Pradesh Value Added Tax Act, 2005. The fire accident occurred on 23.05.2015. The petitioner claimed ITC on the destroyed goods, arguing they were disposed of other than by sale. The matter of insurance compensation for the loss is pending. The petitioner contended that ITC was available for goods destroyed prior to the insertion of Section 13(3)(k) of the Act, which mandates reversal of ITC for lost or destroyed goods.

Key Issues

1. Whether the petitioner is entitled to claim input tax credit on goods destroyed by fire, considering the fire accident occurred prior to the insertion of Section 13(3)(k) of the Andhra Pradesh Value Added Tax Act, 2005, which mandates reversal of ITC for lost or destroyed goods? Petitioner's contention: The petitioner argued that since the fire accident predated the insertion of Section 13(3)(k) (effective 12.01.2016), they are entitled to claim ITC on the purchase value of the goods destroyed. They inferred that the insertion of Clause (k) implies ITC was available prior to its enactment. They relied on the Gujarat High Court's decision in State of Gujarat v. S.A.Himnani Distributors Pvt. Ltd., which allowed ITC for goods destroyed by an 'act of God' subject to non-receipt of insurance compensation. Revenue's contention: The revenue contended that the petitioner is not entitled to claim ITC for compensation received from the insurance company. ITC is permissible only for goods destroyed by fire for which no compensation is paid. As the claim for compensation is pending and its quantum is undetermined, the ITC claim is premature.