Heard both.
2. The petitioner, which is a registered dealer on the file of the respondent under the provisions of the Tamil Nadu Value Added Tax Act, 2006 and the Central Sales Tax Act, 1956, approached this Court challenging the assessment order dated 02.5.2017 under both the Enactments for the year 2014-15.
3. The basis, on which, the impugned assessment order was passed, pertains to reversal of input tax credit under Section 19(4) of the State Act on stock transfer of MS Billets. The other issue pertains to reversal of the input tax credit under
Section 19(2) of the State Act for the conversion charges.
4. The learned counsel for the petitioner submits that the legal issue involved in this writ petition is squarely covered by the order passed by the Hon'ble Division Bench of this Court in the case of Patina Gold Ornaments Pvt. Ltd. Vs. AC (CT) and another [W.P.No.6377 of 2010 dated 22.9.2017].
5. The said writ petition was filed challenging the Constitutional validity of Sections 19(2)(ii) and
19(4) of the State Act. The Hon'ble Division Bench, ultimately, allowed the writ petition. The relevant portions in the order dated 22.9.2017 read as follows :
"25. As a matter of fact, in our view,
Section 19(4) of the 2006 Act provides intrinsic evidence that ITC cannot be disallowed merely because transfer of goods takes place outside the State.
Section 19(4) allows for ITC on tax paid or payable, albeit, (in excess of 3%)* in respect of goods purchased in the State in two situations: (i) First, where transfer takes the goods to a place outside the State, otherwise than by way of sale; or (ii) Second, where goods are used in manufacture of other goods and are transferred to a place outside the State, otherwise than by sale. 26. The provision, recognizes the fact that goods purchased within the State, on which tax has been paid, can be transferred outside the State, for reasons, other than sale. However, while recognising this aspect, the provision grants credit of tax to the extent it is in excess of 3%. In other words, tax paid on purchase of goods, within the State, as rightly pointed out by the respondents is retained by the State to the extent of 3%, while the tax collected over and above 3% is passed on to the assessee, by way of credit.
.....
30. Therefore, having regard to the foregoing discussion, we are of the view that Section 19(2)(ii) of the 2006 Act is invalid to the extent that it denies availment of ITC in respect of those units which despatch tax suffered raw materials i.e. bullion/worn-out jewellery for conversion into final product (i.e. jewellery) outside the State which upon conversion are received back and sold within the State of Tamil Nadu. Thus, according to us, the mere fact that the manufacturing unit is located outside the State of Tamil Nadu, cannot be the basis, for denial of ITC, under Section 19(1) of the 2006 Act. Clause (ii) of Sub-Section (2) of
Section 19 of the 2006 Act is, thus, declared bad in law.
31. For the very same reason, we also hold that the respondents cannot retain ITC on goods purchased within the State, by invoking provision of
Section 19(4) of the 2006 Act to the extent of rate of tax provided therein i.e., 3% (which was the rate provided therein at the relevant point of time), as that would make the relief inefficacious since the subject goods i.e. bullion/worn-out jewellery on which tax credit was sought by the writ petitioner was imposed at the rate of 1%.
32. The writ petition is, thus, allowed in the aforesaid terms, leaving parties to bear their own costs."
6. The learned Additional Government Pleader appearing for the respondent does not dispute this legal position.
7. In the light of the same, the writ petition is allowed, the impugned order is set aside and the matter is remitted back to the respondent for a fresh consideration. The respondent shall redo the assessment by taking note of the above legal position. No costs. Consequently, the connected WMP is closed.
24.11.2017 Internet : Yes To The Assistant Commissioner (CT) (FAC), Kilpauk Assessment Circle, F-50, I Main Road, Anna Nagar East, Chennai-102.
RS T.S.SIVAGNANAM,J RS WP.No.14465 of 2017& WMP.No.15688 of 2017 24.11.2017