Input tax credit on inter-State purchases barred where Tamil Nadu VAT scheme limits credit to intra-State purchases from registered dealers.

Input tax credit was held inadmissible on goods purchased from outside Tamil Nadu and brought into the State, because Section 19(5)(b) of the Tamil Nadu VAT Act bars credit for tax paid or payable in other States on such goods. Rule 10(3)(b)(i) applies only to purchases from the first seller within the State with tax separately shown in the invoice, and Rule 10(3)(b)(iv) cannot be read to extend credit to inter-State purchases. The scheme of the provision was treated as confining credit to intra-State purchases from registered dealers within Tamil Nadu. The dealer's claim was disallowed and the assessment order was upheld.

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Issues: Whether input tax credit was admissible on goods purchased from outside the State and brought into the State, and whether the dealer could rely on the rules relating to stock held on commencement to claim credit for the tax paid by itself.

Analysis: Section 19(5)(b) of the Tamil Nadu Value Added Tax Act, 2006 expressly prohibits input tax credit on tax paid or payable in other States on goods brought into the State from outside the State. Rule 10(3)(b)(i) applies to purchases effected from the first seller in the State with invoice or bill showing tax separately, while Rule 10(3)(b)(iv) cannot be read in isolation so as to extend credit to inter-State purchases. The scheme of the provision shows that the credit is intended only for intra-State purchases from registered dealers within Tamil Nadu and not for goods brought from outside the State.

Conclusion: The dealer was not entitled to input tax credit on the inter-State purchases, and the assessment order disallowing the claim was upheld. The writ petition was dismissed.

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