Advance ruling required before enforcing input tax credit reversal where transaction classification remained unresolved under VAT law.

Reversal of input tax credit under the Tamil Nadu VAT Act could not be enforced until the Advance Ruling Authority determined whether the transaction fell under the manufacturing or processing limb or the inter-State sale limb of the relevant provision. The dispute turned on the proper classification of the assessee's transactions and the effect of the amended proviso, which required a ruling under the advance ruling mechanism before any demand was raised. Orders passed while that application was still pending, without showing how the issue was resolved, reflected non-application of mind and were unsustainable.

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Issues: Whether the reversal of input tax credit under section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 could be enforced before the Advance Ruling Authority determined whether the transaction fell under clause (ii) or clause (v) of section 19(2).

Analysis: Clause (ii) of section 19(2) refers to goods used as input in manufacturing or processing of goods in the State, while clause (v) refers to sale in the course of inter-State trade or commerce under section 8(1) of the Central Sales Tax Act, 1956. The dispute turned on the proper classification of the assessee's transactions and the effect of the proviso inserted by the amendment, a question that required a ruling by the Advance Ruling Authority under section 48A. The impugned orders proceeded without showing how the assessing authority resolved this legal issue and were passed while the advance ruling application was still pending, reflecting non-application of mind.

Conclusion: The demand for reversal of input tax credit could not be sustained before the advance ruling was obtained, and the impugned orders were liable to be set aside.

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