2015 (10) TMI 2672 - HC - VAT and Sales Tax

Madras HC: Refund of input tax credit on zero rate sales flexible, promotes exports

First Garment MFG Co. (India) Pvt. Ltd. Versus Assistant Commissioner, Thiruparankundram Circle, Madurai

The Madras High Court ruled on multiple Writ Petitions regarding the refund of input tax credit on zero rate sales under the TNVAT Act. The court held ... Interpretation of statute - Section 18(3) of the Act - whether the petitioners are entitled to get back their Input Tax Credit on Zero Rate Sales, after the prescribed statutory period given under Section 18 of the Act? Held that: - there is no dispute that the petitioners herein have filed the monthly returns in the form of Form-I in time by which they claim the refund of Input Tax Credit from the respondents. The respondents herein have turned down their request in refunding the Input Tax Credit on the primary ground that such claim is beyond the statutory period - It is true that the Input Tax Credit is a concession but such concession is extended to the Companies/Dealers in order to encourage them to do exports by which the foreign exchange will flow into the Country and give a fillip to the economy of our State or Country as the case may be. In a given situation, necessarily, this Court will have to answer as to whether, it can use its discretionary power by interpreting Section 18(3) of the Act. When admittedly there is no dispute that the petitioners have exported the goods, the technicalities shall not stand in the way of claiming refund of Input Tax Credit in the form of 'Form W' - a direction is issued to the respondents herein to the effect that if the petitioners after following the conditions stipulated in Form-W issued by the respondents, except the time limit, the respondents shall then consider the claim of the petitioners afresh as per Section 22(2) of the Act, within a period of eight weeks from the date of receipt of a copy of this order. Petition allowed by way of remand. Issues:1. Claim for refund of input tax credit beyond statutory period under Section 18(3) of the TNVAT Act.2. Interpretation of Section 18(3) as mandatory or directory.3. Discretionary power of the court under Article 226 of the Constitution of India.4. Comparison of Section 18 and Section 19 of the TNVAT Act regarding input tax credit.5. Application of judgment in similar cases regarding refund of zero rate sales.Analysis:The judgment by the Madras High Court dealt with multiple Writ Petitions concerning the refund of input tax credit on zero rate sales under the TNVAT Act. The primary issue was whether the petitioners could claim the refund beyond the statutory period of 180 days as per Section 18(3) of the Act. The petitioners argued that the time limit was directory, not mandatory, and the court could use its discretionary power under Article 226 of the Constitution of India. They claimed that their entitlement to the refund was based on Form I submissions and should not be denied due to technicalities. The court considered previous judgments and emphasized the purpose of input tax credit as a concession to encourage exports for economic benefits.The Additional Government Pleader contended that the time limit under Section 18 was mandatory to prevent misuse and tax evasion. He highlighted a judgment emphasizing strict compliance with provisions for claiming input tax credit. The court analyzed the differences between Sections 18 and 19 of the Act, noting that the latter imposes stricter timelines. The court differentiated cases of intra-state trade from zero rate sales for export, emphasizing the importance of encouraging exports for economic growth.The court referenced previous judgments to support its decision, emphasizing that technicalities should not hinder legitimate refund claims on zero rate sales. It directed the respondents to reconsider the petitioners' claims if they fulfilled conditions in Form W, excluding the time limit, within eight weeks. The court clarified that while interpreting the time limit, other formalities outlined in Form W must be followed for claiming the refund. The judgment balanced the need for compliance with statutory provisions and the objective of facilitating export-related transactions.In conclusion, the court disposed of the Writ Petitions, providing relief to the petitioners by allowing a reconsideration of their refund claims within a specified timeframe. The judgment clarified the court's interpretation of the time limit under Section 18(3) while upholding the importance of complying with procedural requirements for claiming input tax credit on zero rate sales.