Input tax credit cannot be denied under a later-amended VAT provision; turnover threshold also triggers credit eligibility from year start.

A notice denying input tax credit under the Tamil Nadu Value Added Tax Act was unsustainable because the provision relied on had been introduced only later and could not be applied to the relevant tax period. The Court also applied the settled position that once turnover crosses the prescribed limit, the assessee moves out of the compounded scheme and is entitled to input tax credit from the beginning of the year, in line with the departmental clarification relied on. The impugned notice and assessment action were therefore set aside, and full input tax credit was allowed.

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Issues: Whether the notice denying input tax credit and applying Section 3(4)(b) of the Tamil Nadu Value Added Tax Act, 2006 to the petitioner was sustainable in law.

Analysis: The impugned action proceeded on Section 3(4)(b) of the Tamil Nadu Value Added Tax Act, 2006, but that provision had been introduced only with effect from 17.06.2008. On the date of the revised returns, the provision was not in force, and its application to the petitioner's case was therefore impermissible. The Court also applied the settled view that once the turnover crosses the prescribed limit of Rs. 50,00,000, the assessee is not to be assessed under the compounded scheme and is entitled to input tax credit from the beginning of the year, as clarified by the Commissioner's circular relied on in the decision discussed by the Court.

Conclusion: The notice was held to be bad in law and was set aside; the petitioner was held entitled to the benefit of input tax credit and the impugned order was quashed.

Final Conclusion: The writ petition succeeded and the assessment action denying full input tax credit could not be sustained.

Ratio Decidendi: A provision brought into force after the relevant tax period cannot be applied to that period, and a binding departmental clarification governing crossing of the turnover threshold must be given effect in determining eligibility for input tax credit.

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