Zero-rated export sales entitle dealers to full input tax refund; revenue cannot cut claims by applying a lower rate.

Under the zero-rating scheme in the Tamil Nadu Value Added Tax Act, a dealer making export sales is entitled to refund of input tax credit on purchases, including capital goods, where the statutory export conditions are satisfied. The court held that the assessee could claim refund of the tax actually paid and that the revenue had no power to reduce the claim suo motu by applying a lower rate not supported by the statute. As the dealer had paid tax at 12.5% on the purchases used for exports, the restriction of refund to 4% was unsustainable and the reduced-refund orders were quashed.

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Issues: Whether a purchasing dealer engaged in zero-rated export sales is entitled to refund of the full input tax credit paid on capital goods without reduction, and whether the revenue can restrict the refund by treating the excess tax as not refundable to the purchaser.

Analysis: Section 18 of the Tamil Nadu Value Added Tax Act treats zero-rated sales as eligible for input tax credit or refund of the tax paid on purchases, including capital goods, and section 18(2) specifically entitles the dealer making such zero-rated sale to refund of input tax paid or payable on goods exported as such or used in the manufacture of exported goods. The Court held that the statute gives the assessee the choice of refund and does not permit the revenue to make a suo motu reduction of the claim. Since the petitioner had in fact paid tax at 12.5% on the purchases and the export-related conditions were satisfied, the purchaser was entitled to refund of the amount actually paid. The authority's attempt to confine the refund to 4% on the footing that the seller ought to have paid only that rate was held to be unsustainable.

Conclusion: The restriction of refund to 4% was set aside and the petitioner was held entitled to refund of the full input tax paid.

Final Conclusion: The writ petitions were allowed insofar as the refund claim was reduced, and the impugned orders on that aspect were quashed.

Ratio Decidendi: Under the zero-rating scheme, a dealer who has actually paid input tax on purchases used for exported goods is entitled to refund of the full tax paid, and the revenue cannot unilaterally curtail that refund by fixing a lower rate not borne out by the statute.

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