Zero-rated input tax refund under Section 18 cannot be reduced by impermissible reversal of credit on capital goods.

Under Section 18 of the Tamil Nadu Value Added Tax Act, 2006, a dealer entitled to zero-rated treatment and refund of input tax cannot have that entitlement curtailed by an adjustment or reversal inconsistent with the statutory scheme. The Court followed its earlier interpretation of Section 18 and held that reversal of input tax credit on capital goods beyond the permitted adjustment was impermissible. The assessment order was therefore quashed to that extent.

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Issues: Whether reversal of input tax credit on capital goods beyond 4% under the Tamil Nadu Value Added Tax Act, 2006 was sustainable in view of the earlier decision on the scope of Section 18.

Analysis: The challenge to the assessment order was based on the settled position that the issue stood covered by an earlier decision of the Court. The legal position accepted was that, under Section 18 of the Tamil Nadu Value Added Tax Act, 2006, a dealer entitled to zero-rated treatment and refund of input tax could not have the claim reduced by adjustment contrary to the statutory scheme. The Court followed that view and found that the assessment order could not be sustained.

Conclusion: The assessment order was quashed and the writ petition was allowed in favour of the assessee.

Final Conclusion: The dispute was resolved by applying the earlier interpretation of Section 18 of the Tamil Nadu Value Added Tax Act, 2006, resulting in invalidation of the reassessment to the extent it reversed input tax credit on capital goods.

Ratio Decidendi: Where the statutory scheme grants zero-rated treatment and refund of input tax under Section 18 of the Tamil Nadu Value Added Tax Act, 2006, the assessing authority cannot curtail that entitlement by making an impermissible adjustment or reversal contrary to the provision.

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