Retrospective substitution in tax law extended input tax credit from the Act's inception by removing an anomaly.

The substitution of section 19(2)(v) in the Tamil Nadu Value Added Tax Act, 2006 was treated as retrospective because the amendment removed an anomaly and extended input tax credit to transactions under section 8(2) of the Central Sales Tax Act as well. The use of the word "substituted" was taken to indicate replacement of the earlier clause, not the creation of a new burden or restriction. Applying the amended provision only from 01.04.2015 would have created an unjustified distinction between identical transactions across different periods, so the benefit was held to operate from the inception of the Act.

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Issues: Whether the substitution of section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 by the 2015 amendment operated retrospectively from the date of commencement of the Act or prospectively from 01.04.2015.

Analysis: The amendment used the expression "substituted", which ordinarily indicates replacement of the earlier clause. The earlier provision had granted input tax credit only for inter-State sales falling under section 8(1) of the Central Sales Tax Act, 1956, i.e. transactions with registered dealers. By the 2015 amendment, the benefit was extended to transactions falling under section 8(2) as well, thereby removing the earlier distinction between registered and unregistered dealers. The change was treated as a correction of an anomaly and not as the creation of a new restriction or burden. In that setting, limiting the benefit only to the amendment date would produce an unjustified dichotomy between identical transactions for different periods.

Conclusion: The amended section 19(2)(v) was held to be retrospective and applicable from the inception of the Act. The issue was answered in favour of the petitioners.

Ratio Decidendi: Where a substitution in a fiscal provision is plainly intended to remove an anomaly and extend a benefit already in existence, the substituted clause operates retrospectively from the date of the original provision unless the statute indicates a contrary intention.

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