Input tax credit proviso cannot be extended beyond its specific clause; writ remedy remained available

A proviso restricting input tax credit under the Tamil Nadu VAT Act was confined to the specific inter-State sales clause to which it was attached and could not, by implication, be extended to other independently listed purposes in Section 19(2). On that reading, manufacturers using purchased goods for manufacturing and processing remained entitled to input tax credit. The availability of appeal or revision did not bar writ jurisdiction where the challenge concerned the assessing authority's power to reverse credit on an erroneous statutory interpretation, so the writ petitions were entertained and the reversal orders were set aside.

---

---

Issues: (i) Whether the proviso to Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 restricted input tax credit only in relation to inter-State sales falling under clause (v), or whether it applied to all the purposes enumerated in Section 19(2). (ii) Whether the writ petitions should be declined on the ground of availability of alternate statutory remedies.

Issue (i): Whether the proviso to Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 restricted input tax credit only in relation to inter-State sales falling under clause (v), or whether it applied to all the purposes enumerated in Section 19(2).

Analysis: Section 19(2) grants input tax credit for taxable goods purchased within the State from a registered dealer and used for the purposes specified in clauses (i) to (vi). The proviso carves out a limitation only for the purpose specified in clause (v), namely sales in the course of inter-State trade or commerce falling under Section 8(1) of the Central Sales Tax Act, 1956. The limitation cannot be extended to the other clauses by implication. The statutory language is plain, and the proviso is confined to the specific clause to which it is attached. The later legislative deletion of the proviso also supports the conclusion that the earlier interpretation adopted by the revenue was incorrect.

Conclusion: The proviso applied only to clause (v) and not to clauses (i) to (iv) and (vi). The assessees were entitled to full input tax credit in respect of purchases used for manufacturing and processing.

Issue (ii): Whether the writ petitions should be declined on the ground of availability of alternate statutory remedies.

Analysis: The challenge went to the jurisdiction of the assessing authority to reverse input tax credit on the basis that the proviso did not apply to manufacturers. In such circumstances, the existence of a statutory appeal or revision did not compel relegation to alternate remedies. The Court also noted the long pendency of the writ petitions and held that entertaining them was within the constitutional writ jurisdiction.

Conclusion: The plea based on alternate remedy was rejected.

Final Conclusion: The impugned orders reversing input tax credit were set aside and the writ petitions were allowed, with the substantive benefit going to the assessees.

Ratio Decidendi: A proviso limiting input tax credit must be confined to the specific clause to which it is attached and cannot be extended to other independently enumerated purposes in the charging provision by implication.

---