Job-work goods return timelines are directory, so input tax credit cannot be denied if the same goods are later proved returned.

Rule 20 of the Punjab VAT Rules was upheld as a valid regulatory measure under Section 13(3), because the 90-day time limit for return of job-work goods was intended to support verification and prevent misuse, not to override the statutory scheme. The 90-day period was treated as directory rather than mandatory, since restoration of input tax credit depends on proof that the same goods were returned after processing. Credit cannot be denied merely because the goods came back after 90 days if the delay is reasonable and does not prejudice the department's ability to verify identity.

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Issues: (i) Whether Rule 20 of the Punjab Value Added Tax Rules, 2005 is ultra vires Section 13(3) of the Punjab Value Added Tax Act, 2005 insofar as it prescribes a 90-day time limit for return of goods sent for job work. (ii) Whether the 90-day period prescribed in Rule 20 is mandatory or directory, and whether reversal of input tax credit can be denied merely because the goods were received back beyond that period.

Issue (i): Whether Rule 20 of the Punjab Value Added Tax Rules, 2005 is ultra vires Section 13(3) of the Punjab Value Added Tax Act, 2005 insofar as it prescribes a 90-day time limit for return of goods sent for job work.

Analysis: Section 13(1) confers entitlement to input tax credit subject to prescribed conditions, while Section 13(3) deals with a distinct situation where goods are sent for further processing on job work basis and the debit of credit is restored if the same goods are received back after processing. The rule-making power under Section 70 enabled the State to prescribe a mechanism to ensure that the goods returned are the same goods that were sent out. The 90-day prescription was held to be a regulatory measure designed to facilitate verification and prevent misuse, not a condition that contradicted Section 13(3).

Conclusion: Rule 20 is not ultra vires Section 13(3) of the Act.

Issue (ii): Whether the 90-day period prescribed in Rule 20 is mandatory or directory, and whether reversal of input tax credit can be denied merely because the goods were received back beyond that period.

Analysis: The language of Section 13(3) requires restoration of the debit when the same goods are received back after processing, but it does not make restoration conditional upon receipt within a fixed period. The 90-day stipulation was treated as directory, because the real requirement is that the department must be able to verify that the returned goods are the very goods sent for job work. The relevant test is whether the delay is beyond a reasonable time and whether the department's ability to verify identity of goods is prejudiced. A rigid insistence on return within the same assessment year or within a few days was rejected.

Conclusion: The 90-day period is directory and not mandatory, and credit cannot be denied merely for receipt beyond 90 days if the same goods are proved to have been returned and the delay is reasonable.

Final Conclusion: The challenge to Rule 20 failed in part, but the petitioner obtained relief on the construction of the rule, and the matter was remanded for fresh consideration on the correct legal test.

Ratio Decidendi: A rule prescribing a time limit for return of job-work goods is valid as a regulatory measure, but the statutory right to restore input tax credit depends on proof that the same goods were returned after processing and not on strict compliance with a mandatory time bar, unless the delay defeats verification of identity.

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