Input tax credit reversal must be tested against the operative proviso interpretation where no stay has been granted.

The proviso to Section 19(2) of the Tamil Nadu VAT Act was construed as limiting reversal of input tax credit only to transactions covered by clause (v), not to the other purposes listed in Section 19(2). As no interim stay had been granted against that interpretation, the earlier ruling continued to operate. On that basis, the taxpayer's request for refund of reversed input tax credit had to be considered on merits, and the authority was directed to pass a reasoned order in accordance with law.

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Issues: Whether the respondent should be directed to consider the petitioner's request for refund of input tax credit reversed, in the light of the earlier interpretation of the proviso to Section 19(2) of the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The earlier decision interpreting the proviso to Section 19(2) held that the restriction on input tax credit applied only to the category of transactions covered by clause (v) and not to the other purposes specified in Section 19(2). The Court noted that the State's appeal against that decision had not yet been numbered and there was no stay of the earlier ruling. In such circumstances, the settled position was that the absence of an interim stay meant the earlier decision continued to operate, and the petitioner's representation for refund required consideration on merits.

Conclusion: The respondent was directed to consider the petitioner's representation for refund and pass orders on merits and in accordance with law within eight weeks.

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