Input tax credit mismatch assessment must await the prescribed mechanism before final determination and fresh reassessment.

Input tax credit mismatch under the Tamil Nadu VAT Act had to be dealt with in line with the JKM Graphics Solutions directions and Circular No. 3 of 2019, which required such mismatch issues to remain pending until an appropriate mechanism was evolved. The revised assessment, insofar as it treated the mismatch component as finally determined, was therefore not sustainable. It was set aside and remitted for fresh action, with a fresh notice to be issued and the assessment redone in accordance with law once the prescribed mechanism becomes available.

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Issues: Whether the revised assessment made on account of input tax credit mismatch and related discrepancies was liable to be set aside and remitted for fresh action.

Analysis: The assessment arose under the Tamil Nadu Value Added Tax Act, 2006, where the dealer had filed monthly returns and a revised assessment was later made after inspection and notice. The dispute centred on mismatch issues, and the Court noted that the matter was covered by the earlier directions in the JKM Graphics Solutions line of cases. It was also noted that Circular No. 3 of 2019 had been issued by the Department pursuant to that decision, under which mismatch issues were to be kept pending until an appropriate mechanism was evolved, while other issues could be finalized. In that backdrop, the impugned revised assessment could not be sustained as a final determination on the mismatch component.

Conclusion: The revised assessment was set aside and remitted to the respondent for fresh action after the new mechanism on the mismatch issue becomes available, with a fresh notice to be issued and the assessment redone in accordance with law.

Ratio Decidendi: Where input tax credit mismatch is covered by an extant departmental circular issued pursuant to binding judicial directions, the revised assessment on that issue is liable to be kept in abeyance and redone after the prescribed mechanism is evolved.

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