Purchase tax on cotton kappas was upheld, with input tax credit available under the statutory scheme.

Section 12(1) of the Tamil Nadu VAT Act, 2006 was treated as an exception to the charging provision under Section 3, and purchase tax was held payable on cotton kappas purchased from agriculturalists and unregistered dealers. The Court further noted that Section 12(2) permits the resulting tax to be taken as input tax credit and utilised in the manner allowed by law. The assessee's contention that no purchase tax was leviable was rejected, and the challenge to the levy failed.

---

---

Issues: Whether purchase tax was leviable under Section 12 of the Tamil Nadu Value Added Tax Act, 2006 on purchase of cotton kappas from agriculturalists and unregistered dealers, and whether the assessee was entitled to avail credit of such tax.

Analysis: Section 12(1) was treated as an exception to the charging provision under Section 3, and the Court held that purchase tax was payable on the disputed purchases. The Court further noted that the statutory scheme under Section 12(2) provided for availment of credit of such tax as input tax credit, which could then be utilised in the manner permitted by law. On that basis, the assessee's contention that no purchase tax was payable was rejected.

Conclusion: Purchase tax was held to be payable on the purchases in question, and the challenge to the levy failed.

---