Purchase tax under Tamil Nadu VAT cannot be discharged through input tax credit; cash payment remains mandatory first.

Purchase tax liability under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 is treated as a distinct charge from tax payable under Section 3, and the input tax credit mechanism under Sections 12(2) and 19 operates only as a facilitation measure to reduce cascading. The adjustment language in Section 3(3) applies to tax under Section 3(2) and does not extend to purchase tax under Section 12(1). On that construction, purchase tax must be paid in cash before any credit can be availed, and a contrary departmental clarification was not accepted as binding.

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Issues: Whether purchase tax payable under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 can be discharged from and out of input tax credit under Section 12(2) of that Act, and whether the impugned clarification directing payment of purchase tax in cash is legally sustainable.

Analysis: Section 12(1) operates as an exception to the charging scheme under Section 3 and creates a liability to pay purchase tax in the circumstances prescribed by the Act. The input tax credit mechanism under Sections 12(2) and 19 is available as a facilitation measure to reduce cascading, but it is not a provision enabling discharge of the purchase tax liability under Section 12(1). The adjustment contemplated by Section 3(3) relates to tax payable under Section 3(2) and not to purchase tax under Section 12(1). The reasoning that purchase tax must first be paid in cash before any credit can be availed is consistent with the statutory scheme. Reliance placed on decisions dealing with Central Excise credit was found inapposite because those authorities arose in a different statutory context. The contrary view based on departmental clarification was not accepted as binding.

Conclusion: Purchase tax under Section 12(1) of the Tamil Nadu Value Added Tax Act, 2006 cannot be discharged through input tax credit, and the impugned order was upheld.

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