2020 (2) TMI 404 - HC - VAT and Sales Tax

Transitional credit denied for entry tax: Court dismisses writ petition

M/s. Sangam Motors Versus The Assistant Commissioner (CT), The Appellate Deputy Commissioner (CT) Tirchy, Trichy District.

The court dismissed the writ petition, upholding the impugned orders denying transitional credit under Section 88(6)(a) of the TNVAT Act, 2006. The ... Transitional credit of entry tax paid - whether the petitioner was entitled to avail transitional credit of entry tax paid by a local dealer under section 88 (6) (a) of the TNVAT Act, 2006? - HELD THAT:- While selling the vehicles to the petitioner and paying the tax under TNGST Act, 1959, the local dealer would have set off the entry tax paid against the TNGST and passed on only the net of the tax paid under TNGST Act, 1959 to the petitioner - Therefore, if at all, the petitioner would have been entitled to transitional credit under Section 88(6)(a) of the TN VAT Act, 2006 of only the net of the tax paid under TNGST Act, 1959 by such dealer and not on the burden of entry tax which was purportedly collected by the dealer from the petitioner illegally. Even otherwise having purchased the motor vehicles from a local dealer in Tamilnadu, transitional input tax credit of entry tax paid under Tamil Nadu Tax on Entry of Motor Vehicles Into Local Areas Act, 1990 under section 88(6)(a) of the T.N. VAT Act, 2006 cannot be countenanced. Transitional input tax credit of Entry tax on the closing stock is not permissible under Section 88(6)(a) of the TN VAT Act, 2006 even if the petitioner had actually imported motor vehicles and paid the entry tax on import of the motor vehicles from other state. If such tax was paid, such tax at best would be available for adjustment in terms of Section 4 of the Tamil Nadu Tax on Entry of Motor Vehicles Into Local Areas Act, 1990 - the petitioner had wrongly availed credit of the Entry tax paid by the local dealer who sold the motor vehicle to the petitioner. The entry tax paid by the selling dealer would have got subsumed into the TNGST Act 1959 paid by the dealer and only net of the TNGST would have been passed on to the petitioner. There are no infirmity in the impugned orders passed by the 2nd respondent on 16.4.2015 and by the 1st respondent on 29.09.2015 - petition dismissed. Issues:1. Claim for transitional Input Tax Credit under Section 88(6)(a) of the TNVAT Act, 2006 on entry tax paid on closing stock of vehicles.2. Discrepancy in the claimed amount of transitional Input Tax Credit.3. Allegations of wrongly claiming credit at a higher rate.4. Notice to reverse excess Input Tax Credit and imposition of penalty.5. Appeal filed against the order and subsequent remand for fresh disposal.6. Denial of entire transitional credit availed by the petitioner.7. Interpretation of Section 88(6)(a) of the TN VAT Act, 2006 regarding entitlement to transitional credit of entry tax paid by a local dealer.Analysis:1. The petitioner, a motor vehicle dealer, claimed transitional Input Tax Credit under Section 88(6)(a) of the TNVAT Act, 2006 on the entry tax paid on the closing stock of vehicles available as of 31.12.2006. The claimed amount was challenged due to discrepancies, leading to a notice to reverse excess credit and imposition of a penalty.2. A subsequent appeal was filed against the order, resulting in a remand for fresh disposal. The appellate authority set aside the initial order, highlighting the dealer's payment of entry tax at a higher rate and the inapplicability of such credit under the TN VAT Act, 2006.3. The issue revolved around the entitlement of the petitioner to avail transitional credit of entry tax paid by a local dealer under Section 88(6)(a) of the TN VAT Act, 2006. It was argued that the dealer could only claim credit on the net tax paid under the TNGST Act, 1959 by the local dealer, not on the burden of entry tax collected illegally.4. The judgment clarified that transitional input tax credit of entry tax on the closing stock was impermissible under the TN VAT Act, 2006. The court found that the petitioner had wrongly availed credit of entry tax paid by the local dealer, as it would have been subsumed into the TNGST Act, 1959 paid by the dealer.5. Consequently, the court dismissed the writ petition, upholding the impugned orders denying the transitional credit. The decision emphasized the legal provisions governing transitional credit entitlement and the inadmissibility of claiming credit on entry tax paid by a local dealer.