Input tax credit on DEPB licence purchases denied under Tamil Nadu VAT law; binding precedent controlled the challenge.

Input tax credit on purchase of DEPB licences under the Tamil Nadu VAT Act, 2006 was examined against the statutory definitions of goods, input, input tax and the credit mechanism under Section 19. Although DEPB scrips were treated as goods and the broader scheme of the Act was noted, the Court followed an earlier Division Bench ruling that denied input tax credit on such purchases. It declined to treat that precedent as per incuriam, despite expressing reservations about some aspects of its reasoning. The challenge to reversal of input tax credit therefore failed, and the demand was upheld in substance.

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Issues: Whether input tax credit could be availed and utilised on the purchase of DEPB licences under the Tamil Nadu VAT Act, 2006, and whether the demand for reversal of such credit was sustainable.

Analysis: DEPB scrips were treated as goods and the Court noted the broader scheme of the Act, including the definitions of goods, input and input tax, and the mechanism of input tax credit under Section 19. However, the Court held itself bound by the earlier Division Bench decision which had answered against availability of input tax credit on purchase of DEPB licences. Although reservations were expressed about aspects of that earlier reasoning, the Court declined to hold it per incuriam and accepted that the binding precedent governed the present case.

Conclusion: The challenge to the reversal of input tax credit failed and the demand was upheld in substance.

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