Excess Input Tax Credit must be refunded after adjustment; continued business and GST transition cannot defeat the entitlement.

The VAT scheme required excess Input Tax Credit to be adjusted against outstanding tax dues and then refunded if any balance remained unutilised. Rule 10 governed the refund mechanism and did not permit indefinite carry-forward of the excess credit instead of refund. The dealer's continued business activity did not defeat this statutory entitlement, and the transition to the GST regime, including filing of Form GST TRAN-I, did not justify withholding credit that had already become refundable under the earlier law. The rejection of refund was therefore unsustainable, and refund of the balance Input Tax Credit was due after adjustment.

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Issues: (i) whether the dealer was entitled to refund of excess Input Tax Credit under Section 19(17) and Section 19(18) of the Tamil Nadu Value Added Tax Act, 2006 read with Rule 10(10)(a) and Rule 10(10)(b) of the Tamil Nadu Value Added Tax Rules, 2007; (ii) whether the continued business activity of the dealer and the transition to the GST regime could justify denial of refund of the unutilised credit.

Issue (i): Whether the dealer was entitled to refund of excess Input Tax Credit under Section 19(17) and Section 19(18) of the Tamil Nadu Value Added Tax Act, 2006 read with Rule 10(10)(a) and Rule 10(10)(b) of the Tamil Nadu Value Added Tax Rules, 2007.

Analysis: The statutory scheme permits adjustment of excess Input Tax Credit against outstanding tax dues and, after such adjustment, contemplates refund of the remaining excess. Rule 10 prescribes the manner of refund, and the prescribed procedure does not authorise indefinite carrying forward of the excess credit for later set-off in place of refund. Once the excess credit remains unutilised after the mandated adjustment, the authority is obliged to refund it.

Conclusion: The dealer was entitled to refund of the excess Input Tax Credit after statutory adjustment.

Issue (ii): Whether the continued business activity of the dealer and the transition to the GST regime could justify denial of refund of the unutilised credit.

Analysis: The mere fact that the dealer remained a going concern did not extinguish the statutory entitlement to refund. The substitution of the VAT enactment by the GST regime also did not validate the refusal of refund, because the credit ought to have been refunded when it became due under the earlier regime. The transition through Form GST TRAN-I did not cure the illegality of withholding the refund.

Conclusion: The refund could not be denied on the grounds of continued business or transition to GST.

Final Conclusion: The rejection order was unsustainable, and the petitioner was entitled to refund of the unutilised Input Tax Credit lying after adjustment.

Ratio Decidendi: Where a taxing statute mandates adjustment of excess Input Tax Credit and thereafter refund of the balance, the authority cannot refuse refund on the ground that the dealer continues in business or later transitions to a different tax regime.

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