2020 (5) TMI 495 - HC - VAT and Sales Tax

Petitioner entitled to refund of excess Input Tax Credit under TNVAT Act, 2006

Tvl. M.R. Motor Company, Versus The Assistant Commissioner (CT), (FAC), Salem.

The court held that the petitioner was entitled to a refund of excess Input Tax Credit under the TNVAT Act, 2006, as mandated by law regardless of the ... Refund of excess Input Tax Credit - refund of claim denied on the ground that the petitioner was still in business and was adjusting the amount regularly - Sections 19(17) and 19(18) of the TNVAT Act, 2006 - whether in the light of changed scenario after the implementation of TNGST Act, 2017, the petitioner is entitled to refund? - HELD THAT:- As per the Rules prescribed, excess of Input Tax Credit has to be refunded back to the dealer. There was no provision for carrying forward of such Input Tax Credit for adjustment of tax liability for the subsequent period - merely because the petitioner was a going concern by itself did not mean that the petitioner was not entitled to such refund of the excess of Input Tax Credit which the petitioner accumulated over a period of time. Merely because the TNVAT Act, 2006 was substituted with Tamil Nadu Goods and Service Tax Act, 2017 with effect from 1.7.2017 by itself did not mean that the petitioner would be entitled to refund merely because the petitioner filed Form Transfer-1 - The petitioner cannot be found fault with. It did not mean that the petitioner was not entitled to refund of the accumulated Input Tax Credit which was lying unutilised after due adjustment. The impugned order passed by the respondent cannot be sustained and same is liable to be quashed with consequential direction to refund the amount lying unutilised after adjustment at the beginning of each financial year - Petition allowed. Issues:1. Entitlement to refund of Input Tax Credit under TNVAT Act, 2006.2. Justification for disallowing the refund claim.3. Entitlement to refund post implementation of TNGST Act, 2017.Analysis:Issue 1: Entitlement to refund of Input Tax Credit under TNVAT Act, 2006The petitioner, a dealer of Motor Vehicles, claimed a refund of excess Input Tax Credit under Sections 19(17) & 19(18) of the TNVAT Act, 2006. The provisions allowed for adjustment of excess credit against outstanding tax dues and mandated refund of any remaining amount. Rule 10 of the TNVAT Rules, 2007 specified the procedure for refund, emphasizing that excess credit must be refunded back to the dealer. The court held that the petitioner was entitled to the refund as the law mandated refunding the unutilized credit after due adjustment, regardless of the petitioner being a going concern.Issue 2: Justification for disallowing the refund claimThe respondent rejected the refund claim, arguing that the petitioner had been adjusting the Input Tax Credit against output tax dues continuously, hence the closing balance as of March 2012 could not be refunded. However, the court noted that the law required the refund of excess credit after due adjustment, and the accumulation of credit by the petitioner did not disqualify them from receiving the refund. The court emphasized that the Assessing Authority must refund the excess credit to the dealer after necessary adjustments.Issue 3: Entitlement to refund post implementation of TNGST Act, 2017Following the replacement of TNVAT Act, 2006 with TNGST Act, 2017, the respondent clarified the petitioner's credit status under the new act. The court highlighted that the petitioner's filing under the new act did not negate their entitlement to the refund under the previous act. Merely transitioning the credit under the new act did not absolve the respondent from refunding the unutilized credit as required by the TNVAT Act, 2006. The court referred to a Supreme Court decision emphasizing fair treatment of taxpayers and directed the respondent to refund the unutilized amount at the beginning of each financial year.In conclusion, the court allowed the Writ Petition, quashed the impugned order, and directed the refund of the unutilized amount after adjustment at the start of each financial year, emphasizing the duty of authorities to act reasonably and fairly in tax matters.