Input tax credit reversal for invisible loss requires factual enquiry, proper notice, and consideration of objections before assessment.

Input tax credit reversal under the Tamil Nadu Value Added Tax Act, 2006 cannot rest on a blanket or uniform percentage of invisible loss without proper factual enquiry. The Assessing Authority must issue a clear show cause notice, specify the proposed grounds for reversal, consider the dealer's objections, and then decide the matter in accordance with law. On that basis, the impugned assessment orders were set aside and the matter was remitted for fresh adjudication after notice, objections, and hearing.

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Issues: Whether the assessment orders rejecting the petitioner's claim and reversing input tax credit on the basis of a uniform percentage of invisible loss were sustainable, and whether the matters required fresh consideration after notice and objections.

Analysis: The dispute concerned the rejection of the petitioner's request to drop the proposal to levy tax on invisible loss and on certain sales, and the consequent reversal of input tax credit. Following the earlier decision on the same statutory scheme, the assessment mechanism under the Tamil Nadu Value Added Tax Act, 2006 was held not to permit an ad hoc or uniform percentage to be applied as invisible loss without a proper fact-finding exercise. The Assessing Authority was required to issue a clear show cause notice, set out the circumstances for proposed reversal, consider objections, and then decide the matter in accordance with law. The impugned orders were therefore set aside, with liberty to proceed afresh after following the prescribed procedure.

Conclusion: The challenge succeeded to the extent that the assessment orders were quashed and the matter was remitted for fresh adjudication after notice, objections, and hearing.

Final Conclusion: The petitioner obtained relief against the impugned reassessment orders, but the revenue was left free to re-examine the issue lawfully by issuing proper notices and passing fresh orders on merits.

Ratio Decidendi: Input tax credit reversal cannot be sustained on a blanket percentage of invisible loss without a proper factual enquiry and compliance with the requirement of prior notice and consideration of objections.

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