Input tax credit refund under Tamil Nadu VAT requires notice, fact-finding, and hearing before any reversal.

Under the Tamil Nadu VAT regime, refund of input tax credit must be examined with the restrictions and conditions in Section 19, including the safeguards in Section 19(9), and not as an independent entitlement under Section 18(2). Any reversal of refund or input tax credit requires proper fact-finding and prior notice to the dealer on the circumstances relied upon. The document notes that ad hoc reversal of input tax credit is impermissible and that the assessing authority must issue a clear show cause notice, consider objections, and proceed only after granting a personal hearing. The impugned order was therefore set aside and the matter remitted for fresh decision.

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Issues: Whether the order reversing the refund of input tax credit could be set aside and the matter sent back for fresh consideration after notice and opportunity.

Analysis: The refund claim arose under the Tamil Nadu Value Added Tax regime, where entitlement under Section 18(2) is not independent and must be tested along with the restrictions and conditions in Section 19, including the safeguards reflected in Section 19(9). A proper fact-finding exercise is required before any reversal of refund or input tax credit, and the dealer must be put on notice of the circumstances relied upon. The earlier decision relied on had already held that uniform ad hoc reversal of input tax credit is impermissible and that the assessing authority must proceed by issuing a clear show cause notice and considering objections before passing a fresh order.

Conclusion: The impugned order was set aside and the matter was remitted to the second respondent for fresh decision after issuing notice, receiving objections, and granting personal hearing. The relief was therefore granted in part in favour of the assessee.

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