Writ jurisdiction despite alternate tax remedy, and final input tax credit adjustment cannot be reopened without legal basis.
Writ jurisdiction under Article 226 may still be invoked in tax matters despite an alternate statutory remedy where the impugned action is wholly unreasonable, unsustainable, and no disputed factual enquiry is required. The Madras HC note further states that a concluded departmental adjustment of excess input tax credit, once it has attained finality, cannot be reopened without legal justification; reopening the same issue was treated as unjustified. On that reasoning, the departmental order reversing the earlier adjustment and directing fresh treatment of the amount was quashed, and the writ proceedings succeeded.
Issues: (i) Whether the writ appeal could be entertained under Article 226 of the Constitution of India despite the availability of an alternate remedy under the tax statute. (ii) Whether the departmental order reversing the earlier adjustment of excess input tax credit and directing fresh treatment of the amount was sustainable.
Issue (i): Whether the writ appeal could be entertained under Article 226 of the Constitution of India despite the availability of an alternate remedy under the tax statute.
Analysis: The bar of alternate remedy in tax matters is only a self-imposed restraint and not an absolute prohibition. Where the impugned action is wholly unreasonable and unsustainable, and no disputed question of fact requires examination, the High Court can exercise writ jurisdiction. On the facts, the controversy turned on the legality of the departmental action and did not require a factual enquiry.
Conclusion: The availability of an alternate remedy did not preclude interference in writ jurisdiction, and the appeal was maintainable.
Issue (ii): Whether the departmental order reversing the earlier adjustment of excess input tax credit and directing fresh treatment of the amount was sustainable.
Analysis: The excess input tax credit had already been adjusted by the Department against arrears payable by the appellant, and that adjustment had attained finality. The notice seeking reversal had already been quashed in earlier proceedings. In that backdrop, reopening the same issue against the appellant was unjustified. Even on the assumption that reversal was permissible, the consequence would have been refund of the amount with compensatory interest. The impugned order, therefore, could not stand.
Conclusion: The departmental order was unsustainable and liable to be quashed.
Final Conclusion: The writ appeal succeeded, the order of the Single Judge was set aside, the writ petition was allowed, and the impugned departmental order was quashed.
Ratio Decidendi: In tax matters, writ jurisdiction may be exercised notwithstanding an alternate remedy where the impugned action is wholly unreasonable and unsustainable, and a concluded departmental adjustment of tax credit cannot be reopened after it has attained finality without legal justification.
TaxTMI 
AI Drafter ✕
TaxTMI 
