Retrospective input tax credit amendment removes anomaly and invalidates reversal on inter-State sales without C Forms.

A curative substitution in Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006, which extended input tax credit to inter-State sales under Section 8(2) of the Central Sales Tax Act, was treated as removing an anomaly rather than creating a new benefit. On that reasoning, the amendment was stated to operate retrospectively from the inception of the statute, so the restriction of input tax credit to the later period would create an artificial distinction between similar transactions and defeat the object of the change. The reversal of input tax credit on sales not covered by C Forms was therefore described as invalid, and the assessee succeeded.

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Issues: Whether the reversal of input tax credit on inter-State sales not covered by C Forms was lawful, and whether the amendment to Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006 operated retrospectively so as to cover the relevant assessment period.

Analysis: The dispute concerned inter-State sales taxed under Sections 8(1) and 8(2) of the Central Sales Tax Act, 1956, and the availability of input tax credit under Section 19(2)(v) of the Tamil Nadu Value Added Tax Act, 2006. The governing principle was that the legislative substitution broadening input tax credit to transactions under Section 8(2) removed an anomaly and could not be confined only to the date of substitution when the amendment was curative in nature. Applying the earlier reasoning on the same statutory scheme, the restriction of the benefit to the later period would create an artificial distinction between similar transactions and defeat the object of the amendment.

Conclusion: The reversal of input tax credit was invalid, the amendment was held to operate retrospectively, and the assessee succeeded.

Ratio Decidendi: A curative substitution that removes an anomaly and extends a tax benefit to a previously excluded class of transactions operates retrospectively from the inception of the statute.

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