Input tax credit under Tamil Nadu VAT requires proof of genuine transactions; 2016 amendment to Section 19(1) is prospective.

Input tax credit under the Tamil Nadu Value Added Tax Act is a statutory benefit that must be substantiated by the purchaser, and retrospective cancellation of the selling dealer's registration does not by itself nullify validly claimed credit. The dealer must still prove the genuineness of the transaction and, where material, the movement or delivery of goods; credit may be denied where that burden is not discharged or the claim is bogus. The 29.01.2016 amendment to the proviso to Section 19(1), which introduced stricter conditions for credit, was treated as a substantive change and therefore prospective. In writ matters involving disputed facts such as turnover, transport and purchase genuineness, statutory appellate remedies were preferred, while non-speaking orders were remitted.

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Issues: (i) whether input tax credit under the Tamil Nadu Value Added Tax Act, 2006 could be denied for the relevant periods merely because the selling dealer's registration was cancelled retrospectively or because the dealer could not produce transport or movement documents; (ii) whether the amendment to the proviso to Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006, effective from 29.01.2016, was prospective or could be applied to earlier assessment years; and (iii) whether the High Court should interfere in writ jurisdiction with assessment orders and appellate orders where factual disputes, lack of proof of movement of goods, and other turnover issues were involved.

Issue (i): whether input tax credit under the Tamil Nadu Value Added Tax Act, 2006 could be denied for the relevant periods merely because the selling dealer's registration was cancelled retrospectively or because the dealer could not produce transport or movement documents?

Analysis: Input tax credit under Section 19 is a statutory concession available on fulfilment of the prescribed conditions, and the purchaser bears the burden of proving the claim. For the period prior to the 2016 amendment, the Court held that the proviso to Section 19(1), read with Section 19(10), Section 19(13), Section 19(15), Section 19(16) and the relevant rules, did not permit unconditional denial of credit merely because the selling dealer's registration was later cancelled with retrospective effect. At the same time, the Court held that the buyer cannot rely only on invoices and bank payments where the transaction itself is doubtful and the assessee fails to establish genuineness, movement or delivery of goods in cases where such proof is material. The Court also held that the authorities may deny credit where the dealer fails to discharge the burden of proof or where the claim is found to be bogus or unsupported.

Conclusion: Retrospective cancellation by itself does not automatically defeat validly availed credit, but the purchasing dealer must still prove the genuineness of the transaction and the movement or delivery of goods where required; credit can be denied where that burden is not discharged.

Issue (ii): whether the amendment to the proviso to Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006, effective from 29.01.2016, was prospective or could be applied to earlier assessment years?

Analysis: The amendment substituted the earlier proviso and introduced a stricter requirement that the tax due on the purchase must actually have been paid by the selling dealer in the prescribed manner and that the goods must actually have been delivered. The Court treated this as a substantive change, not a mere clarification, because it imposed new conditions affecting the assessee's entitlement to input tax credit. Accordingly, the amendment could not be mechanically applied to completed transactions and assessment years preceding its commencement.

Conclusion: The amendment was held to be prospective and not retrospective.

Issue (iii): whether the High Court should interfere in writ jurisdiction with assessment orders and appellate orders where factual disputes, lack of proof of movement of goods, and other turnover issues were involved?

Analysis: The Court distinguished between matters turning purely on law and matters involving disputed facts such as bogus purchases, movement of goods, stock, transport documents, suppression of turnover, mismatch, and related evidentiary questions. In the batch where the orders were already speaking and the controversy involved factual adjudication, the Court declined writ interference and directed the parties to work out the statutory appellate remedy. In the separate case where the impugned order was found to be non-speaking, the Court set aside the order and remitted the matter for fresh adjudication by the competent authority.

Conclusion: Writ relief was declined in the main batch of cases and statutory appeals were directed, while one set of non-speaking orders was set aside and remanded for fresh consideration.

Final Conclusion: The decision substantially upheld the Revenue's stand in the main batch by refusing writ interference and by insisting on proof of genuine transactions and movement of goods for input tax credit claims, while also recognising that the 2016 amendment operated prospectively and remanding one separate set of matters for fresh adjudication.

Ratio Decidendi: Input tax credit under the Tamil Nadu Value Added Tax Act, 2006 is a provisional statutory benefit that must be proved by the dealer, and an amendment that imposes new substantive conditions for availing such credit operates prospectively unless the legislature clearly provides otherwise.

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