Transition of input tax credit cannot be denied for procedural lapse where underlying VAT credit is otherwise valid.

Validly availed input tax credit under the earlier VAT regime was treated as a substantive entitlement that should not be denied merely for failure to file the prescribed transition declaration under the GST framework. The Court held that the procedural requirements in Section 140 read with Rule 117 were mandatory in form, but directed that the underlying eligibility of the credit must still be verified, including whether it had been lawfully earned under the Tamil Nadu Value Added Tax Act, 2006 and supported by original invoices. The assessment order was set aside for limited fresh adjudication after such verification.

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Issues: (i) whether input tax credit earned under the Tamil Nadu Value Added Tax Act, 2006 could be transitioned and utilised under the GST regime despite non-compliance with the prescribed declaration procedure; (ii) whether the impugned assessment order was liable to be set aside and the matter remitted for verification of the validity of the credit.

Issue (i): whether input tax credit earned under the Tamil Nadu Value Added Tax Act, 2006 could be transitioned and utilised under the GST regime despite non-compliance with the prescribed declaration procedure.

Analysis: The credit earned under the earlier VAT regime was treated as indefeasible once validly availed. The procedural requirement under Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017 read with Rule 117 of the Tamil Nadu Goods and Services Tax Rules, 2017 was held to be mandatory in form, but the Court emphasised that a mere procedural lapse in filing the transition declaration should not defeat a valid substantive credit, particularly when no lapse provision was shown to apply. The Court also noted that such credit could not be denied without examining whether it was lawfully earned under the earlier statute.

Conclusion: The credit was not held to be barred merely because it was not transitioned in the prescribed manner, and it could not be denied if it was otherwise validly availed under the earlier VAT law.

Issue (ii): whether the impugned assessment order was liable to be set aside and the matter remitted for verification of the validity of the credit.

Analysis: The Court found it necessary to verify whether the petitioner had validly availed input tax credit under Section 19 of the Tamil Nadu Value Added Tax Act, 2006 and whether the supporting original invoices established entitlement to transition under Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017. The assessment order was therefore set aside only for that limited purpose, with a direction for fresh adjudication after verification.

Conclusion: The impugned order was set aside and the matter was remitted for fresh consideration on merits after verification.

Final Conclusion: The petitioner obtained relief against the assessment order, but the substantive entitlement to transition of input tax credit was left to be re-determined by the assessing authority after factual verification.

Ratio Decidendi: A validly availed input tax credit under the earlier VAT regime cannot be denied merely for procedural non-compliance in transition, and entitlement must be tested on the legality of the underlying credit and statutory verification.

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