2024 (10) TMI 1604 - HC - GST

Madras HC quashes denial of input tax credit refund under Section 142(6) TNGST Act 2017

The Madras HC allowed the petition challenging denial of input tax credit refund under Tamil Nadu VAT regime. The petitioner had debited pre-deposit ... Refund of pre-deposit/input tax credit - adjustment versus refund of excess input tax credit - compliance with court direction by debiting input tax credit - validity of departmental circular as a bar to refund - transitional provision under the TNGST Act, 2017 (Section 142(6))Refund of pre-deposit/input tax credit - adjustment versus refund of excess input tax credit - transitional provision under the TNGST Act, 2017 (Section 142(6)) - Impugned intimations dated 25.11.2021 denying refund of amounts debited from input tax credit pursuant to the Court's order are not sustainable and are quashed; petitioner entitled to refund or adjustment in accordance with law. - HELD THAT: - The Court held that the substantial question of law on inclusion of freight and pumping charges had been decided in the petitioner's favour and that the Revision Orders dated 14.09.2021 recorded entitlement to refund of the pre-deposit made by debiting input tax credit. The Department could not, at a belated stage, invoke the earlier circular to deny refund where the pre-deposit had been accepted through returns and the revision proceedings had culminated in release of the deposit. Further, the transitional scheme under the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017, specifically Section 142(6)(a) and (b), contemplates that amounts of credit found admissible under the existing law are to be refunded in cash and that recoveries, if any, are to be treated under transitional provisions; thus the intimations seeking to deny refund were contrary to the statutory transitional mandate and liable to be quashed with consequential reliefs. [Paras 32, 34, 35, 36, 37]Impugned intimations dated 25.11.2021 quashed; respondents directed to refund the amount within 30 days or adjust as authorised by law.Compliance with court direction by debiting input tax credit - refund of pre-deposit/input tax credit - Petitioner's deposit by debiting input tax credit pursuant to the Court's order of 25.03.2015 constituted compliance with that order and could not be treated as non-compliance to refuse refund. - HELD THAT: - The Court found there was no dispute that the petitioner complied with the directions in the writ petitions of 2015 by making the pre-deposit through debiting its input tax credit and by filing the requisite reply. Having accepted the pre-deposit in the VAT returns and having the subsequent revision orders in favour of the petitioner, the Department was not entitled to contend that the mode of pre-deposit rendered the petitioner ineligible for refund. The respondents could not now allege non-compliance with the earlier order to avoid refund. [Paras 6, 29, 33]Deposit by debiting input tax credit satisfied the Court's direction and cannot be used as a basis to deny refund.Validity of departmental circular as a bar to refund - refund of pre-deposit/input tax credit - The departmental circular (Circular No.05/2015) cannot be invoked at a belated stage to deny refund where the statutory and transitional provisions and the Court's orders require refund or adjustment. - HELD THAT: - The Court examined the respondents' reliance on the Circular issued pursuant to an earlier order in W.P.No.7094 of 2013 and concluded that reliance on that circular to deny refund after acceptance of the pre-deposit in returns and after revision orders favorable to the petitioner was untenable. The circular could not override the statutory transitional scheme under Section 142(6) of the TNGST Act, 2017, which mandates refund of amounts of credit found admissible under the existing law, subject to the limited proviso regarding carried-forward balances. [Paras 12, 20, 32, 36]Departmental circular cannot be used to deny refund; intimations based on it are quashed.Final Conclusion: Writ petitions allowed; impugned intimations dated 25.11.2021 quashed and respondents directed to refund the amounts debited from input tax credit (or adjust as permissible) within thirty days, with no order as to costs. Issues Involved:1. Denial of refund of input tax credit debited as a pre-deposit.2. Inclusion of freight and pumping charges in the taxable value of Ready Mix Concrete (RMC).3. Compliance with the court's order regarding pre-deposit and refund.4. Applicability of transitional provisions under the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017.Issue-wise Detailed Analysis:1. Denial of Refund of Input Tax Credit:The petitioner challenged the denial of a refund of input tax credit debited as a pre-deposit for Assessment Years 2004-2005, 2005-2006, and 2006-2007. The petitioner had complied with the court's order dated 25.03.2015 by depositing the amount through input tax credit. However, the respondents, invoking a circular, denied the refund. The court found that the denial of refund was unjustified, especially since the substantial questions of law were decided in favor of the petitioner in a previous judgment dated 13.12.2018.2. Inclusion of Freight and Pumping Charges:The core dispute revolved around whether freight and pumping charges should be included in the taxable value of RMC. Initially, the petitioner's stance that these charges were post-sale activities was accepted, but later revised orders sought to include them. The Division Bench of the court, in its order dated 13.12.2018, ruled that such charges, when separately charged, cannot be included in the sale price. This decision was based on established precedents, including rulings by the Supreme Court.3. Compliance with Court's Order:The court had earlier directed the petitioner to deposit 10% of the tax amount, which the petitioner did by debiting from the input tax credit. The respondents argued that this did not constitute proper compliance. However, the court held that having accepted the pre-deposit through input tax credit, the respondents could not now deny the refund. The court emphasized that the petitioner had complied with the order, and the respondents' stance was inconsistent with the earlier acceptance of the deposit method.4. Transitional Provisions Under TNGST Act, 2017:The court addressed the applicability of transitional provisions under the TNGST Act, 2017. It highlighted that as per Section 142(6)(a) and (b), amounts paid as pre-deposit should be refunded in cash. The court noted that the TNGST Act, 2017, replaced the TNVAT Act, 2006, and the amounts debited under the VAT regime should be either refunded or adjusted under the new GST regime. The court concluded that the respondents' reliance on the circular to deny refund was inappropriate, given the statutory provisions favoring refund.Conclusion:The court quashed the impugned intimations dated 25.11.2021, which sought to deny the refund, and directed the respondents to refund the amount within thirty days. The writ petitions were allowed with consequential reliefs, affirming the petitioner's entitlement to the refund of the pre-deposited amounts.