Retrospective input tax credit restriction rejected for accrued VAT entitlement, while broken-bottle credit claim failed on proof of stock position.

A substantive VAT amendment withdrawing input tax credit on coolers and refrigerators for soft drink manufacturers was treated as prospective, because an accrued credit entitlement cannot be taken away retrospectively unless the legislative intention is clear. The court also examined the claim for broken glass bottles and held that credit was not established on the stock position proved; the FIFO theory was not accepted on the facts. The result was partial relief: input tax credit remained admissible for coolers and refrigerators, while the broken-bottle claim failed.

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Issues: (i) Whether the amendment inserting Rule 20(2)(n) of the Andhra Pradesh Value Added Tax Rules, 2005, denying input tax credit on coolers and refrigerators purchased by soft drink manufacturers, operated retrospectively so as to deprive the dealer of an accrued entitlement; (ii) whether input tax credit was admissible on the claim relating to broken glass bottles and whether the FIFO principle could be invoked to sustain that claim.

Issue (i): Whether the amendment inserting Rule 20(2)(n) of the Andhra Pradesh Value Added Tax Rules, 2005, denying input tax credit on coolers and refrigerators purchased by soft drink manufacturers, operated retrospectively so as to deprive the dealer of an accrued entitlement.

Analysis: The right to claim input tax credit under the transitional and business-use provisions of the VAT regime was treated as an accrued benefit once tax had been paid on eligible purchases. The amendment was examined against the settled principles governing retrospectivity, including the presumption against retrospective operation, the distinction between clarificatory and substantive amendments, and the rule that vested or accrued rights are not taken away retrospectively unless the statute clearly so provides. The Court held that the impugned amendment was not merely clarificatory and could not be applied to extinguish the dealer's existing entitlement in respect of coolers and refrigerators purchased for business use.

Conclusion: The amendment could not be applied retrospectively against the assessee, and input tax credit on coolers and refrigerators was held admissible.

Issue (ii): Whether input tax credit was admissible on the claim relating to broken glass bottles and whether the FIFO principle could be invoked to sustain that claim.

Analysis: The claim relating to broken bottles was tested on the basis of the stock position and the nature of the goods. The Court accepted that the bottles on which credit was claimed were not shown to have remained in closing stock in the manner required for the relief sought. The FIFO theory was not accepted on the facts proved, and the broken bottles were not treated as eligible goods for the claimed relief.

Conclusion: The claim relating to broken glass bottles was rejected and was held against the assessee.

Final Conclusion: The revision succeeded only in part: the assessee obtained relief on the cooler and refrigerator component, while the balance claim, including the claim based on broken bottles, did not survive.

Ratio Decidendi: A substantive amendment cannot retrospectively take away an accrued input tax credit unless the legislative intent to do so is clear, but a credit claim must still be supported by the statutory conditions and proved stock position for the goods in question.

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