Reversal of ITC

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Dear All,

Dealer registered under Tamilnadu VAT Act has received notice from assessment circle proposing them to reverse ITC on goods stock transferred to other States, under Section 19(4) of TNVAT Act. While provisions exist for reversal @ 5%, stand taken by the department to reverse ITC on entire amount (not only locally purchased goods, which are stock transferred) appears to be incorrect. I request views/Circulars/Case laws which support this view that ITC reversal is to be done only for goods which are locally purchased by the dealer and not entirely. Also, any precedents on this will help! Thanks.

AI Summary

Reversal of Input Tax Credit: whether ITC should be reversed only for locally purchased goods transferred interstate. Reversal of Input Tax Credit is contested where a dealer was proposed to reverse ITC on goods stock transferred interstate; the department seeks reversal of the entire claimed ITC rather than limiting reversal to input tax on locally purchased goods constituting the transferred stock, raising the issue whether ITC reversal scope is confined to locally purchased inputs tied to the transfer or extends to the dealer's entire credit balance.