Reversal of ITC under TNVAT

[Raam Srinivasan Swaminathan Kalpathi]

My client with export turnover constituting about 75% of the aggregate turnover, has received a Notice on 22-02-24 from the TNVAT department seeking reversal of ITC u/s.19(5)(c) of TNVAT Act, 2006 for failure to produce 'C' Forms on inter-state sales from registered dealers for the financial year 2013-14. Although we had remitted the CST at the rate prevailing for local sales (i.e. higher rate) this anachronistic provision in the TNVAT Act continued till 31-03-2015. The SC in the case TVS Motor Company Ltd had passed judgment validating the vires of Sec.19(5)(c).

Even though all the dealers (customers) are registered, none of them issued 'C' Forms and this violates provisions of Sec.8(4) of CST Act.

Further the amount involved is not significant - around Rs.2.10 lakhs and the client wants resolution without knocking at the doors of higher judicial forums.

Further-more, we had uploaded TRAN-1 ITC in December 2017 of around Rs.6.50 lakhs and GST audit for the period 2017 to 2020 was conducted and stands resolved as on date. The month on month, SGST credit ledger balance has consistently been hovering around Rs.50 lakhs till date.

My query can I suggest reversal of SGST balance of Rs.2.10 lakhs in February 2023 3B Returns and seek resolution with the TNVAT department or is there any approach to be adopted?

Profuse thanks and regret the lengthy narrative.

[Shilpi Jain]

There is a demand under TNVAT now?

Is the demand not time barred?

[Raam Srinivasan Swaminathan Kalpathi]

No Madam.  The Notice seeking reversal of ITC is not time barred as the provisions of Sec.27 of TNVAT Act, 2006 provides a time limit of 6 years from the date of assessment.  In the client's case the assessment was completed in the year 2019.  Therefore this Notice cum demand is not time-barred.

Further the Notice only seeks to reverse ITC of Rs.2.10 lakhs and there is no other associated demand like Interest or penalty.

Thanks

[emma agro]

If goods are sold or disposed of or destroyed then entire input tax credit shall be reversed. No time limit is specified for issuing Core Ball the certificate by the purchaser. Such a certificate may be relied on by the seller at the time of his assessment by the authorities. allows dealers to take Input Tax Credit (ITC) of local taxable purchases made by him. Previously, ITC was allowed of the amount of tax paid or payable under the Act. Now, this has been changed to 'paid'.

[Raam Srinivasan Swaminathan Kalpathi]

The reply by 'emma agro' is completely out of context.  This issue we are discussing is reversal of ITC under TNVAT for violation of provisions of Sec.19(5)(c) of TNVAT Act, 2006 read with Sec.8(4) of CST Act. and the  modus operandi to resolve the issue without much collateral damage.

[Shilpi Jain]

What I understand the precise query is whether ITC can be used to pay off the demand under TNVAT.

There was initially some dispute whether pre-deposit can be made with GST ITC.  This matter has contradictory decisions including a favourable decision.

By Circular No. 172/04/2022-GST dated 6th July, 2022, the CBIC clarified:

that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.

By Circular No. 172/04/2022-GST dated 6th July, 2022, the CBIC clarified:

that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.

Dell International Services India Pvt Ltd Vs Commissioner of Central Tax - 2019 (1) TMI 1033 - CESTAT BANGALORE, the CESTAT allowed pre-deposit in a service tax case to be made from CGST Credit

WHen a pre-deposit can be allowed to be made for a case relating to erstwhile taxes, then demand also should be allowed to be paid. 

However, it is suggested to write to the officer along with references of these cases and then take appropriate steps.

[Raam Srinivasan Swaminathan Kalpathi]

Thanks Madam.  Most obliged.

[Ganeshan Kalyani]

I agree with the views of the expert.

AI Summary

Exporting Client Faces ITC Reversal Under TNVAT Act for Missing 'C' Forms; Exploring Non-Litigation Solutions A client, whose export turnover is 75% of their total turnover, received a notice from the TNVAT department to reverse Input Tax Credit (ITC) under Section 19(5)(c) of the TNVAT Act, 2006, due to failure to produce 'C' Forms for inter-state sales for the financial year 2013-14. The notice is not time-barred as it falls within the six-year limit from the 2019 assessment. The client seeks resolution without litigation, considering the amount involved is Rs. 2.10 lakhs. The forum discusses whether ITC can be used to settle this demand, referencing relevant circulars and legal precedents.