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.

AI Summary

Reversal of input tax credit may be settled by using the electronic credit ledger to discharge the demand administratively.
Reversal of ITC is sought under Sec.19(5)(c) TNVAT for failure to produce C Forms; the notice is not time barred. Administrative guidance allows utilisation of the electronic credit ledger to discharge output tax liabilities and demands. The practicable approach is to request the assessing officer to accept reversal by adjusting the SGST credit in returns or by formal correspondence proposing use of available credit to settle the ITC reversal and resolve the matter administratively.