TaxTMI 
TaxTMI 
2018 (7) TMI 1355
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the facts set out therein are taken up for consideration to decide the writ petitions. 3.The assessee is a manufacturer of automobile tyres and tubes and allied products in the State of Tamil Nadu. They also have units in other States and Union Territories in the Country. During the course of its business, the assessee purchased requisite raw-materials either from local registered dealers or by way of import or by way of stock transfer. The assessee is registered as a dealer on the file of the respondent, Large Taxpayers Unit under the provisions of the TNVAT Act and Central Sales Tax Act, 1956 (hereinafter referred to as the CST Act). The assessee purchases various capital goods to be used in its business by paying applicable VAT on the same. The assessee relies upon Section 19(3) of the TNVAT Act for claiming input tax credit on the VAT paid in respect of the capital goods. 4.It is the assessees case that in terms of Section 19(3)(b) of the TNVAT Act, a dealer can utilise the input tax credit on capital goods over a period of three years from the date of commencement of commercial production as may be prescribed. In this regard, reference is made to Rule 10(4)(b) of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AT Act deals with conditions that are to be satisfied for the allowance of input tax credit under the Act. It is the submission that Section 19(11) is a general provision, which deals with the time limit for claiming input tax credit that is allowed as per the Act wherein it states that the credit must be claimed within the financial year or within ninety days from the date of taxable purchase, whichever is later. It is submitted that Section 19(11) of the TNVAT Act does not apply to capital goods that are covered by a different provision in Section 19(3) of the TNVAT Act altogether. 8.It is submitted that Section 19(3)(b) of the TNVAT Act states that deduction of such input tax credit shall be allowed only after the commencement of commercial production and over a period of three years in the manner as may be prescribed and after the expiry of three years, the unavailed input tax credit shall stand lapsed to Government. Further, Section 19(3) of the TNVAT Act gives the Government the power to make Rules in respect of input tax credit and the Rule being Rule 10(4)(a) of the TNVAT Rules, which clearly indicates that the intent of the legislature with regard to the claim of input ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h are mentioned in Clauses (a) to (j) in Rule 6(9) of the TNVAT Rules. 12.Insofar as claims of input tax credit on capital goods are concerned, a separate procedure is prescribed under Rule 6(10) of the TNVAT Rules wherein the assessee is required to maintain the register with particulars mentioned in Clauses (a) to (f) in Rule 6(10) of the TNVAT Rules. It is submitted that Section 64 of the TNVAT Act deals with maintenance of up-to-date, true and correct accounts and records by dealers. The manner of maintaining such account is as per the prescription in Rule 6 of the TNVAT Rules. 13.Referring to Section 64(5)(b) of the TNVAT Act, it is submitted that the Officer conducting the audit shall on no account remove or cause to be removed any books of accounts, other documents or stocks. Therefore, the accounts, which are required to be maintained by the assessee in terms of Rule 6(9) of the TNVAT Rules are required to be kept in the place of business of the assessee and cannot be removed by the Assessing Officer. 14.The learned counsel invited the attention of this Court to Form I, which is the Form in which the assessee is required to file the value added tax monthly returns.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al year or before ninety days from the date of purchase is also applicable to capital goods as per Section 2(24) of the TNVAT Act. In terms of the above provision, the credit claimed by the petitioner on the purchase of capital goods for the years 2011-12 and 2012-13 was found to be in violation of the provisions of the TNVAT Act and accordingly, had been reversed. 18.It is further submitted that credit has to be claimed in the month of purchase, failing which, it can be claimed within the extended period as per Section 19(11) of the TNVAT Act and this outer limit cannot be stretched to three years as per Rule 10(4) of the TNVAT Rules. The time limit prescribed is solely for the purpose of deduction of input tax credit as laid down in Section 19(3)(b) of the TNVAT Act and therefore, it is explicit that the provision of Section 19(11) alone is applicable, as the provision prescribes time limit for claim of input tax credit and not Rule 10(4) as claimed by the assessee. 19.It is further submitted that the validity of Section 19(11) of the TNVAT Act was put to challenge in a batch of cases as being inconsistent with Section 3 and the general scheme of TNVAT Act and as being arbi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....put tax means the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods including capital goods in the course of his business; .................... Section 19. Input tax credit. - (1) There shall be input tax credit of the amount of tax paid or payable under this Act, by the registered dealer to the seller on his purchases of taxable goods specified in the First Schedule : Provided that the registered dealer, who claims input tax credit, shall establish that the tax due on such purchases has been paid by him in the manner prescribed. Sec. 19(2) : Input tax credit shall be allowed for the purchase of goods made within the State from a registered dealer and which are for the purpose of (i) re-sale by him within the State; or (ii) use as input in manufacturing or processing of goods in the State; or (iii) use as containers, labels and other materials for packing of goods in the State; or (iv) use as capital goods in the manufacture of taxable goods. (v) sale in the course of inter-State trade or commerce falling under sub-section (1) of secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(2) of section 8 of the Central Sales Tax Act, 1956. Sec. 19(6) : No input tax credit shall be allowed on purchase of capital goods, which are used exclusively in the manufacture of goods exempted under section 15: *[Provided that on the purchase of capital goods which are used in the manufacture of excepted goods and taxable goods, input tax credit shall be allowed to the extent of its usage in the manufacture of taxable goods in the manner prescribed.] Note : *Proviso was added by Act 21/2007 Gazette Extraordinary dated 08.06.2007 Effective from 01.01.2007 (Retrospective.) Sec. 19(7) : No registered dealer shall be entitled to input tax credit in respect of- Sec. 19(7)(a) : goods purchased and accounted for in business but utilised for the purpose of providing facility to the proprietor or partner or director including employees and in any residential accommodation; or Sec. 19(7)(b) : purchase of all automobiles including commercial vehicles, two wheelers and three wheelers and spare parts for repair and maintenance thereof, unless the registered dealer is in the business of dealing in such automobiles or spare parts; or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claimed input tax credit based on such invoice, bill or cash memorandum from such date. Sec. 19(14) : Where the business of a registered dealer is transferred on account of change in ownership or on account of sale, merger, amalgamation, lease or transfer of the business to a joint venture with the specific provision for transfer of liabilities of such business, then, the registered dealer shall be entitled to transfer the input tax credit lying unutilized in his accounts to such sold, merged, amalgamated, leased or transferred concern. The transfer of input tax credit shall be allowed only if the stock of inputs, as such, or in process, or the capital goods is also transferred to the new ownership on which credit has been availed of are duly accounted for, subject to the satisfaction of the assessing authority. Sec. 19(15) : Where a registered dealer has purchased any taxable goods from another dealer and has availed input tax credit in respect of the said goods and if the registration certificate of the selling dealer is cancelled by the appropriate registering authority, such registered dealer, who has availed by way of input tax credit, shall pay the amount av....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be prescribed in any of the languages specified in the Eighth Schedule to the Constitution or in English, showing such particulars as may be prescribed and different particulars as may be prescribed for different classes of dealers. Sec. 64(2)(a) : Every registered dealer shall keep at the place of business specified in the certificate of registration, books of account for the current year. If more than one place of business in the State is specified in the certificate of registration, the books of account relating to each place of business for the current year shall be kept in the place of business concerned. Sec. 64(2)(b) : Every registered dealer shall also ordinarily keep the books of account for the previous five years at such place or places as he may notify to the registering authority. If the registered dealer decides to change the place or places so notified, he shall, before effecting such change, notify the same to the registering authority. Sec. 64(3) : Every registered dealer or person who moves goods in pursuance of a sale or purchase or otherwise from one place to another shall send along with the goods moved a bill of sale or delivery note....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f commencement of the business; or (iii) within thirty days from the date of installation of the software application used to maintain accounts in electronic form, as the case may be:; Provided also that the modification, deletion or addition of features of the Accounting or Enterprise Resource Planning software application, if any, shall be informed to the registering authority within thirty days from the date of such modification, deletion or addition.; R.6(2)(a) : Every dealer shall maintain accounts showing purchases and sales. R.6(2)(b) : The purchase account maintained by registered dealer shall contain the following particulars, namely - (i) Invoice No. and date with sellers Taxpayer Identification Number; (ii) Description of the goods purchased; (iii) Value of purchase of exempted goods; (iv) Value of the goods purchased from registered dealers with rate of tax; (v) Value of the goods purchased from unregistered dealers with rate of tax; (vi) Value of goods purchased from outside the State by issue of C Forms as prescribed under the Central Sales Tax (Registration and Turnover) Rules, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es industrial inputs to use them in manufacture of taxable goods shall issue a certificate to the seller containing the details of his Taxpayer Identification Number, the details of goods purchased, details of goods manufactured and the name and address and Taxpayer Identification Number of the seller. R.6(4) : Every registered dealer shall issue bill or invoice for each sale in triplicate showing the particulars of goods and quantity sold with its value, one copy of which must be retained for check by the officials of the Commercial Taxes Department. The invoice shall contain the rate and tax charged, the Taxpayer Identification Number of the seller and that of the buyer, in case the buyer is a registered dealer. R.6(5) : Every registered dealer, who effects sales through agents shall maintain the accounts of goods consigned on each occasion, agent-wise showing the particulars of name and full address of the agent, nature and quantity of goods dispatched and details of the mode of dispatch and delivery note. He shall also maintain the originals of the written contract, if any, entered into between him and the agent, office copies of the authorisation letter, cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an input tax adjustment account with the following particulars, namely:- (a) Month ; (b) Input tax credit brought forward; (c) Input tax paid during the month; (i) at 1%; (ii) at 4%; (iii) at 12.5%; (d) Reversal of input tax credit; (e) Total input tax credit; (f) Ineligible input tax credit; (g) Net input tax credit claimed; (h) Output tax; (i) Advance tax adjusted including entry tax; (j) Tax payable. R.6(10) : Every registered dealer who claims input tax credit on capital goods shall maintain input tax adjustment account with the following particulars, namely:- (a) Month; (b) Date of commencement of commercial production; (c) Value of capital goods; (d) Rate of tax; (e) Tax paid; (f) Tax credit availed - First year (not exceeding fifty per cent) Second year Third year. *[R.6(11) : Accounts maintained by a registered dealer shall be preserved by him for a period of 1[six] years from the date of assessment.] *Note : Rule 6(11) was substituted by G.O.Ms.No.83, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... registered dealer, other than those who opt to pay tax under sub-section (4) of section 3 or section 6 or section 8, who claims input tax credit for other than capital goods purchased on or after 1st January 2006 held in stock on the commencement of the Act, shall submit a stock inventory statement in Form V in duplicate along with photostat copy of related purchase invoice or bill within thirty days from the date of commencement of the Act. R.10(3)(b) : In the case of claim of input tax credit for other than capital goods purchased on or after 1st January 2006, held in stock on the commencement of the Act ,-- R.10(3)(b)(i) : Where the purchase has been effected from first seller in the State with invoice or bill showing the tax separately, the claim for input tax credit shall be allowed to the extent of the tax paid by him on the value of such goods; R.10(3)(b)(ii) : Where the purchases have been effected from second and subsequent dealer, the claim for input tax credit shall be restricted to the extent of the tax calculated on the purchase value of goods after deducting fifteen per cent and by using the tax fraction formula at the rate specified in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the input tax credit in the same financial year and the balance of the input tax credit before the end of the third financial year, provided the said capital goods are in possession of the dealer. After the expiry of the third financial year, the un availed input tax credit, if any, shall lapse to Government: Provided that a registered dealer who makes purchase of parts and accessories for capital goods already purchased and use in manufacture of taxable goods is entitled to input tax credit relating to such goods in the month of purchase or thereafter. R.10(4)(c) : The registered dealer shall not be entitled to claim input tax credit on the capital goods purchased prior to the commencement of the Act. R.10(4)(d) : A registered dealer who manufactures goods, the sales of which are exempted under Section 15 of the Act is not entitled to input tax credit. 1[(e) A registered dealer who purchases and uses capital goods for the manufacture of both taxable and exempted goods shall be entitled to the input tax credit proportionately by applying the following formula. Total Amount of Input tax paid on Sales turnover of taxable goods the the pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ote without disturbing the tax component on the price in the original tax invoice, so as to retain the quantum of input tax credit already claimed by the buying dealers as well as not to disturb the tax already paid by the selling dealer. R.10(7)delete[(a) The principal is entitled for the input tax credit on those purchases which are transferred to the agent and sold by the agent on behalf of him. R.10(7)(b) : The principal is entitled for the input tax credit for those purchases effected by the agent on behalf of him.]delete *[(a) The principal is entitled for the input tax credit corresponding to the goods which are transferred to the agent and sold by the agent on behalf of him and such input tax credit is adjustable to any liability of the principal. (b) The principal is entitled for the input tax credit for those purchases effected by the agent on behalf of him with principals Taxpayer Identification Number and on such purchases, the agent cannot claim input tax credit.;]* R.10(7)(c) : The agent is not liable to pay tax on the sale of those goods which were received by him from the principal. R.10(8)(a) : The transferee claiming in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ose assessees for detailed scrutiny and pass appropriate orders. 24.In USA Agencies, (supra) one of the arguments advanced by the assessee was that Section 3(2) of the TNVAT Act makes it mandatory for the dealer to pay tax on every sale and the dealer as of rights is entitled to claim input tax credit and therefore, the input tax credit provided under sub-Section (3) of Section 3 is not a concession, but is an indefeasible right. Therefore, it was the submission that this substantiative right of claiming input tax credit cannot be curtailed by imposing restrictions like Section 19(11) of the TNVAT Act. This argument was rejected by the Division Bench in the said decision and it was held that the benefit of credit under the TNVAT Act is in the nature of concession given, which could be availed only in the manner and in the circumstances mentioned in Section 19. 25.The sheet anchor of the argument of Mr.M.V.Swaroop, is pitched on Sections 19(3) and 19(6) of the TNVAT Act read with Rules 10(4) and 10(4)(b) of the TNVAT Rules. Thus, it is submitted that capital goods have been treated differently and the statutory provisions are clear and Section 19(11) of the TNVAT Act would hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this intimation to the office of the Joint Commissioner (CT), Large Taxpayers Unit, Chennai and obtained an endorsement in the letter delivery book. It is not known as to why the Commercial Taxes Department still continues such an archaic practice of permitting the dealers to obtain acknowledgements for the documents submitted by them by endorsing in a letter delivery book. This procedure gives room for manipulation as has been seen by this Court in several writ petitions. The Commercial Taxes Department always take a stand that e-commerce has been best implemented in their Department. If such is the case, one fails to understand as to why still the Department continues to give acknowledgements in letter delivery book and the reason behind such practice though deprecated by the Courts in several orders, the respondent having denied receipt of the intimation, the Court is not inclined to accept the stand of the assessee that they have intimated about their commercial production to their Assessing Officer. 30.Having come to such a conclusion, it may not be necessary for this Court to dwell further upon the challenge to the impugned orders, as the mandatory requirement to be fulfil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before the end of the financial year or before ninety days from the date of whichever is later. 35.Section 19(11) does not carve out any distinction between the type of goods purchased by the dealer on which there is a claim for input tax credit, but refers to any transaction of taxable purchase in any month. Thus, if a dealer fails to claim input tax credit in respect of any transaction of taxable purchases, in any month, the legislature has given time to the dealer to make the claim before the end of the financial year or before 90 days from the date of purchase, whichever is later. 36.Section 2(24) of the TNVAT Act defines input tax to mean tax paid under the TNVAT Act in the manner prescribed by a registered dealer to another registered dealer on the purchase of goods including capital in the course of his business. Thus, the claim for input tax referred to in Section 19(11) includes the tax paid on the purchases of capital goods. Thus, Section 19(11) applies to all claims of input tax credit leviable / permissible under Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lain language of Section 19(11) of the Act, which provision has already been upheld. The argument that the petitioner has reflected the purchases in the input tax adjustment account maintained cannot make or extend the limitation prescribed under Section 19(11) of the TNVAT Act. 40.The prescription under Rule 6 of the TNVAT Rules is mandatory, which the dealer has to comply with. Therefore, such maintenance of input tax adjustment account can have no impact on the time limit prescribed in the statute for claiming input tax credit. Thus, the distinction, which has to be borne in mind is that Section 19(3) deals with entitlement and Section 19(11) deals with availment, which prescribes not only a procedure but also an outer time limit. Thus, the interpretation given by the respondent in the impugned order is perfectly valid and legal. 41.Mr.M.V.Swaroop, learned counsel, contended that in the present case, the Court is concerned with the interpretation of the phrase any transaction of taxable purchase appearing in Section 19(11) of the TNVAT Act, and whether the same applies to the purchase of capital goods. 42.Relying on the judgment of the Constitution Bench of the Hon'....