IMPORTANT POINTS
Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 and Rule 10(9)(a) of the Tamil Nadu Value Added Tax Rules, 2007 are not unconstitutional.
Input Tax Credit (ITC) is a form of concession, cannot be claimed as a matter of right.
In cases where a dealer makes sales exclusively to the other State Government(s), benefit of ITC would be allowed without insisting on the furnishing of Form ‘C’. However, in order to avail this benefit, a certificate from said the State Government to whom the supplies are made would be obtained by the dealer claiming ITC and submitted to the VAT authorities.

JUDGMENT :

A.K. Sikri, J.

Leave granted.

2. This group of eleven appeals was heard together and is being disposed of by this common judgment as identical issues are involved in all these appeals.

3. At the outset, the issues involved in the present appeals are: whether Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006, Act No. 32/2006 (hereinafter referred to as “TNVAT Act”) and Rule 10(9)(a) of the Tamil Nadu Value Added Tax Rules, 2007 (hereinafter referred to as “Rules”) are ultra vires of Articles 14, 19(1)(g), 256 and 301 of the Constitution of India as also the Central Sales Tax Act (hereinafter referred to as “CST Act”) and whether Notice dated August 16, 2018 of the Revenue is liable to be quashed?

4. The instant appeals have been preferred against the common impugned judgment of the High Court of Judicature at Madras dated October 29, 2014 (hereinafter referred to as “Impugned Judgment I”) in the writ petitions which were filed by the appellants and the impugned judgment dated 17th November, 2017 of the High Court of Judicature at Madras (hereinafter referred to as “Impugned Judgment II”) in W.P. No. 29393 of 2017.

5. The brief facts leading to the cases are as follows:

6. All the appellants herein are the Assessees under the TNVAT Act and are duly registered on the file of their respective Jurisdictional Commercial Officers.

7. On January 17, 2005, a White Paper was released by the Committee of Finance Ministers (hereinafter referred to as “White Paper”), making it clear that Input Tax Credit (hereinafter “ITC”) would be available to set-off against tax liability on all intra-state and inter-state sales. Paragraph 2.3 of the same states as follows:

“Coverage of Set-Off / Input Tax Credit

2.3 This input tax credit will be given for both manufacturers and traders for purchase of inputs/supplies meant for both sale within the State as well as to other States, irrespective of when these will be utilised/sold. This also reduces immediate tax liability.

Even for stock transfer/consignment sale of goods out of the State, input tax paid in excess of 4% will be eligible for tax credit.”

8. Thereafter, on December 15, 2006, the TNVAT Act was enacted under List II, Entry 54 of the Constitution of India and notified in the Official Gazette after receiving assent of the Governor (on December 14, 2006), to consolidate and amend the law relating to the levy of tax on the sale or purchase of goods in the State of Tamil Nadu. Section 19(5)(c) of the same read as follows:

“No input tax credit shall be allowed on the purchase of goods sold as such or used in the manufacture of other goods and sold in the course of inter-State trade or commerce falling under sub-section (2) of section 8 of the Central Sales Tax Act, 1956. (Central Act 74 of 1956).”

9. Thereafter, on January 01, 2007, the Government of Tamil Nadu, in exercise of its powers under Section 80(1) of the TNVAT Act, notified the Rules vide Notification No. SROA-(ai1)/2007 G.O.M.S. No. 1. Rule 10(9)(a) of the same states as follows:

“Input tax credit on inter-state sales shall be allowed only if Form C prescribed in the Central Sales Tax (Registration and Turnover) Rules, 1957 is filed.”

10. After the Assessment was completed for the appellants for Assessment Year 2007-08, they received Show Cause Notices from the Revenue in and around 2013, proposing to reverse the ITC claimed made by them on the ground that they had not filed the Declaration Form C for the purpose of availing the concessional rate of tax. The appellants paid the differential tax arising out of the Assessment order for 2007-08 as well as the amount relating to proportionate ITC under process.

11. Consequently, on 16th August, 2013, the Revenue issued Impugned Notice in TIN 33450460109/2007-08 proposing to deny the ITC credit availed against the transactions for which Form C were not filled, and reversing credit on in