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High Court of Judicature at Madras
R. BANUMATHI & T.S. SIVAGNANAM, JJ.
USA Agencies, rep. by its Proprietrix A. Umamaheswari, Salem District
Versus
The Commercial Tax Officer, Attur
W.P. Nos. 902, 1202, 2016, 2233, 3732, 4329 to 4331, 5766, 20302, 25124 and 26281 of 2009, 2832, 5385, 5386, 5770, 5955, 6790, 6791, 8717, 8718, 9175-76, 9462-63, 10027, 11715, 11724, 11726,12101 to 12103, 12502, 13442, 13468, 14461, 14732, 14993, 15475, 16639 of 2010, 24631, 25329, 25376 to 25380, 25777 to 25779 of 2011, 3736 to 3738, 31817, 31818, 31967 of 2012 & 16452, 16453, 16796, 16797, 16992, 16993, 17993 to 17995, 18161-62, 19313-14 of 2013
Decided On : 17-07-2013
The impugned provision of Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006 (TN VAT Act) prescribes modalities and time frame as regards availment or enjoyment of the Input Tax Credit (ITC) accrued on purchases. The Court held that Section 19(11) is not violative of Article 265 and 360A of the Constitution of India and is not liable to be struck down. The Court further held that Section 19(11) is not inconsistent with the Charging Section sub-section (2) of Section 3 and is not inconsistent with the scheme of the Act like Sections 21, 22, 27 and 29 of TN VAT Act. The Court also held that Section 19(11) is mandatory and not directory.
Fact of the Case:
None
Finding of the Court:
1. Section 19(11) of TN VAT Act is not violative of Article 265 and 360A of the Constitution of India and is not liable to be struck down. 2. Section 19(11) is not inconsistent with the Charging Section sub-section (2) of Section 3 and is not inconsistent with the scheme of the Act like Sections 21, 22, 27 and 29 of TN VAT Act. 3. Section 19(11) is mandatory and not directory.
Issues: 1. Whether Section 19(11) of TN VAT Act is violative of Article 265 and 360A of the Constitution of India and is liable to be struck down? 2. Whether Section 19(11) is to be struck down on the ground that Section 19(11) is inconsistent with the Charging Section sub-section (2) of Section 3 and whether Section 19(11) is inconsistent with the scheme of the Act like Sections 21, 22, 27 and 29 of TN VAT Act? 3. Whether Section 19(11) is only directory and not mandatory?
Ratio Decidendi: 1. The Court held that Section 19(11) of TN VAT Act is not violative of Article 265 and 360A of the Constitution of India and is not liable to be struck down because: a) The impugned provision prescribes modalities and time frame as regards availment or enjoyment of the ITC accrued on purchases. b) The Legislature consciously wanted to set up a time frame for availment of ITC before the end of the financial year or ninety days from the date of purchase whichever is later. c) Section 19(11) being part of Section 19, to avail ITC, the conditions thereon are to be strictly complied with. d) Section 19(11) is a pre-condition for availing ITC. e) The Legislature consciously enacted Section 19(11) of TN VAT Act with avowed object of incorporating the time frame for availing ITC before the end of financial year or ninety days from the date of purchase whichever is later. f) The provision is for safeguarding the interest of the revenue and to prevent the cascading effect of tax burden on the ultimate consumer. 2. The Court held that Section 19(11) is not inconsistent with the Charging Section sub-section (2) of Section 3 and is not inconsistent with the scheme of the Act like Sections 21, 22, 27 and 29 of TN VAT Act because: a) Section 3(3) provides for ITC and Section 19 is the machinery for effectuating the ITC. b) Section 19(11) being part of Section 19 which is the mechanism for working out ITC, cannot be said to be merely procedural. c) Section 19(11) actually relaxes the rigour of Rule 7 under which the registered dealer is required to furnish correct and complete details of ITC on or before 20th of succeeding month. d) Section 19(11) not only effectuates the provision of the Act, but is also more in the nature of the beneficial to registered dealer. e) Section 19(11) does not operate as an embargo for claiming ITC. f) When assessment or revision of assessment is made under Sections 22, 24, 27, 28 or 29 of the Act, Section 19(11) does not operate as an embargo for claiming ITC. 3. The Court held that Section 19(11) is mandatory and not directory because: a) The Legislature consciously prescribed a time frame for availment of “ITC” accrued on purchases before the end of the financial year or 90 days from the date of purchase, whichever is later. b) Section 19 is a pre-condition for availment of “input tax credit”. c) When Section 19(11) is a pre-condition for availing ITC, it is to be strictly complied with and the petitioners cannot contend that there ought to have been flexibility in the time frame for availing “ITC”.
Final Decision: All the writ petitions are dismissed holding that Section 19(11) is a valid piece of legislation, cannot be struck down as being either unreasonable or discriminatory and violative of Article 265 and 360A of the Constitution of India.
R. Banumathi, J. & T.S. Sivagnanam, J.
1. Challenge in these writ petitions is the vires of Section 19(11) of Tamil Nadu Value Added Tax Act, 2006 (for short “TN VAT Act”) which prescribes modalities and time frame as regards availment or enjoyment of the Input Tax Credit as being inconsistent with Section 3 and the general scheme of TN VAT Act as being arbitrary and irrational infringing the rights of the petitioners under Article 14 and 19(1)(g) of the Constitution of India.
2. In the other set of writ petitions, petitioners seek for Writ of Certiorarified Mandamus to quash the orders/show cause notices issued by the concerned Assessing Authority denying the Input Tax Credit taken in the revised returns invoking Section 19(11) of TN VAT Act.
3. Petitioners are carrying on business in various goods and are registered dealers under the provisions of TN VAT Act. Petitioners are periodically filing returns as per the provisions of TN VAT Act and the Rules thereon. Petitioners filed return and the same was not accepted by the Authorities on one ground or the other. The petitioners who are registered dealers filed revised return rectifying the mistakes in the return already filed claiming Input Tax Credit. The same was denied invoking the provisions of Section 19(11), which provides that if the registered dealers fail to claim the 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 purchase, whichever is later.
4. According to petitioners there is no rule “prescribed regarding the manner” for the tax reduced under Section 3(3) and “manner” will not include time limit, but indicates mode of doing and Section 19(11) cannot whittle down the substantive right. Petitioners contend that Sections 20, 21, 22 and 25 of TN VAT Act, which deal with “assessment of tax”, “filing of returns”, “procedure to be followed in assessment” do not provide for any time limit. While so, the time limit for securing Input Tax Credit under Section 19(11) of TN VAT Act is irrational and arbitrary. Section 19(10)(a) of TN VAT Act gives legal right to Input Tax Credit on receipt of tax invoice and Section 19(10)(a) and Rule 10(2) does not give time limit; whereas Section 19(11) of TN VAT Act prescribes time limit which is arbitrary and irrational offending Article 14 of the Constitution of India and has no nexus to any object of law. While the relevant provisions for assessment does not prescribe the time limit for assessment, Section 19(11) fixes time limit in an arbitrary manner. Contending that Section 19(11) is unworkable and is inconsistent with the general scheme of the Act, petitioners have challenged the vires of Section 19(11) of TN VAT Act.
5. Respondents resisted the writ petitions contending that there is nothing unreasonable or arbitrary in prescribing the time limit for claiming Input Tax Credit in respect of any transaction of taxable purchase. Since intention of the Legislature is to avoid misuse and tax evasion, the time limit prescribed under Section 19(11) of TN VAT Act for claiming Input Tax Credit cannot be termed as unreasonable restrictions. If indefinite period is allowed, it is likely to be misused apart from the fact that after the lapse of long time, the related transactions cannot be verified.
6. We have heard Mr.C.Natarajan, learned Senior counsel, Mrs.R.Hemalatha, Mr.S.P.Asokan, Mr.Pramodkumar Chopda, Mr.V.Sundareswaran, Krishna Srinivas and Mr.P.Rajkumar, learned counsels appearing for the petitioners and the other learned counsels who adopted the arguments of the learned Senior Counsel.
7. Submissions:-The learned Senior Counsel Mr.C.Natarajan interalia contended as follows:- That sub-sections (2) and (3) of Section 3 of the VAT Act together constitute the charging section regarding the scheme of tax levy on the sale of goods specified in Part B or Part C of the First Schedule to the Act. The
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