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BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
D. KRISHNAKUMAR, R. VIJAYAKUMAR, JJ.
M/s. Thillai Agencies, Represented by its partner, S. Rajkumar, Virudhunagar - Appellant
Versus
State of Tamil Nadu, Represented by The Secretary to Government, Chennai & Ors. - Respondents
W.P(MD). No. 12333 of 2009 & MP(MD). No. 1 of 2009
Decided On : 24-01-2024
Input Tax Credit - Constitutional Validity of Section 19(15) of Tamil Nadu Value Added Tax Act 2006 - Section 19(15), Section 40 - The court discussed the provisions of Section 19(15) and Section 40 of the Act, highlighting the conditions for availing Input Tax Credit and the consequences of cancellation of the selling dealer's registration certificate. The court also referred to relevant judgments emphasizing strict compliance with statutory conditions for availing concessions and benefits under the Act.
Fact of the Case:
The petitioner, a registered dealer, challenged the constitutional validity of Section 19(15) of the Tamil Nadu Value Added Tax Act 2006, after the authorities proposed to reverse the Input Tax Credit claimed for the purchase of mobile phones due to the cancellation of the selling dealer's registration certificate.
Finding of the Court:
The court found that the petitioner failed to produce the original tax invoice from a registered dealer and therefore could not complain about the reversal of Input Tax Credit. The court also held that the notice for reversing the credit did not amount to double taxation, as the selling dealer had not paid tax after the cancellation of registration. The court dismissed the writ petition, stating that it was filed to delay the proceedings initiated by the authorities.
Issues: Constitutional validity of Section 19(15) of the Tamil Nadu Value Added Tax Act 2006, reversal of Input Tax Credit, alleged double taxation, compliance with statutory conditions for availing concessions and benefits under the Act.
Ratio Decidendi: Strict compliance with statutory conditions for availing concessions and benefits under the Act, consequences of cancellation of selling dealer's registration certificate, inadmissibility of plea for net purchase price after discount, lack of violation of constitutional provisions, dismissal of writ petition to delay proceedings.
Final Decision: The writ petition challenging the constitutional validity of Section 19(15) of the Tamil Nadu Value Added Tax Act 2006 was dismissed, and no costs were awarded. The connected miscellaneous petition was closed.
JUDGMENT
(Prayer: Writ Petition has been filed under Article 226 of Constitution of India to issue a writ of Declaration, declaring that Section 19(15) of Tamil Nadu Value Added Tax Act 2006 as unconstitutional and enforceable.)
R. VIijaykumar, J.
1. The present writ petition has been filed by a registered dealer under Tamil Nadu Value Added Tax 2006 challenging Section 19(15) of Tamil Nadu Value Added Tax 2006 as unconstitutional and unenforceable.
2. The facts leading to the filing of the writ petition are as follows:
(i) The petitioner is a registered dealer in mobile phones and he effected purchase of Nokia Mobile Phones from an authorised whole sale dealer namely M/s.Smart Trading Company, Madurai in September 2008. The petitioner had filed monthly returns in Form-I in the month of September for the assessment year 2008-2009 and claimed input tax credit for the purchase made during the relevant month.
(ii) On 11.03.2009, the third respondent had issued a notice proposing to reverse the Input Tax Credit claimed by the petitioner to the tune of Rs.1,04,673/- for the month of September 2008 on the ground that the registration of the selling dealer was already cancelled. According to the learned counsel for the petitioner, as per Section 19(10)(a) of the Tax Value Added Act, 2006, the only condition imposed for claiming input tax credit is to produce the original tax invoice. In the present case, though the petitioner had furnished the original tax invoice issued by the wholesale dealer namely M/s.Smart Trading Company Madurai, the same has not been accepted by the authorities on the ground that the registration of the selling dealer was already cancelled and was not subsisting on the date when the petitioner had effected purchase.
Contentions of the learned counsels:
3. According to the learned counsel for the writ petitioner, it is impossible to verify about the validity/subsistence of the registration of the selling dealer. He had further contended that the petitioner is a bonafide purchaser. In case, if the input tax credit is reversed, the tax paid towards the purchase effected by him will result in forfeiting under Section 40 of the Act. As a consequence of the impugned provision, for a single transaction, a tax would be levied at two points which is quite contrary to the object of Tamil Nadu Value Added Tax Act, 2006. He had further contended that the said provision is in violation of Article 14 and 301 of the Constitution of India.
4. The learned Additional Government Pleader appearing for the respondents relying upon his counter and contended that the registration of the whole sale dealer was cancelled on 21.04.2008 itself and the petitioner is said to have purchased from the said whole sale dealer in September 2008. He had further contended that the seller dealer is a non-existing dealer and thereby, assessing authority proposed to reverse the claim of Input Tax Credit to the extent of Rs.1,04,673/- under Section 19(16) of TNVAT Act 2006 by an audit notice dated 11.03.2009.
5. The learned Additional Government Pleader had contended that the audit notice issued on 11.03.2009 would not amount to double taxation, in view of the fact that the wholesale dealer ( whose registration has been cancelled) has not paid any tax at all. He had further contended that when the petitioner seeks to take advantage of Section 19 TNVAT Act 2006, he is bound to adhere to the condition imposed under the said section for availing Input Tax Credit. The petitioner has not chosen to send any reply to the notice dated 11.03.2009 and instead he had filed the present writ petition challenging Section 19(15) of the said Act.
6. The learned Additional Government Pleader further relied upon the judgement of the Hon'ble Supreme Court reported in (2016) 15 SCC 125 (Jayam and Company Vs. Assistant Commissioner and another) which was followed in (2019) 13 SCC 225 (Ald Automotive Private Limited Vs. Commercial Tax Officer now upgraded as Assistant Commissioner (C
Strict compliance with statutory conditions for availing concessions and benefits under the Act.
Non-compliance with Rule 38 of the Rules of 2006 can lead to the disallowance of input tax credit under Section 18 of the Act of 2003.
The claim of Input Tax Credit cannot be sustained when the selling dealer has not paid the tax to the Government despite collecting it from the purchasing dealer.
Input Tax Credit under GST is a concession, not an absolute right, subject to conditions including actual tax payment by suppliers and adherence to filing deadlines.
The court held that input tax credit cannot be denied based on the seller's retrospective registration cancellation when the transaction occurred while the seller was registered.
Input Tax Credit under GST is a conditional right, contingent on actual tax payment by suppliers, and Sections 16(2)(c) and 16(4) are constitutionally valid restricting eligibility based on complianc....
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