Madras High Court
Tvl.K.P.S.Oil Mills vs The Commercial Tax Officer on 19 July, 2021
W.P.No.11707 of 2014
and M.P.No.1 of 2014
;IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 19.07.2021
CORAM
THE HON'BLE Mr. JUSTICE S.M.SUBRAMANIAM
W.P.No.11707 of 2014
and
M.P.No.1 of 2014
Tvl.K.P.S.Oil Mills,
Represented by its Partner, K.Paramasivam,
117, Bhavani Road, Erode – 638 004. ...Petitioner
Vs
1.The Commercial Tax Officer,
Group-IV, Enforcement (South),
Chennai – 600 006.
2.The Joint Commissioner (CT),
(Enforcement), Coimbatore.
3.The Assistant Commissioner (CT),
Chithode Assessment Circle,
Chithode, Erode District. ... Respondents
PRAYER : Writ Petition filed under Article 226 of the Constitution of
India praying to issue a Writ of Certiorari, calling for the records on the
files of the 1st respondent in his proceedings in form – VSI-I and quash
the surprise inspection – report dated 17.03.2014, 18.03.2014 and
19.03.2014 as being without jurisdiction and authority of law and further
https://www.mhc.tn.gov.in/judis/
1
W.P.No.11707 of 2014
and M.P.No.1 of 2014
direct the 3rd respondent not to implement or use the inspection results
against the petitioner for the purpose of assessment / re-assessment.
For Petitioner : Mr.R.Senniappan
For Respondents : Mr.V.Nanmaran
Government Advocate
ORDER
The relief sought for in the present writ petition is to call for the
records on the files of the 1st respondent in his proceedings in form –
VSI-I and quash the surprise inspection – report dated 17.03.2014,
18.03.2014 and 19.03.2014 as being without jurisdiction and authority of
law and further direct the 3rd respondent not to implement or use the
inspection results against the petitioner for the purpose of assessment /
re-assessment.
2. With reference to the similar prayer, this Court has considered
the issues and passed an order dated 04.12.2019 in W.P.No.3172 of 2014
and the relevant paragraphs are extracted hereunder:
“2.This issue is now covered by a decision of this
Court in Interfit Techno Products Ltd. Vs Principal
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W.P.No.11707 of 2014
and M.P.No.1 of 2014
Secretary/Commissioner of Commercial Taxes, Ezhilagam,
Chennai and Another, (2015) 81 VST 389 (Mad).
3.In paragraph Nos.61 & 62, learned Single Judge has
summarised his views as follows:-
61. In the light of the above conclusion, the decision
relied on by the learned counsel for the petitioner in the
case of Binani Industries Limited v. Assistant
Commissioner of Commercial Taxes VI Circle,
Bangalore [2007] 6 VST 783 (SC) with regard to
reopening of the assessment does not render assistance
to the case of the petitioners. Accordingly Question No. 6
is answered against the petitioners.
62. In the result,
(1) the challenge to the impugned circular is held to be
unnecessary since the circular is a non statutory circular
and is in the nature of guideline and the prayer for
quashing the circular is rejected.
(2) Section 18 of the TNVAT Act is not an independent or
a separate stand alone provision under the provisions of
TNVAT Act but subject to other provisions of the Act
including Section 19 of the VAT Act.
(3) For the reasons assigned, it is not sufficient for a
dealer claiming refund under Section 18(2) of the Act to
show that he has paid input tax on the goods purchased;
that those goods are used in the manufacture and
nothing more but there is duty upon the dealer to satisfy
the Assessing Authority that the claim is not hit by any of
the restrictions or conditions contained under Section 19
of the VAT Act. In this regard, it is essential for the
Assessing Authority to embark upon the fact finding
exercise to ascertain the quantum of loss of the goods
which were purchased on which tax was paid vis-a-vis
the goods manufactured from and out of the goods
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W.P.No.11707 of 2014
and M.P.No.1 of 2014
purchased and to examine as to whether they fall within
any of the restrictions contained in Section 19 of the VAT
Act. The Assessing Officer has to conduct an exercise by
which it is to be ascertained as to whether the
representation made by the dealer is justified and is not
hit by any any of the restrictions and conditions
contained in Section 19 and in particular Section 19(9)
of the VAT Act.
(4) It is held that the Assessing Authorities are not
justified in adopting uniform percentage as invisible
loss and calling upon the dealer to reverse the input
tax credit availed to that extent. Consequently, all
notices issued to the petitioner for reopening and all
consequential order passed reversing the input tax
credit to the extent of either 4% or 5% or on adhoc
per centage stands set aside. However, liberty is
granted to the concerned Assessing Officer to issue
appropriate show cause notices to the petitioners
clearly setting out under what circumstances they
propose to revise or call upon the petitioner to reverse
refund sanctioned and after inviting objections
proceed in accordance with law.
(5) The undertaking given by the dealer in Form W is
with regard to information furnished for the purpose of
verification by the Assessing Officer under Rule 11(2) of
the VAT Rules for being entitled to refund under Section
18(2). Therefore, it is not as if the Act does not provide a
remedy in the event of a wrong or erroneous refund
sanctioned when Section 18 cannot be treated as an
independent provision but subject to restrictions and
conditions under Section 19 of the VAT Act.
4.The Writ Petition is disposed in terms of the above
decision of this Court referred to supra. There is no provision
under the TNVAT Act, 2006, to call upon a dealer who is a
manufacture to reverse credit on “invisible loss” of input in the
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W.P.No.11707 of 2014
and M.P.No.1 of 2014
course of manufacture of final product. TNVAT Rules, 2007 also
does not speak about input-output norm. Further, Rules also do
not contemplate 100% assimilation of inputs into final products.
Section 19(9)(i), (ii) & (iii) of TNVAT Act, 2006 only deals with
three situation when input tax is not available. They are as
follows:-
(9) No input tax credit shall be available to a registered
dealer for tax paid or payable at the time of purchase of
goods, if such-
(i) goods are not sold because of any theft, loss or
destruction, for any reason, including natural calamity.
If a dealer has already availed input tax credit against
purchase of such goods, there shall be reversal of tax
credit; or
(ii) inputs destroyed in fire accident or lost while in
storage even before use in the manufacture of final
products; or
(iii) inputs damaged in transit or destroyed at some
intermediary stage of manufacture.
5.In my view, the expression "inputs destroyed at some
intermediary stage of manufacture" in sub Clause (iii) of Section
19(9)(iii) of TNVAT Act, 2006 will not take within its fold those
inputs "consumed" in the manufacture of final product. Only
when inputs are “destroyed at some intermediary stage of
manufacture”, reversal of input tax credit is warranted. They
would be instance of inputs which are withdrawn at an
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W.P.No.11707 of 2014
and M.P.No.1 of 2014
intermediary stage of manufacture and are incapable of being
used further and are sold as scrap/waste or physically destroyed
by an assessee having no residual value. Such inputs alone can be
construed as "inputs destroyed at some intermediary stage of
manufacture". There is no scope for reversal of input tax credit
on inputs which get consumed during the course of manufacture
as “invisible loss”. The authorities may therefore keep these
observations while passing orders in the Show Cause Notice
which have been issued.
6.Accordingly, this Writ Petition is disposed in terms of the
above decision of this court. No cost. Consequently, connected
Miscellaneous Petitions are closed.”
3. In view of the judgment cited supra, the present writ petition
stands disposed of. No costs. Consequently, connected miscellaneous
petition is closed.
19.07.2021
Pns
Internet:Yes
Index:Yes
Speaking order
https://www.mhc.tn.gov.in/judis/
W.P.No.11707 of 2014
and M.P.No.1 of 2014
To
1.The Commercial Tax Officer,
Group-IV, Enforcement (South),
Chennai – 600 006.
2.The Joint Commissioner (CT),
(Enforcement), Coimbatore.
3.The Assistant Commissioner (CT),
Chithode Assessment Circle,
Chithode, Erode District.
https://www.mhc.tn.gov.in/judis/
W.P.No.11707 of 2014
and M.P.No.1 of 2014
S.M.SUBRAMANIAM, J.
Pns
W.P.No.11707 of 2014
and M.P.No.1 of 2014
19.07.2021
https://www.mhc.tn.gov.in/judis/
