The Madras High Court in the case of TVL. MOON LABELS VS. GOVERNMENT OF INDIA, vide WP (MD) No. 3450 of 2024 and WMP (MD) Nos. 3429 and 3430 of 2024 dated 11.06.2024, The Court has held that credits validly obtained under the TNVAT Act are deemed to be non-transferable unless explicitly provided for to lapse under the Act. Procedural errors in the transition of ITC should not result in denial of credit if substantive right is proved. The Court requires verification of the original invoices and compliance with the requirements of the TNVAT Act before allowing the transition of ITC.
The court granted relief by setting aside the contested order and remanding the case for a new decision, stressing the imprescriptibility of validly used credits and the need for verification. This ensures that procedural lapses do not unfairly deprive taxpayers of the credits to which they are entitled.
Facts of the case:
The petitioner claimed unutilized input tax credit (ITC) under the Tamil Nadu Value Added Tax (TNVAT) Act, 2006 as on June 30, 2017, which he was entitled to carry forward under Section 140 of the GST provisions. Instead of filing Form TRANS-01, the petitioner reflected the ITC in the monthly returns of GSTR-3B and utilized this credit to cancel the tax liability under the GST Act.
The respondents argued that the petitioner bypassed the procedure prescribed under Section 140 of the TNGST Act, 2017 and Rule 117 of the TNGST Rules, 2017 by directly reflecting the ITC in the GSTR-3B returns.
Held that :-
The court noted that credits validly obtained under the TNVAT Act, 2006 are immovable. The court relied on precedents, including the Supreme Court’s decision in Central Excise Collector, Pune v. Dai Ichi Karkaria Ltd. and others, stating that validly used credits are not subject to seizure.
The Court directed the applicant to submit original invoices for the ITC claimed. Upon verification, if it is found that the applicant validly availed the credit, it should be allowed to be set off against the GST liability. The Court emphasised that procedural violations in transfer of credit should not lead to denial of credit.
The impugned order was set aside for verification to determine whether the petitioner validly availed ITC under the TNVAT Act, 2006 and whether he complied with the requirements of Section 19 of the TNVAT Act, 2006.
To read the full sentence 2024 Taxo.online 1284
