Summary
The Supreme Court generally upheld denial of Tamil Nadu input tax credit for inter-State sales outside the registered-dealer/Form C framework. The classification served the legitimate purpose of preventing tax evasion. It read down the provision for dealers selling exclusively to other State Governments: credit could be claimed without Form C upon submission of the purchasing State Government’s certificate. That appellant’s appeal was allowed to this extent; the other appeals were dismissed with costs.
Issues
- Whether the inter-State-sale credit restriction and Form C condition were valid.
- Whether exclusive supplies to other State Governments required different treatment.
Provisions considered
- Section 19(5)(c), Tamil Nadu Value Added Tax Act, 2006The restriction on credit for sales falling under section 8(2) of the CST Act was generally upheld, but read down for dealers supplying exclusively to other State Governments, subject to the required certificate. (¶¶ 8, 23, 41, 42, 43, 44, 45, 46, 47, 48, 49)
- Rule 10(9)(a), Tamil Nadu Value Added Tax Rules, 2007Form C was a valid condition within the credit scheme, subject to the Court’s limited alternative-certificate direction for exclusive sales to other State Governments. (¶¶ 9, 23, 43, 49)
Held
- Input tax credit was a statutory concession governed by the legislation’s conditions. Restricting credit to the registered-dealer framework served the rational purpose of verifying transactions and preventing evasion in inter-State dealings. (¶¶ 38, 39, 40, 41, 42, 43, 44)
- The general challenge failed: the different treatment of unregistered purchasers outside the State was supported by intelligible differentia and the stated enforcement difficulty. (¶¶ 42, 43, 44)
- Exclusive supplies to other State Governments raised a distinct issue. Those governments were deemed dealers but were exempt from registration, could not issue Form C and did not present the same evasion concern. Denial solely on that footing failed the reasonable-classification test in this limited context. (¶¶ 45, 46, 47, 48)
- For dealers selling exclusively to other State Governments, those governments were to be deemed registered for credit purposes. Form C was unnecessary, but the dealer had to obtain and submit the purchasing State Government’s certificate to the VAT authorities. (¶¶ 48, 49)
- The appeal arising from SLP(C) No.9326 of 2015 was allowed to that extent. The other appeals were dismissed with costs. (¶ 50)
Result
Appeal arising from SLP(C) No.9326 of 2015 allowed to the specified extent: exclusive supplies to other State Governments qualify for credit on their certificate without Form C. Other appeals dismissed with costs.