ITC claims case: Madras HC's grants interim stay on single

In a reprieve to the Tamil Nadu government from losing Rs 1,000 crore revenue through Input Tax Credit (ITC), the Madras High Court today granted an interim stay on the operation of a single judge order which ruled against limitation set by the administration against such claims.
A division bench of justices S Manikumar and R Suresh Kumar based on the arguments by Advocate General Vijay Narayan, in its order, said, "Considering the importance of the issue involved and prima facie satisfied with the submissions of the advocate general, we deem it fit to admit the writ appeal and grant interim stay of the impugned judgement."

The matter relates to restriction imposed by government on such ITC claims through section 19(2)(v) of TNVAT Act.
Under the provision, manufacturers were made to make three per cent ITC reversal to the state for sale made in the course of inter-state trade falling under section 8(1) of the Central Sales Tax Act 1956.
The provision was in force from November 11, 2013 to April 1, 2015. Subsequently, in March 2015, the state government, to make industries in the state competitive as compared with those in the neighbouring states, withdrew the three ITC reversals.
Claiming that the repeal of the provision does not have impact over the period during which it was in force, the state commercial tax department issued notices to manufacturers for reversal of ITC for the period when the restriction was in force.

Assailing the orders, several dealers approached the high court.

Allowing the pleas, a single judge through a common order dated February 6, set aside the orders, noting that officers had no jurisdiction to reverse the ITC.
Appalled over the order, the government preferred an appeal claiming that the order has opened the floodgates to all dealers seeking refund to crore of rupees.
Pointing out that already nearly 80 petitions with revenue interlocked to a tune of approximately Rs 700 crore were ordered on the above lines, the government contended that in addition to this, there were nearly 400-450 dealers who had sought refund.

In toto, there was a likelihood of revenue impact involved to a tune of nearly Rs 1000 crore, the government submitted.
The advocate-general submitted that if the operation of the single judge order is allowed, the state would incur a revenue loss to the tune of Rs 1,000 crore.
The bench in its order directed the special government pleader Narmadha Sampath to bring all the appeals for admission as expeditiously as possible to avoid repetition and multiplicity of the proceedings and posted the matter for further hearing November 13.