Madras High Court has upheld two key provisions in Tamil Nadu Value Added Tax Act, including its implementation with retrospective effect.
A division bench comprising Justice R Banumathi and Justice T S Sivagnanam said there was nothing wrong in implementing the Tamil Nadu VAT (Second Amendment) Act 2010 retrospectively from January, 2007.
Accordingly, commercial/sales tax assessment/show-cause notices involving several hundred crores of rupees were slapped on manufacturers, dealers, agents and traders.
Similarly, by Section 19 of the Tamil Nadu VAT Act, the state government stipulated that traders must avail themselves of Input Tax Credit (ITC), which is nothing but refund/ adjustment of the VAT already paid, before the end of the financial year or 90 days from the date of the purchase, whichever was later.
Assailing both the measures, a slew of petitions had been filed in the court by aggrieved traders and dealers.
They contended that enforcing the act retrospectively and serving demand notices for business transactions since 2007 would render them poorer by several lakhs of rupees, when they had not foreseen or made provision for such an outgo.
As for the time limit on set off, they said the original legislation did not provide for it and hence it could not be introduced afresh. They wanted both the provisions to be struck down as unconstitutional.
The division bench, concurring with the detailed submissions of Advocate General A L Somayaji, held that Section 19(11) of TN VAT Act cannot be struck down as being either unreasonable or discriminatory. "We do not find any merit in the challenge."
As for those facing assessment order or show-cause notices, the judges said the challenge against the notices have no legs to stand since the constitutionality of the section itself had been upheld.
Hence, all petitions against the notices were dismissed.
If final assessment orders themselves had been issued and challenged, court said the dealers/traders could file fresh appeals within 60 days of the judgement.
