The Madras High Court has dismissed a batch of writ petitions challenging certain provisions of the Tamil Nadu Value Added Tax (VAT) Act relating to Input Tax Credit.
The Legislature consciously enacted Sections 19(20) and 19(11) of TN VAT Act with some avowed objects. These provisions were for safeguarding the interest of the revenue and to prevent the cascading effect of tax burden on the ultimate consumers. “Therefore, we are of the view that these sections are mandatory and its contravention will result in forfeiture of the concession of availment or Input Tax Credit,” the second bench consisting of Justice R Banumathi and Justice TS Sivagnanam said on Friday.
The bench was dismissing a batch of writ petitions from Jayam Stores of Chennai and over 50 other dealers seeking to quash the sections as being arbitrary and irrational infringing the rights of the petitioners under Article 14 and 19(1)(g) of the Constitution. The petitioners also sought to quash the subsequent penal action in the form of assessment orders/show cause notices.
Since the writ petitions challenging the constitutionality of the sections having failed, their plea to quash the penal action would have no legs to stand and therefore, they should necessarily fail, the bench said. The VAT structure had the ultimate goal of augmenting the revenue by making the procedure simple. The Legislature in its wisdom mandated the Act, the bench added.