M/S. TVS MOTOR COMPANY LTD. versus THE STATE OF TAMIL NADU AND OTHERS

Citation: [2018] 13 S.C.R. 961 · Decided: 12-10-2018 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Leave Granted & Disposed off

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Judgment (excerpt)

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[2018] 13  S.C.R. 961
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M/S. TVS MOTOR COMPANY LTD.
v.
THE STATE OF TAMIL NADU AND OTHERS
(Civil Appeal Nos. 10560-10564 of 2018)
OCTOBER 12, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Tamil Nadu Value Added Tax Act, 2006: s. 19(5)(c) – Input
tax credit, set-off against tax liability on all intra-state and inter-
state sales, allowed only if Form C as prescribed is filed – Validity
of – On facts, claim of input tax credit by assessee – Issuance of
notice by Revenue denying input tax credit availed against the
transactions for which Form C were not filled, and reversing credit
on inter-State sales – Writ petition by assessee challenging the
constitutional vires of s. 19(5)(c) and r. 10(9)(a) – Held: s. 19(5)(c)
is constitutionally valid – Provision was aimed at achieving a specific
and justified purpose to protect the Revenue against clandestine
transaction resulting in invasion of tax and could not be treated as
discriminatory – Sale by a dealer who is registered in the State of
Tamil Nadu which is effected outside the State of Tamil Nadu will
qualify for ITC only when the said sale is made to a registered dealer
– Insofar sales to unregistered dealers, that too situated outside the
State of Tamil Nadu, the State would not have any mechanism to
find out the genuineness of these sales – In essence, the State is
putting the condition that ITC would be admissible when Form ‘C’
is given, which can be given only in those cases where sale is to a
registered dealer – Prescribing such a condition in order to ensure
that there is no evasion, has a rationale purpose and objective –
Tamil Nadu Value Added Tax Rules, 2007 – r. 10(9)(a).
Disposing of the appeals, the Court
HELD: 1.1 In ALD Automotive Pvt. Ltd. & Anr. v. The
Commercial Tax Officer & Ors. it was held that Input tax credit-
ITC is a form of concession which is provided by the Act; it cannot
be claimed as a matter of right but only in terms of the provisions
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SUPREME COURT REPORTS
[2018] 13  S.C.R.
of the statute; therefore, the conditions mentioned in Section
19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006 had to be
fulfilled by the dealer; and sub-section (20) of Section 19 was
constitutionally valid. In the process, that there were valid and
cogent reasons for inserting that provision and the main purpose
was to protect the Revenue against clandestine transaction
resulting in invasion of tax. The reasoning given while upholding
sub-section (20) of Section 19 shall equally apply while examining
the validity of Section 19(5)(c) thereof. The High Court noted
that in respect of unregistered dealer in other States, the State of
Tamil Nadu has no mechanism to prevent invasion of tax and
loss of revenue cost by trade with such unregistered dealers in
the State of Tamil Nadu. Therefore, the provision was aimed at
achieving a specific and justified purpose and could not be treated
as discriminatory. [Para 41, 42][996-C-F]
ALD Automotive Pvt. Ltd. & Anr. v. The Commercial Tax
Officer & Ors. SLP (Civil) Nos. 36112-36113 of 2013
– relied on.
1.2 Section 19 of TNVAT Act deals with ITC. It incorporates
provision for grant of ITC under certain circumstances and, at
the same time, also lays down the conditions in which such ITC
would be admissible. It is in this context sub-section (5) of Section
19 is to be analysed. Sub-section (5) stipulates certain
contingencies where such ITC would not be admissible. Clause
(c) of this sub-section which provides that ITC would not be
allowed on the purchase of goods sold as such or used in the
manufacture of other goods and sold in the course of inter-State
trade or commerce falling under sub-section (2) of Section 8 of
the Central Sales Tax Act. Sale by a dealer who is registered in
the State of Tamil Nadu which is effected outside the State of
Tamil Nadu will qualify for ITC only when the said sale is made to
a registered dealer. If it is to an unregistered dealer, it would not
be admissible. This classification is based on intelligible differentia
having a proper rationale. Insofar sales to unregistered dealers
are concerned, that too situated outside the State of Tamil Nadu,
the State would not have any mechanism to find out the
genuineness of these sales. In essence, the State is putting the
condition that ITC would be admissible when Form ‘C’ is given,
which can be given only in those cases where sale is to a
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registered dealer. Prescribing such a condition in order to ens

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