The Madras High Court in the case of TVL. MOON LABELS VERSUS THE GOVERNMENT OF INDIA vide W. P. (MD) No. 3450 of 2024 and W. M. P. (MD) Nos. 3429 & 3430 of 2024 dated 11.06.2024, has held that Credits validly availed under the TNVAT Act are considered indefeasible unless explicitly provided to lapse under the law. Procedural mistakes in transitioning ITC should not lead to the denial of credit if the substantive entitlement is proven. The court mandates verification of original invoices and compliance with the requirements of the TNVAT Act before allowing the transition of ITC

The court provided relief by quashing the impugned order and remanding the case for a fresh decision, emphasizing the indefeasibility of validly availed credits and the need for verification. This ensures that procedural lapses do not unjustly deprive taxpayers of their entitled credits.

Facts of the Case:- 

The petitioner claimed unutilized input tax credit (ITC) under the Tamil Nadu Value Added Tax (TNVAT) Act, 2006 as of 30.06.2017, which they were entitled to transition under Section 140 of the GST enactments. Instead of filing Form TRANS-01, the petitioner reflected the ITC in the monthly GSTR-3B returns and utilized this credit to discharge tax liability under the GST Act.

The respondents argued that the petitioner bypassed the prescribed procedure under Section 140 of the TNGST Act, 2017 and Rule 117 of the TNGST Rules, 2017 by directly reflecting the ITC in the GSTR-3B returns.

Held that :- 

The court noted that credits validly availed under the TNVAT Act, 2006 are indefeasible. The court relied on precedents, including the Supreme Court's decision in Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd. and others, affirming that validly availed credits are indefeasible. 

The Court directed to call upon the petitioner to produce original invoices for the claimed ITC. Upon verification, if the petitioner is found to have validly availed the credit, it should be allowed for set-off against the GST liability. The court emphasized that procedural infractions in transitioning the credit should not lead to denial of the credit.

The impugned order was set aside for verification to determine if the petitioner validly availed ITC under the TNVAT Act, 2006 and if it satisfied the requirements of Section 19 of the TNVAT Act, 2006.

To read the complete judgment 2024 Taxo.online 1284