Indian Oil Corporation Limited, Vs Deputy Commissioner (ST) (Madras High Court)
Madras High Court held that section 84 of Tamil Nadu Value Added Tax Act, 2006 provides for the rectification of an error apparent on record and not one which involves discussion, debate or possible multiple opinions.
Facts- The petitioners, in the course of its business, it had purchased Petroleum products, such as Motor Spirit (petrol), High Speed Diesel oil (HSD), furnace oil, Low Sulphur Heavy Stock (LSHS), Bitumen and Naphtha among others. Furnace oil is an input for power generation and is used by HT industrial users as fuel in gensets, to ensure and maintain continuous production.
The period in and around 2012 and 2013 saw the State of Tamil Nadu face power shortages and hence the demand for furnace oil at the instance of the HT industrial consumers rose. The petitioner approached the State for assistance in this regard and, at their instance, three Notifications came to be issued granting exemption from tax on the sales of furnace oil u/s. 30 of the Act.
As per the impugned notification, the conditions imposed in the 2013 Notification were (i) a requirement that the HT consumers produce a certificate in Form–I annexed to the Notification and (ii) refund of VAT paid was subject to production of original documents such as sale bills and proof of payment of tax as well as certificates in the forms annexed to the Notification. Refunds obtained from the respondent of the tax paid, were to be fully restored to the respective HT consumers.
Accordingly, there was a proposal by the respondent to reverse Input Tax Credit (ITC) under section 19(5)(a) of the Act for the period 01.02.2012 to 06.02.2013, vide notice dated 08.09.2016.
Conclusion- Section 84 provides for the rectification of an error apparent on record and not one which involves discussion, debate or possible multiple opinions. This is a settled position as per several judgments of the Hon’ble Supreme Court and High Courts.
None of the Notifications in this case touch upon the aspect of Input Tax Credit in the hands of the selling dealers, and had they done so, the officer would perhaps have been right in stating that the grant of ITC even in the place of such express provision for reversal in the Notification, was an error apparent on record. Since the Notification did not mention anything about ITC or reversal, the impugned proceedings would also have to be tested in the context of whether at all Section 84 could be applied in this case, and thus fail.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner in both Writ Petitions is an Oil manufacturing Company, the Indian Oil Corporation Limited (in short ‘IOCL’), a Public Sector Undertaking engaged in the marketing of petroleum products and registered as a dealer under the provisions of the Tamil Nadu Value Added Tax Act, 2006 (in short ‘Act’).
2. In the course of its business, it had purchased Petroleum products, such as Motor Spirit (petrol), High Speed Diesel oil (HSD), furnace oil, Low Sulphur Heavy Stock (LSHS), Bitumen and Naphtha among others. Furnace oil is an input for power generation and is used by HT industrial users as fuel in gensets, to ensure and maintain continuous production.
3. The period in and around 2012 and 2013 saw the State of Tamil Nadu face power shortages and hence the demand for furnace oil at the instance of the HT industrial consumers rose. They approached the State for assistance in this regard and, at their instance, three Notifications came to be issued granting exemption from tax on the sales of furnace oil under Section 30 of the Act.
4. The first is G.O.Ms.No.103 dated 01.08.2012 issued in exercise of powers conferred by Section 30 (1) and (2) of the Act granting exemption in respect of the tax on sale of furnace oil to HT consumers, who are registered under the provisions of the Act for use in Gensets, subject to production of a certificate. The Notification covered the period 01.02.2012 to 30.09.2012.
5. The second is G.O.Ms.No.155 dated 08.12.2012 that continued the exemption granted under the first G.O. and covered the period 01.10.2012 to 31.05.2013, in the same circumstances as earlier, that is, in regard to sale of furnace oil to HT consumers registered under the Act for use in Gensets, upon production of a certificate.
6. The third is G.O.Ms.No.6 dated 06.02.2013, that superceded the second G.O. and expanded the exemption to include sale of furnace oil by one oil company to another oil company, apart from sales to HT consumers registered under Act for use in gensets.
7. The conditions imposed in the 2013 Notification were (i) a requirement that the HT consumers produce a certificate in Form–I annexed to the Notification and (ii) refund of VAT paid was subject to production of original documents such as sale bills and proof of payment of tax as well as certificates in the forms annexed to the Notification. Refunds obtained from the respondent of the tax paid, were to be fully restored to the respective HT consumers.
8. The exemptions span a little over 1 1/2 years, from 01.02.2012 to 31.05.2013 and both the petitioner as well as the purchasing dealers have sought and obtained the benefit of the same, upon compliance with the conditions imposed under the Notifications.
9. While this is so, there was a proposal by the respondent to reverse Input tax credit (ITC) under Section 19(5)(a) of the Act for the period 01.02.2012 to 06.02.2013, vide notice dated 08.09.2016. In reply dated 21.10.2016, the main submissions of the petitioner echo the stand of the petitioner in these Writ Petitions.
10. The petitioner submitted that it has effected re-sale of furnace oil to various purchasers charging tax at 5% and ITC had also been availed. Furnace oil was purchased by the purchasing dealers not just from OMCs but also by way of stock transfer from their own refineries or by way of inter-state purchases.
11. Section 15 which speaks of exempted sales is specific to either goods that are exempted by Notification or as specified in the 4th Thus, the scope of sales referred to under Section 15 cannot be expanded to other categories of transactions. Section 30 notifies exemptions under 3 modes, i.e., goods (specified taxable goods), assessee (specified class of assessee) and events (specified combinations of goods and assessees).
12. In the last category, the commodity, by itself, is not exempt, as it is the ‘event’ that is the granted the benefit of exemption. Such an event is not brought under the cover of Section 15 and consequently does not attract reversal of ITC under Section 19(5)(a).
13. The petitioner also submitted that the right of ITC has already accrued and thus cannot be retrospectively taken away by the State. Writ Petitions filed by other OMCs on the same issue as in the present matter were cited, where a prima facie case was made out by those assessees, and an interim stay granted by this Court.
14. A personal hearing was held on 21.10.2016, which culminated in an order dated 31.10.2016, adverse to the interests of the petitioner, confirming the reversal of ITC. Inter alia, the entirety of the submission of the petitioner has been extracted and by way of a non-speaking order, the officer confirms the reversal of ITC under Section 19(5)(a). The matter is now stated to be pending in second appeal before the Sales tax Appellate Tribunal in A.P.No.172 of 2016.
15. On 20.04.2018, the respondent issued a notice pursuant to the orders passed by this Court in W.P.No.33787 of 2017 dated 22.12.2017. That writ petition and several others, had been filed by purchasing dealers praying for the refund of taxes as per the Notifications issued in this regard and this Court had directed the authorities to consider the issue of refund of taxes. The petitioner was called upon to file supporting evidences to enable the officer to grant refund.
16. On 13.08.2018, the petitioner filed supporting evidences as per the relevant Government Orders. This was followed by notices dated 24.01.2019, whereunder, the authorities proceeded to address two issues cumulatively. The first related to request for refund and the second was a proposal to reverse ITC under Section 19(5)(a) for the periods 2011-12 and 2012-13.
17. To be noted that the notices have been issued invoking the provisions of Section 84 qua the proposal to reverse ITC, as the officer has, evidently, been of the view that the grant of ITC is a mistake apparent on record.
18. The petitioner retorted by filing a representation to the Commissioner of Commercial taxes requesting that instructions be issued to the Assessing Authority to delink the issues and consider the classification of refund first before proceeding with the assessment, to which the Commissioner responded favourably by his communication dated 13.08.2019.
19. The proceedings relating to reversal of ITC concluded adverse to the petitioner vide order dated 24.06.2019, reversing the ITC in respect of the transactions that were exempt from tax by application of the provisions of Section 19(5)(a) of the Act.
20. Refunds of tax were sought and for both the periods, 2011-12 and 2012-13 and the petitioner, has, admittedly passed on the same to the purchasing dealers. On 10.04.2019, the petitioner had reported certain errors that had crept in the computation, re-quantifying their eligibility for refund. The excess determined by it has been repaid electronically.
21. The petitioner also informed the Assessing Authority that when a refund order had been issued on 10.04.2019 reiterating refund of tax to the petitioner, the petitioner has sought to restore the tax to the consumers. One of the consumers, i.e., Tamil Nadu Petro Products Limited had returned the refund indicating their inability to accept the same.
22. This is for the reason that credit had been availed by TNPPL on the strength of the invoice raised originally and hence the benefit of exemption was not preferred by them, since it would involve re-working of the taxes at a considerable distance of time.
23. As far as this amount is concerned, since the petitioner has consequently, and admittedly, restored the tax to the respondent on 07.08.2019 and thus irrespective of the conclusion in these Writ Petitions, proportionate ITC must be restored to the petitioners in this regard.
24. The quantification in this regard is as below and no dispute has been raised by the respondents in regard to the same.
