Case Law Details
Aruna Alloy Steel Private Limited Vs Assistant Commissioner (CT) (Madras High Court)
The Madras High Court recently addressed a crucial aspect of the TNVAT Act regarding invisible loss in manufacturing. Aruna Alloy Steel Private Limited challenged an assessment order denying input tax credit on input lost during manufacture.
The crux of the dispute revolved around the interpretation of Sections 19(2)(ii) and 19(9) of the TNVAT Act. The petitioner contended that input lost in manufacturing, termed invisible loss, should not attract Section 19(9). They cited a circular issued by the Commercial Tax Department and relevant precedents to support their argument.
The Madras High Court, in its analysis, referred to the decision in Eastman Exports Global Clothing (P) Ltd case and the rules of construction. It concluded that Section 19(9) does not apply to manufacturing/invisible loss, considering it an inevitable and inherent part of the manufacturing process covered by Section 19(2)(ii). However, it emphasized the authority’s right to verify the genuineness of input usage in manufacturing.
Moreover, the court cited a previous case involving M/s. GBR Metals Pvt Ltd, where a similar favorable view was taken. Consequently, the impugned orders were set aside, and the cases were remanded for reconsideration, taking into account the court’s rulings and relevant departmental statements.
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