Case Law Details
Visteon Automotive Systems Pvt. Ltd. Vs Deputy Commissioner (Madras High Court)
The issue under consideration is whether the respondent was justified in directing the petitioner to reverse the input tax credit availed on capital goods in excess of 4% vide the impugned order?
In the present case, the petitioner had purchased “capital goods” for manufacturing purpose and availed input tax credit in terms of Section 19(3) of the said Act. As per Entry 25, Part B to the I schedule of the said Act, the ‘capital goods’ are liable to VAT at 4%. However, the dealer who sold the “capital goods” to the petitioner charged VAT at 12.5% and passed on the incidence of such tax to the petitioner. The petitioner therefore availed the tax paid and reflected in the invoice at 12.5%. It is the contention of the respondent that since the “capital goods” were liable to VAT only at 4%, the petitioner was liable to reverse input tax credit in excess of 4%.
High Court state that the purpose of allowing input tax credit on capital goods and inputs are to reduce the cascading effect of the tax on the products / goods sold by a dealer under the provisions of the said Act. Under Section 19 (3) of the Act every registered dealer, is allowed into tax credit in the manner prescribed on the purchase of capital goods for use in the manufacture of taxable goods. It is noticed that under the scheme of the Act, input tax credit can be availed on the strength of the invoice on the tax paid by the registered dealer who sells such capital goods or input. As a person availing input tax credit, the petitioner had to merely satisfy that the tax reflected in the invoice was paid by the registered dealer who sold the capital goods to it. Even if the registered dealer had deliberately paid tax in excess and passed on the incidence of such tax to the petitioner with a view to liquidate the excess credit of input tax accumulated in their hand, the petitioner cannot be denied of the input tax credit of tax paid and reflected in the invoice.
In this case, it is not the case of the respondent that there was deliberate ploy on the part of the dealer who sold the capital goods to the petitioner by charging tax at 12.5% to liquidate accumulated credit. In my view, whether the tax was paid at 4% or 12.5% as the case may irrelevant as far as the respondent is concerned as the issue is revenue neutral. I therefore see no reason why credit availed by the petitioner should be disallowed particularly in the light of the fact that intention of the legislature is to reduce the cascading effect of the tax the final product.
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