Visteon Automotive Systems (P.) Ltd. v. Deputy Commissioner – [2020] 117 taxmann.com 327 (Madras)

The petitioner registered under Tamil Nadu Value Added Tax Act, 2006 (the Act) had purchased “capital goods” for manufacturing purpose and availed input tax credit. As per the Act, the “capital goods” were 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%.

The department has issued show cause notice (SCN) contending that the “capital goods” were liable to VAT only at 4%, therefore, the petitioner was liable to reverse input tax credit in excess of 4% and accordingly the petitioner was required to reverse credit availed equivalent to 8.5% VAT paid in excess by the registered dealer who sold the capital goods to the petitioner.

The honorable Madras High Court observed that 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.

The High Court relied on its own decision in case Sara Leathers v. Commercial Tax Officer, [2010] 30 VST 581 (Mad.) and held that credit availed by the petitioner could not be disallowed even if registered dealer had deliberately paid tax in excess and passed on incidence of such tax.