SC Upholds Constitutionality Of Section 19(11) Of Tamil Nadu VAT Act, 2006 [Read Judgment]

 ‘The Statutory scheme delineated by Section 19(11) neither can be said to be arbitrary nor can be said to violate the right guaranteed to the dealer under Article 19(1) (g) of the Constitution.’

The Supreme Court on Friday dismissed appeals filed against Madras High Court judgment that had upheld the constitutionality of Section 19(11) of the Tamil Nadu Value Added Tax Act, 2006.

The bench comprising Justice AK Sikri and Justice Ashok Bhushan, in ALD Automotive Pvt. Ltd Vs. The Commercial Tax Officer, held that statutory scheme delineated by Section 19(11) can neither be said to be arbitrary nor can be said to violate the right guaranteed to the dealer under Article 19(1) (g) of the Constitution.

The bench also held that time period as provided in Section 19(11) is mandatory and there is no power conferred on any authority under the Act to dilute the mandatory requirement.

The Law under Challenge

Section 19(11) : In case any registered dealer fails to claim input tax credit in respect of any transaction of taxable purchase in any month, he shall make the claim before the end of the financial year or before ninety days from the date of purchase, whichever is later.

The Issues

The issues considered by the apex court bench were the following:

• Whether Section 19(11) violates Article 14 and 19(1)(g) of the Constitution of India?


• Whether Section 19(11) is inconsistent with Section 3(3) of the Act?


• Whether Section 19(11) is directory provision, noncompliance of which cannot be a ground for denial of input tax credit to the appellants?


• Whether denial of input tax credit to the appellants is contrary to the scheme of VAT Act, 2006?


• Whether Assessing Authorities could have extended the period for claiming Input Tax Credit beyond the period as provided in Section 19(11) of Tamil Nadu VAT Act, 2006?

Constitutional Validity

The bench, mainly referred to decision in Jayam and Company v. Assistant Commissioner and Another, and observed: “The Constitutional validity of Section 19(20) was upheld. The above decision is a clear authority with proposition that Input Tax Credit is admissible only as per conditions enumerated under Section 19 of the Tamil Nadu Value Added Tax Act, 2016. The interpretation put up by this Court on Section 3(2) and 3(3) and Section 19(2) is fully attracted while considering the same provisions of Section 3(2) and 3(3) and provision of Section 19(11) of the Act. The Statutory scheme delineated by Section 19(11) neither can be said to be arbitrary nor can be said to violate the right guaranteed to the dealer under Article 19(1) (g) of the Constitution.”

Mandatory Provision

The bench, answering the 3^rd and 4^th issues, observed that, if the provision is held to be directory it will become too flexible and give rise to large number of difficulties including difficulty in verification of claim of Input Credit. The bench observed: “Section 19(11) thus allowed an extended period for Input Credit which if not claimed in any month can be claimed before the end of the financial year or before the 90 days from the date of purchase whichever is later. The provision of Section 19(11) is thus an additional benefit given to dealer for claiming Input Credit in extended period. The use of word “shall make the claim” needs no other interpretation.”

Authorities Can’t Dilute Mandatory Requirement

Answering the last issue, the bench said that, in the scheme of the Tamil Nadu Value Added Tax Act, 2006, there is no power conferred on any authority under the Act to dilute the mandatory requirement under Section 19(11). “The taxing statute has to be strictly construed. Nothing is to be read in, noting is to be implied and language used in taxing statute had to be looked into fairly. The benefits envisaged in the taxing statute had to be extended as per the restrictions and conditions envisaged therein. The statute having not given any indication for extension of time which is a condition for claiming Input Tax Credit, the submission that period could have been extended by assessing authority is unfounded and cannot be accepted.”