Madras High Court
M/S. P.I. Polymers vs The Commercial Tax Officer on 24 July, 2026
Author: G.Jayachandran
Bench: G. Jayachandran
W.A.Nos.384 & 387 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On: 13.07.2026 Delivered On: 24.07.2026
CORAM
THE HONOURABLE DR JUSTICE G. JAYACHANDRAN
AND
THE HONOURABLE MRS. JUSTICE N. MALA
W.A.Nos.384 & 387 of 2020
& C.M.P.Nos.6345 & 6357 of 2020
M/s.P.I.Polymers,
Rep. By Proprietrix,
#1330 Mugappair Road,
Anna Nagar West Extn.
Chennai – 600 050 … Appellant in both appeals
vs.
The Commerical Tax Officer,
Pattarawalkam Assessment Circle,
No.5, South High Court Colony,
Villivakkam, Chennai – 600 049. … Respondent in both appeals
Prayer in W.P.No.384 of 2020: Writ Appeal filed under Clause 15 of the
Letters Patent Act, to set aside the order passed by the Learned Judge in
W.P.No.38509 of 2015, dated 23.01.2020.
Prayer in W.P.No.387 of 2020: Writ Appeal filed under Clause 15 of the
Letters Patent Act, to set aside the order passed by the Learned Judge in
W.P.No.38508 of 2015, dated 23.01.2020.
For Appellant : M/s.Aparna Nandakumar.
in both appeals
For Respondent : M/s.Amirta Poongodi Dinakaran,
in both appeals Government Advocate
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COMMON JUDGMENT
(Order of this Court made by Dr. G. Jayachandran, J.)
The genesis of these two intra-court appeals filed by the Trader –
Assessee arise out of the re-assessment orders dated 13.11.2015 passed by the
Commercial Tax Officer / Respondent in respect of the assessment years 2012-
2013 and 2013-2014.
2. The assessee had purchased Duty Entitlement Passbook ( DEPB)
and imported plastic granules utilising DEPB. During the relevant period of
assessment, the assessee had availed Input Tax Credit (ITC) under Section 19 of
the TNVAT on the tax borne by it while purchasing Duty Entitlement Passbook
(DEPB). The assessee claims that the plastic granules partly used by it for
manufacturing plastic products and partly sold as granules for manufacturing
other plastic products like pet-bottles, hence entitled to utilise the aforesaid
Input Tax Credit for discharging tax on sale of plastic granules imported.
3. According to the assessee, as a registered dealer is entitled to ITC
on the purchase of DEPB license which is used in the course of its business
namely import of plastic granules. Hence, entitled to claim ITC as per the
provisions of Section 19(1) of TNVAT. The purchase of DEPB license is an
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ancillary activity of business connected to the main activity of import and sale
of plastic granules. The purchase of DEPB license was ‘in the course of the
business’ occurring in section 21 (10) of the TNVAT Act, hence DEPB license
is an input as defined under Section 2(23) of the TNVAT Act.
4. Relying on the clarification of the Commissioner of Commercial
Tax vide proceedings No.VAT Cell/2/5640/2007/VCC 78 dated 12.03.2007, the
assessee contended that there need not be one to one relation between the input
(i.e.,) DEPB license and the goods (i.e.,) the plastic granules ITC sought. The
terms ‘sale’ and ‘purchase’ are interchangeable, so the input tax paid on
purchase of DEPB license can be adjusted on the output tax paid on sale of
plastic granules which are used for manufacturing plastic products.
5. The Commercial Tax Officer held the assessee, no doubt a dealer
and carrying on business as defined under TNVAT Act and eligible for ITC
adjustment, provided it satisfies the requirement mandated under Section 19(2)
of the Act which reads as below:-
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W.A.Nos.384 & 387 of 2020Input tax credit shall be allowed for the
purchase of goods made within the State from a
registered dealer and which are for the purpose of:-
i. Re-sale by him within the State; or
ii. Use of input in manufacturing or
processing of goods in the State; or
iii. Use of containers, labels and other
materials for packing of goods in the State;
iv. Use as capital goods in the manufacture
of taxable goods.
v. Sale in the course of Inter-State trade or
commerce falling under sub-section (1) of Section 8 of
the Central Sales Tax Act, 1956 (Central Act 74 of
1956)
vi. Agency transactions by the principal
within the State in the manner as may be prescribed.
6. In the instant case, the assessee had purchased DEPB license and
paid tax. The said tax is not adjustable towards the sales of plastic granules
imported from other countries and sold in local. Further, the clarification of the
Commissioner dated 12/03/2007 in respect of fabrics manufactured and
exported from the raw material (yarn) is not applicable to the facts of the case,
since the Commissioner vide proceedings dated 25.07.2007 had issued
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clarification that no input credit is eligible on purchase of DEPB license under
section 19(2) of the TNVAT Act, as they were purchased as plastic granules
from abroad and sold as plastic granules in local. Hence, not entitled for ITC.
7. Notices for assessment on demand of tax and notice of penalty for
the assessment years 2012-13 and 2013-14 were issued separately. For the AY
2012-13, notice proposed tax of Rs.3,94,100/- and penalty of Rs 1,97,050/-
being 50% of the tax due. For the Assessment Year 2013-2014, the notice
proposed tax of Rs.3,70,447/- and penalty of Rs.1,85,224/- were issued to the
assessee on 13/11/2015.
8. The assessee filed W.P.No.38508 of 2015 challenging the notice
issued for the assessment year 2012-2013 and W.P,No.38509 of 2015
challenging the notice issued for the assessment year 2013-2014.
9. The Learned Judge, on considering the challenge to the re-
assessment order passed by the respondent, dismissed the writ petitions holding
that he was bound by the judgment of the Division Bench of this Court rendered
in Sha Kantilal Jayanthilal vs. State of Tamil Nadu, reported in 2016 (339)
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ELT 520 (Mad) has given a finding that the rate of tax mentioned in the First
schedule is not applicable in respect of purchase of DEPB. However, he made
certain observations that the view expressed in the above judgment requires re-
look.
10. Being aggrieved by the dismissal of the writ petitions challenging
the re-assessment, the above two appeals were filed for consideration by the
Division Bench.
11. The Learned Counsel appearing for the appellants contended that
the order of the Learned Single Judge confirming the impugned order of re-
assessment passed by the respondent suffers infirmity. The observations made
by the Court do not synchronize with the conclusion. Particularly, it is
contended that, after giving categorical finding that the initiation of assessment
proceedings is not ill-conceived, the Learned Single Judge ought to have struck
down the re-assessment order singularly on the ground. Further, the Learned
Single Judge, having held that the DEPB license is “goods” that fall within
Section 2(21) of the TNVAT Act, 2006, in the light of the law declared by the
Hon’ble Supreme Court in Yasha Overseas v. Commissioner of Sales Tax
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(2008) 17 VST 182 (SC). There is no logical reason to dismiss the writ
petitions by following the judgment of this Court which, even according to the
writ petitioner, is ‘per incuriam’.
12. The Learned Judge, having given a categorical finding that the
DEPB license falls under Entry 70 of Part B of I Schedule, taxable at 5% and
entitled to input tax credit in terms of Section 19(1) of the TNVAT and after
endorsing the contention of the assessee that one-to-one correlation between the
credit availed and its utilization is not required. The Learned Judge erred in
dismissing the Writ Petitions instead of allowing the same. The Learned Judge,
after being convinced that Section 3(3) of the TNVAT Act, 2006 read with Rule
10 of the TNVAT Rules, 2007, does not contemplate one-to-one correlation and
utilization of credit, ought not to have denied the benefit to the assessee merely
because the Division Bench in M/s.Sha Kantilal Jayantilal vs. The State of
Tamil Nadu 2016 (339) ELT 520 (Mad) had held otherwise.
13. The Learned Counsel appearing for the appellants drew our
attention to the observations of the Learned Judge in his order that the Division
Bench in M/s.Sha Kantilal Jayantilal vs. The State of Tamil Nadu 2016 (339)
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ELT 520 (Mad) had failed to note the avowed object of the TNVAT Act, 2006,
which allow utilization of input credit to a dealer to reduce the cascading effect
of tax on the final products. Hence, the said judgment ought not to have taken as
a binding precedent, particularly in view of the dictum of the Hon’ble Supreme
Court rendered in A.R.Antulay v. RS Nayak (1988) 2 SCC 602 and
N.Bhargavan Pillai v. State of Kerala (AIR 2004 SC 2317) and particularly
when the decisions of other High Courts were in favour of the assessee, holding
that DEPB license is intangible goods and ITC can be availed by the assessee in
appropriate cases even without one-to-one correlation.
14. Per contra, the Learned Government Advocate appearing for the
respondent submitted that the conclusion of the Learned Single Judge
dismissing the appeal needs no interference, though certain observations made
by the Learned Single Judge cast cloud over the assessment order passed by the
respondent. The judgment rendered by the Division Bench of this Court in
M/s.Sha Kantilal Jayantilal vs. The State of Tamil Nadu, reported in 2016
(339) ELT 520 (Mad) and followed by the Learned Single Judge, does not carry
any iota of infirmity. It is inconsonance with the interpretation of the Hon’ble
Supreme Court in respect of the term “input” and “input tax credit,” applying
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process-and-use test. The input and the goods manufactured are used in the
process of manufacture must have nexus to each other, though they may not be
one-to-one correlation. The DEPB license, though fall under the definition of
tangible goods that by itself will not enure to the benefit of ITC for the import
of plastic granules and sold as plastic granules to the manufactures, without
establishing the nexus between the input and the goods manufactured. Hence,
the assessee is not entitled for Input Tax Credit.
15. The Learned Government Advocate appearing for the respondent
submitted that the Division Bench of this Court in M/s.Sha Kantilal Jayantilal
(cited supra) had dealt with the claim of input credit on the purchase of DEPB
license viz., Section 19(1) of the TNVAT Act and had denied credit on the
ground that the assessee failed to satisfy the conditions enumerated under the
said Section. The ratio laid down squarely applies to the case of the appellant.
The detailed discussion about the provisions of law and the object of TNVAT
Act been fully understood and discussed in the said judgment, which is binding
precedent.
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16. Perusal of Section 19(2) of the TNVAT Act and the conditions
enumerated under the Section for entitlement to input tax credit, what emanates
is that though the DEPB license is “goods” as defined under the Act, the view
expressed that the term “goods,” without any prefix, makes a difference whether
the DEPB licence, which is a tangible goods, will fall within the expression
“goods” as found in Section 19(1) of TNVAT Act.
17. Paragraph No.34 of the judgment alone been considered by the
Learned Single Judge to arrive at the conclusion that M/s.Sha Kantilal
Jayantilal (cited supra) requires re-look.
18. However, reading the judgment, particularly Paragraph No.27
onwards, would make it clear that the judgment rendered in M/s.Sha Kantilal
Jayantilal case, after considering the decision of the Hon’ble Supreme Court on
input tax credit qua DEPB licence, and the principle of double benefit. Further
claim of ITC without actual payment by utilizing the DEPB license been point
for holding in favour of the Revenue.
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19. The dictum laid in M/s.Sha Kantilal Jayantilal (cited supra)
squarely covers the facts of the case in hand. Though, the Learned Single Judge
had expressed reservations about the reasoning of the decision, in view of this
Court, there is no infirmity in the decision rendered by the Division Bench in
M/s.Sha Kantilal Jayantilal (cited supra). After deep analysis of the TNVAT
Act, particularly Section 19 of TNVAT Act, which provides for ITC, the
Division Bench has held as below:-
14. Though a variety of levies are contemplated
under the Act, the Act seeks to protect a registered dealer
from double taxation. The Act seeks to give this protection
in the form of what is known “input-tax credit” under
section 19. Instead of extracting section 19 in entirety, at
the cost of few more pages, we would better summarise the
scheme of section 19, which provides for input-tax credit,
in simple terms, without technical jargons as follows :
(i) Sub-section (1) of section 19 entitles a
registered dealer to input- tax credit, of the
amount of tax paid or payable under the Act,
to the seller, on the purchases of taxable
goods specified in the First Schedule, subject
to the condition that the registered dealer
establishes that the tax on such purchases
had actually been paid by him in the manner
prescribed.
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(ii) Sub-section (2) stipulates that input-tax
credit should be allowed for the purchase of
goods made within the State from a
registered dealer, if such purchase was for
any one of the 6 purposes indicated in
clauses (i) to (vi) of sub-section (2).
(iii) Sub-section (3) provides for input-tax
credit, in respect of purchases of capital
goods, whenever they are used in the
manufacture of taxable goods.
(iv) Sub-section (4) allows input-tax credit
on tax paid or payable in the State on the
purchase of goods in excess of a prescribed
percentage, if the purchases are intended
either for transfer to a place outside the
State otherwise than by way of sale or for
use in the manufacture of other goods and
transferred to a place outside the State
otherwise than by way of sale.
(v) Sub-sections (5) and (6) stipulate four
contingencies, under which, no input-tax
credit can be allowed. They are : (a) sale of
goods exempted under section 15 ; (b) goods
brought into the State from outside the
State ; (c) purchase of goods sold as such or
used in the manufacture of other goods and
sold in the course of inter-State trade or
commerce; and (d)purchase of capital goods
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used exclusively in the manufacture of goods
exempted under section 15.
(vi) Sub-sections (7), (8), (9) and (10) of
section 19 list out the circumstances, under
which, a registered dealer will not be
entitled to input-tax credit.
(vii) Sub-section (11) indicates the period,
within which, a registered dealer should
make a claim for input-tax credit.
(viii) Sub-section (12) indicates the
contingencies, when a credit availed on
inputs would get reversed.
(ix) Sub-section (13) speaks about the denial
of input-tax credit to a registered dealer,
who issues an invoice or bill or cash memo
without actually entering into a transaction
of sale, with a view to defraud the
Government Revenue.
(x) Sub-section (14) provides for transfer of
input-tax credit, whenever the business of a
registered dealer is transferred on account
of change of ownership due to sale, merger
or amalgamation, etc.
(xi) Sub-section (15) speaks about the
consequences of cancellation of the
certificate of registration of the selling
dealer.
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(xii) Sub-section (16) speaks about the
power of the assessing authority to revoke
the input-tax credit, under certain
circumstances.
(xiii) Sub-section (17) deals with the
contingencies, when the input- tax credit
determined by the assessing authority for a
particular year exceeds the tax liability for
that year.
(xiv) Sub-section (18) speaks about the
carrying forward of the excess input-tax
credit to the next year.
(xv) Sub-section (19) deals with the reversal
of input-tax credit, whenever goods remain
unsold at the time of closure of the business.
(xvi) Sub-section (20) deals with one more
contingency, when the input-tax credit can
be reversed.
15. Therefore, it appears that section 19 was
conceived by the Legislature to be a complete code in
itself, as it speaks of (i) entitlement to tax credit, (ii) the
transactions on which, the entitlement would arise, (iii)
the persons, who are entitled to tax credit, (iv) the
transactions on which, there is no entitlement, (v) persons,
who are not entitled to tax credit, (vi) the manner and the
period, within which, a claim for credit is to be made, (vii)
the circumstances, under which, the credit availed of
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could be reversed and the authority, who is competent to
reverse the credit, (viii) the circumstances, under which,
transfer of input-tax credit could be allowed, (ix) the
circumstances, under which, the credit could be carried
over to the next year and so on and so forth.
16. From the scheme of section 19(1), it
appears that to become eligible for input-tax credit, the
following conditions should be satisfied by a person :
(i) he should be a registered dealer;
(ii) he must have paid or become obliged to
pay a tax under this Act, to the seller on the
purchase of taxable goods; and
(iii) such taxable goods, on the purchase of
which, he paid or became liable to pay tax
under the Act, are also specified in the First
Schedule.
20. On analysis of the scope of Section 19, the facts, which are similar
to the case in hand, the Division Bench arrived at the following conclusion:-
17. Keeping in mind the scheme of section 19 as
enumerated above, if we come back to the case on hand, it
is seen that what the petitioner claims is an input-tax
credit on the amount of duty paid for the purchase of a
DEPB licence. The claim of the petitioner is that a DEPB
licence is also a “goods” within the meaning of the
expression “goods” under section 2(21), which reads as
follows :
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W.A.Nos.384 & 387 of 2020“2(21) ‘goods’ means all kinds of movable
property (other than newspapers, actionable
claims, stocks and shares and securities) and
includes all materials, commodities and
articles including the goods (as goods or in
some other form) involved in the execution
of works contract or those goods to be used
in the fitting out, improvement or repair of
movable property; and all growing crops,
grass or things attached to, or forming part
of the land which are agreed to be severed
before sale or under the contract of sale;”
18. According to the petitioner, the DEPB
licences purchased by him not only constitute goods within
the purview of section 2(21), but also constitute “input”
within the meaning of the expression under section 2(23)
and constitute “input tax” within the meaning of section
2(24). Section 2(23) and 2(24) read as follows:
“2(23) ‘input’ means any goods including
capital goods purchased by a dealer in the
course of his business ;
2(24) ‘input tax’ means the tax paid or
payable under this Act by a registered dealer
to another registered dealer on the purchase
of goods including capital goods in the
course of business;”
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19. On the basis of the above definitions and on
the basis of the charging section namely section 3(3), it is
contended by the learned counsel for the petitioner that
the duty paid on DEPB licences, are liable to be given
credit to. Reliance is placed on the language of section
3(3), which reads as follows :
“3(3) The tax payable under sub-section (2)
by a registered dealer shall be reduced, in
the manner prescribed, to the extent of tax
paid on his purchase of goods specified in
Part B or Part C of the First Schedule,
inside the State, to the registered dealer,
who sold the goods to him.”
20. In support of his contention that DEPB
licences constitute goods within the meaning of the Act,
the learned counsel for the petitioner relies upon the
decision of the Supreme Court in Yasha Overseas v.
Commissioner of Sales Tax [2008] 17 VST 182 (SC).
21. How DEPS though be tangible goods, but not entitled for ITC is
explained by the Division Bench in the following Paragraphs by tracing the march of
law on this issue.
21. We have carefully considered the above
submissions.
22. Before considering the issue as to whether
DEPB licences constitute “goods” within the meaning of
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section 2(21) of the TNVAT Act, 2006, it may be useful to
look at the ratio decidendi of the decision of the Supreme
Court in Yasha Overseas [2008] 17 VST 182 (SC). The
said decision arose under interesting circumstances. In H.
Anraj v. Government of Tamil Nadu [1986] 61 STC 165
(SC) ; (1986) 1 SCC 414, the Supreme Court held that
lottery tickets constituted “goods” within the meaning of
the expression “goods” as given in the Tamil Nadu
General Sales tax Act, 1959 and the Bengal Finance
(Sales Tax) Act, 1941.
23. After 10 years of the decision in H. Anraj
[1986] 61 STC 165 (SC) ; (1986) 1 SCC 414, another
question arose before the Supreme Court in Vikas Sales
Corporation v. Commissioner of Commercial Taxes
[1996] 102STC 106 (SC) ; (1996) 4 SCC 431, as to
whether a replenishment licence (REP licence) granted
under the 1992-97 export-import policy could be taken to
be goods under the Tamil Nadu, Karnataka and Kerala
General Sales tax Acts. After referring to the definition of
the expression “goods” as given in section 2(7) of the Sale
of Goods Act, 1930, the definition of the expression
“movable property” under the General Clauses Act and
the definition of the expression “goods” under the Central
as well as the State sales tax laws, the Supreme Court held
in Vikas Sales Corporation [1996] 102 STC 106 (SC) ;
(1996) 4 SCC 431 that REP licences are neither chose- in-
actions nor actionable claims, but constituted goods that
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have an inherent value and also traded as such,
independent of and unrelated to the goods that can be
imported on their basis. Consequently, the court held that
REP licences were goods.
24. But, in Sunrise Associates v. Government of
NCT of Delhi [2006] 3 VST 151 (SC) ; [2006] 145 STC
576 (SC) ; (2006) 5 SCC 603, a Constitution Bench of the
Supreme Court overruled the decision in H. Anraj [1986]
61STC 165 (SC) ; (1986) 1 SCC 414 and held that the sale
of lottery ticket was not a sale of goods. When the
Constitution Bench was considering the correctness of the
decision in H. Anraj [1986] 61 STC 165 (SC) ; (1986) 1
SCC 414, with reference to the decision in Vikas Sales
Corporation [1996] 102 STC 106 (SC) ; (1996) 4 SCC
431, an issue was raised by the State of Maharashtra as to
whether DEPB licences could constitute goods attracting
sales tax under the Bombay Sales tax Act, 1959 or not.
But, the Constitution Bench refused to go into the same.
25. Therefore, a question arose in Yasha
Overseas [2008] 17 VST 182 (SC) as to whether the three-
Judge Bench decision in Vikas Sales Corporation [1996]
102 STC 106 (SC) ; (1996) 4 SCC 431, [holding that the
transfer/sale of an import licence called replenishment
licence (REP licence) granted under the 1992-97 exim
policy was exigible to sales tax] stood impliedly overruled
by the Constitution Bench decision in Sunrise Associates
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[2006] 3 VST 151 (SC) ; [2006] 145 STC 576 (SC) ;
(2006) 5 SCC 603 wherein it was held that lottery tickets
were actionable claims and were, therefore, excluded from
the definition of “goods” under the Sales tax Act.
26. After analysing in great detail, the decisions
in H. Anraj [1986] 61 STC 165 (SC) ; (1986) 1 SCC 414,
Vikas Sales Corporation [1996] 102 STC 106 (SC) ;
(1996) 4 SCC 431 and Sunrise Associates [2006] 3 VST
151 (SC) ; [2006] 145 STC 576 (SC) ; (2006) 5 SCC 603,
the Supreme Court came to the conclusion in Yasha
Overseas [2008] 17 VST 182 (SC) that the decision in
Sunrise Associates [2006] 3 VST 151 (SC) ; [2006] 145
STC 576 (SC) ; (2006) 5 SCC 603 did not affect the
position in so far as REP licences are concerned and that
the decision in Vikas Sales Corporation [1996] 102 STC
106 (SC) ; (1996) 4 SCC 431 reflected the correct legal
position. Having arrived at such a conclusion with regard
to REP licences, the court then went on to consider
whether the rationale applied in respect of REP licences
could be equally applied in the case of DEPB licences.
27. It was contended on behalf of the assessees
in Yasha Overseas [2008] 17VST 182 (SC) that the
transfer of a DEPB licence was nothing more than a mere
transfer of a credit in the pass book and that therefore,
such a credit could never be called goods under the sales
tax laws. Alternatively, it was contended that the sale of
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DEPB licence involved a mere transfer of the right to
claim credit on a future import and that therefore, it could
at the most be an actionable claim. But, both the
contentions were rejected and the Supreme Court held that
like REP licences, a DEPB licence also has its intrinsic
value and that a purchaser buys something for its value.
Eventually, the Supreme Court held that DEPB licences
are goods within the meaning of the sales tax laws.
28. Therefore, Mr. V. Sundareswaran, learned
counsel for the petitioner, is basically right in contending
that DEPB licences are goods. But, the mere fact that
these licences constitute goods within the meaning of
section 2(21) of the Tamil Nadu Act 32 of 2006, is not
sufficient to make the petitioner entitled to input-tax credit.
29. The Act not merely defines the expression
“goods”. The Act defines the expression “capital goods”
under section 2(11). It also defines the expression
“declared goods” under section 2(16) and it defines the
expression “exempted goods” under section 2(20).
Therefore, the expression “goods” appearing in every
provision has to be understood in the context in which the
expression is used and the adjective along with which, it is
used. It is relevant to point out that the charging section
namely section 3 predominantly uses the expression
“goods” without any adjective, whether it be in relation to
sale or purchase.
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30. But, a look at section 19(1), which provides
for input-tax credit shows that the entitlement for such
credit is restricted only to the amount of tax paid or
payable under the Act by the registered dealer to the seller
on his purchases of taxable goods specified in the First
Schedule. Therefore, unless the claim for input-tax credit
relates to the tax paid or payable on the purchase of
taxable goods specified in the First Schedule, it is not
possible to grant credit.
31. In so far as the First Schedule is concerned,
the same is divided into three parts namely Part A, Part B
and Part C. While Part A gives a list of goods, which are
taxable at the rate of one per cent., Part B gives a list of
goods, which are taxable at the rate of five per cent. Part
C gives a list of items, which are taxable at higher rates.
We are not concerned in this case with the rates.
32. But, it can be seen from the First Schedule
that DEPB licences are not included in any of the parts,
namely, Part A, Part B and Part C. Therefore, the goods
in relation to which, the petitioner claims input-tax credit
namely DEPB licences, despite coming within the purview
of the expression “goods” under section 2(21), do not
constitute goods specified in the First Schedule. Hence,
section 19(1) has no application.
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W.A.Nos.384 & 387 of 2020
33. DEPB licences do not even fall under any of
the categories mentioned in section 19(2). The case of the
petitioner does not even fall under sub- section (3) or sub-
section (4) of section 19. Therefore, our answer to the first
question of law would be that the Department was right in
denying the benefit of input-tax credit in respect of the
duty paid by the petitioner on the purchase of DEPB
licences, despite the fact that these licences constitute
goods within the meaning of section 2(21).
34. Despite the fact that DEPB licences are
goods, they are certainly different and distinct from the
goods that can be imported on the strength of those
licences. These licences confer a right upon the licensees
to import goods at some concession. It is only the goods
that are imported on the strength of these DEPB licences,
that may fall within the ambit of section 19(1) provided a
tax is payable or paid under the Tamil Nadu Value Added
tax Act, 2006 on those goods and those goods are also
listed in the First Schedule to the Act. (emphasis added)
39. But, the entitlement of a registered dealer to
input-tax credit, does not arise solely out of sub-section
(2) of section 19. It arises actually out of sub- section (1)
of section 19. But, since sub-section (1) covers all types of
purchases of all types of goods specified in the First
Schedule by all types of registered dealers, it is generic in
nature. Out of such generic entitlement stipulated in sub-
section (1), the statute carves out—
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W.A.Nos.384 & 387 of 2020
(i) certain purchases made for the purposes
specified in sub-section (2) within the State;
(ii) certain purchases of capital goods under
sub-section (3) ;
(iii) certain purchases, made for purposes
indicated in sub-section (4), etc.
40. Therefore, entitlement, non-entitlement,
etc., are covered with reference to specifics in the other
sub-sections of section 19. It does not mean that the very
entitlement to credit could be traced only to sub-sections
(2) to (4) and the non-entitlement could be traced to sub-
sections (5) to (10). If a dealer satisfies the essential
conditions stipulated in sub-section (1), he is entitled to
credit. Therefore, we are of the considered view that sub-
section (2) of section 19 is enumerative and not
exhaustive.” (Emphasis added)
22. We have taken the privilege of extracting substantial portions of
the M/s.Sha Kantilal Jayantilal judgment to dissect and to find out if it is ‘per
incuriam”. The judgment of this Court in M/s.Sha Kantilal Jayantilal case
(cited supra) has appropriately decided the scope of Input Tax Credit under
Section 19 of the TNVAT Act, qua Duty Entitlement Passbook (DEPB), after
considering the intent of the TNVAT Act, the impression caused in the
impugned order as if the M/s.Sha Kantilal Jayantilal judgment is “per incuriam”
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W.A.Nos.384 & 387 of 2020
is not correct. Hence, we find no reason to revisit the judgment of the Learned
Single Judge.
23. Accordingly, these Writ Appeal Nos.384 & 387 of 2020 are
dismissed. There shall be no order as to costs. Consequently, connected
Miscellaneous petitions are closed.
(Dr. G.JAYACHANDRAN, J.) & (N. MALA, J.)
24-07-2026
Index :Yes.
Neutral Citation :Yes/No.
Internet :Yes.
bsm
To,
1. The Commerical Tax Officer,
Pattarawalkam Assessment Circle,
No.5, South High Court Colony,
Villivakkam, Chennai – 600 049.
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W.A.Nos.384 & 387 of 2020
Dr. G.JAYACHANDRAN, J.
&
N. MALA, J.
bsm
Pre-Delivery common judgment made in
W.A.Nos.384 & 387 of 2020
Judgment delivered on
24-07-2026
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