Authority: High Court of Judicature at Madras (Division Bench)

Order Date: 24-07-2026

Case Overview

  • Parties: Appellant – M/s P.I. Polymers (represented by Proprietrix, #1330 Mugappair Road, Anna Nagar West Extn., Chennai); Respondent – The Commercial Tax Officer, Pattarawalkam Assessment Circle, Villivakkam, Chennai.
  • Appeals: W.P. Nos. 384 & 387 of 2020 filed under Clause 15 of the Letters Patent Act, seeking to set aside reassessment orders dated 13.11.2015 for Assessment Years 2012‑13 and 2013‑14.
  • Background: The assessee purchased Duty Entitlement Passbook (DEPB) licences and imported plastic granules, claiming Input Tax Credit (ITC) under Section 19 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT) on tax paid for the DEPB licences. The Commercial Tax Officer denied the ITC, issuing notices of tax and penalty (AY 2012‑13: tax Rs.3,94,100; penalty Rs.1,97,050; AY 2013‑14: tax Rs.3,70,447; penalty Rs.1,85,224) on 13‑11‑2015.
  • Lower Court: Single Judge dismissed the writ petitions, relying on the Division Bench judgment in Sha Kantilal Jayantilal vs. State of Tamil Nadu (2016 ELT 520 (Mad)) which held DEPB licences are not eligible for ITC.
  • Arguments: Appellants argued that DEPB licences are “goods” under Section 2(21) and “input” under Section 2(23) of TNVAT, citing the Commissioner’s clarification (12‑03‑2007) and Supreme Court decision in Yasha Overseas v. Commissioner of Sales Tax (2008) that such licences are goods and should attract ITC without a one‑to‑one correlation.
  • Respondent (Government Advocate) contended that DEPB licences are not listed in the First Schedule and therefore fall outside the scope of Section 19(1); also relied on the Sha Kantilal judgment as binding precedent.
  • Court’s Analysis: The Division Bench examined the definitions in the TNVAT Act, the enumerative nature of Section 19(2), and the requirement that input tax credit be claimed only for goods specified in the First Schedule (Parts A, B, C). It noted that DEPB licences are not included in any part of the First Schedule and do not satisfy the conditions of Section 19(2)‑(4). Consequently, the licence cannot be treated as eligible input for ITC.
  • The Court also reiterated that while DEPB licences are “goods” under Section 2(21), the adjective “goods” must be read in context; the licence does not meet the statutory criteria for credit.

Final Outcome

  • The Division Bench dismissed both writ appeals (W.P. Nos. 384 & 387 of 2020).
  • No order as to costs was made.
  • All connected miscellaneous petitions were closed.

Topics: Input Tax Credit, State VAT Litigation