Department cannot compel the Registered person to carry forward the ITC to GST regime.

Case Title: Easwaran Brothers India (P.) Ltd. v. Assistant Commissioner (ST) (FAC)

Court: High Court of Madras

Petition No.: W.P. No. 33593 of 2022; W.M.P. No. 33048 of 2022

Category of Dispute: Transitional ITC Refund under TNVAT Act

Date of Judgment: 15 December 2022

Relevant Sections: TNVAT Act, 2006; CGST provisions relating to transitional ITC refund under TRAN-1

Takeaway: Once Refund is Opted, Authority Cannot Mandate Carry Forward

Facts of the Case [Para 3]

• The petitioner was a registered dealer under the Tamil Nadu VAT Act, 2006.
• With the introduction of GST from 01.07.2017, TNVAT was subsumed.
• Dealers had the option to either carry forward ITC to GST regime or claim a refund.
• The petitioner chose a refund but faced technical glitches, leading to litigation and a Supreme Court order in Filco Trade Centre (P.) Ltd. directing the reopening of the TRAN portal.
• The department processed the refund and issued a provisional refund order dated 06.10.2022 along with FORM-P, quantifying the refund as ₹13,36,741.
• Despite this, a notice dated 25.11.2022 was issued asking the petitioner to opt for carry forward instead of refund.

Questions in Consideration [Para 2, 4, 7]

• Whether the department can issue a notice directing the petitioner to opt for carry forward of transitional ITC when refund was already chosen and processed?
• Is the petitioner entitled to the refund amount quantified under the provisional refund order?

Observation of the Court [Para 7, 8]

• The GST regime provided two options: refund or carry forward of ITC.
• Since the petitioner chose refund, and the department processed it and issued FORM-P, compelling the petitioner to opt for carry forward is impermissible.
• The impugned notice contradicted the already processed refund and was deemed erroneous.

Judgment of the Court [Para 9, 10]

• The impugned notice dated 25.11.2022 is quashed.
• The respondent is directed to process and disburse the refund of ₹13,36,741 as quantified in the provisional refund order dated 06.10.2022 within three weeks, i.e., by 05.01.2023.
• Writ petition allowed; WMP closed.

Between Fine Lines

1. A registered VAT dealer is entitled to choose between refund or carry forward of transitional ITC.
2. Once refund is chosen and processed, the department cannot reverse the path and mandate carry forward.
3. The refund process must be honoured if FORM-P and a provisional refund order are issued.
4. Court protected the taxpayer’s statutory option and held that administrative backtracking is unjustified.
5. Mandating refund payout within a deadline ensures revenue accountability and taxpayer relief.

Summary of Referred Cases

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