Hon’ble SC holds that dealer engaged in selling exclusively to Government can claim ITC even in absence of ‘C’ Form – TVS Motor Company

The Hon’ble SC  in the case of TVS Motor Company  held that a dealer engaged in selling exclusively to Government entities  can claim ITC even in absence of ‘C’ Form  as there sales are easily verifiable.



1. The said judgement in the case of M/s TVS Motor Company Limited (Civil Appeal No. 10560-10564 of 2018) wherein challenge was laid to Section 19(5)(c) of the TNVAT Act and Rule 10(9)(a) of the Tamil Nadu VAT Rules for the same being violative of Article 14, 19(1)(g), 256 and 301 and also the CST Act for the following reasons:

• That the said provisions were discriminating between the dealers in the state of Tamil Nadu, who are selling to registered dealers vis a vis dealers in the state of Tamil Nadu who are selling to unregistered dealers in the course of interstate trade and commerce. Such was so, as input tax credit in the state of Tamil Nadu was dependent on producing Form C received from the dealer in the outside state who is making the purchases from dealer registered in Tamil Nadu.

2. In view thereof it was the contention of the appellants that the provisions being discriminatory to dealers on the basis of – to whom they are making the sales in the course of interstate trade and commerce i.e., whether the buyer is registered or unregistered in its state.

3. The Hon’ble Supreme Court upon consideration of the submissions of the respondent, that the state of Tamil Nadu had no mechanism to prevent invasion of tax and loss of revenue in respect of unregistered dealers in other states and that ITC being a form of concession and not a matter of right, the prescribed conditions for claiming ITC were required to be fulfilled by the dealer (in context procurement of Form C), the challenge Section 19(5)(c) was only making an intelligible differentia on the basis of a proper rationale.

4. However, the Ld. Bench considered the submission that in case a dealer is making sales exclusively to a Government, and Governments being not required to be registered under the Tamil Nadu VAT Act, the reasoning of intelligible differentia as referred above fails as the government could not have been registered and in case of sales made to governments, there existed no possibility of tax evasion and even if not registered sales made to the governments are identifiable.

5. In view of the above Section 19(5)(c) was upheld and was read down to the extent that those dealers who are making sales exclusively to other State Governments (i.e. outside the State of Tamil Nadu), the said States would be deemed as registered dealers for the purposes of availing benefits of ITC.

6. The gist of the entire matter has been expressed in para 49 of the Judgement, extracted hereunder:

“49. Result of the aforesaid discussion would be to uphold the judgment of the High Court with one rider, namely, that in those cases where a dealer makes sales exclusively to the other State Government(s), benefit of ITC would be allowed without insisting on the furnishing of Form ‘C’. However, in order to avail this benefit, a certificate from said the State Government to whom the supplies are made would be obtained by the dealer claiming ITC and submitted to the VAT authorities.”

Impact of the above positive judgment in the current times shall be limited in view of application of GST and in view of the fact that assessment under most of the state VAT Acts is complete and dealer would not be interested in opening of a pandora’s box.

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