Case Of: Trishala Alloys Pvt. Ltd
Issued By: Hon Supreme Court
Order No: Civil Appeal No. 2212 of 2024
Date: 17th February 2025
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Input Tax Credit is a Legal Right and Cannot Be Retrospectively Reduced Without Legislative Sanction
The case pertains to the validity of Rule 21(8) of the Punjab VAT Rules, 2005, which was introduced between 25.01.2014 and 01.04.2014, during a period when there was no enabling provision in the Punjab VAT Act, 2005.
The respondent, a manufacturer of iron and steel products, bought raw materials both from within Punjab and outside the state. Under the Punjab VAT Act, businesses were allowed to claim Input Tax Credit (ITC) on taxable goods used for resale or for making other taxable goods.
On 25.01.2014, the Punjab Government changed Rule 21 by adding sub-rule (8), which took effect from 01.02.2014. This rule reduced the ITC available on stock held as of 31.01.2014, limiting it to a lower tax rate.
The respondent challenged this new rule in the High Court, arguing that it unfairly reduced ITC on goods already purchased and taxed before the rule was introduced.
The case pertains to the validity of Rule 21(8) of the Punjab VAT Rules, 2005, which was introduced between 25.01.2014 and 01.04.2014, during a period when there was no enabling provision in the Punjab VAT Act, 2005.
The respondent, a manufacturer of iron and steel products, bought raw materials both from within Punjab and outside the state. Under the Punjab VAT Act, businesses were allowed to claim Input Tax Credit (ITC) on taxable goods used for resale or for making other taxable goods.
On 25.01.2014, the Punjab Government changed Rule 21 by adding sub-rule (8), which took effect from 01.02.2014. This rule reduced the ITC available on stock held as of 31.01.2014, limiting it to a lower tax rate.
The respondent challenged this new rule in the High Court, arguing that it unfairly reduced ITC on goods already purchased and taxed before the rule was introduced.