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13. The learned Advocate General made meticulous submission that the right to claim Input Tax Credit being a concession is available only in situation contemplated under the statute and if the right is not available in a given situation, it only means that the legislature did not intend to grant the right to claim Input Tax Credit in such situations. It is further submitted that all situations as claimed by the petitioners are not covered by Section 19(11), are situation where the tax liability of the vendor increases due to events like price variation, revision of assessment, reassessment etc., and in such situation whether increase in tax liability is transferred by the vendor to the purchaser is entirely a matter of contractual arrangement between the parties. Section 19 is mandatory and the word shall used in the statute intended the provision to be mandatory. According to respondents, the provision for consequences for failure in the form of lapse of credit or reversal of credit in other provisions such as Section 18(3), 19(19) etc., are not relevant inasmuch as under all those provisions the right to claim Input Tax Credit has already accrued to the assessee and the same is to be adjusted or refunded, unlike Section 19(11) which is a pre-condition for claiming credit.

(16) The input tax credit availed by any registered dealer shall be only provisional and the assessing authority is empowered to revoke the same if it appears to the assessing authority to be incorrect, incomplete or otherwise not in order.

(17) If the input tax credit determined by the assessing authority for a year exceeds tax liability for that year, the excess may be adjusted against any outstanding tax due from the dealer.

(18) The excess input tax credit, if any, after adjustment under sub-section (17), shall be carried forward to the next year or refunded, in the manner, as may be prescribed.

36. On this issue, useful reference may be made to the recent decision of the Division Bench of Bombay High Court in M/s.Mahalaxmi Cotton Ginning Pressing and Oil Industries vs. the State of Maharastra and Ors., [MANU/MH/0620/2012]. The challenge before the High Court of Bombay was to the constitutional validity of Section 48 (5) of the Maharastra Value Added Tax Act, 2002. Section 48 deals with set-off, refund, etc. Though the terminology used in Section 48 is slightly different from the terminology used in Section 19 of the TNVAT Act, in effect what is contemplated under Section 48 of the MVAT Act is in effect a credit or a refund of duty paid by a dealer subject to fulfillment of the conditions set out in Section 48. The Bombay High Court threadbare analyzed the set-off provision and held that the purpose of set-off is to obviate a cascading effect of the tax burden on the ultimate consumer and this element of legislative policy is to be balanced with the need for securing tax compliance and ensuring against a loss of legitimate revenue owing to Government. After analysing the erstwhile provisions contained in the Bombay Sales Tax Act and the Maharastra Value Added Tax Act, the Division Bench of the Bombay High Court held that a set-off constitutes a concession granted by the legislature and in the absence of set-off, the selling dealer would be liable to pay tax on the sale consideration and there is no independent right to a set-off apart from Section 48.

81. Sub-section (17) of Section 19 contemplates that excess may be adjusted against any outstanding tax due from the dealer. Sub-section (18) of Section 19 stipulates that excess Input Tax Credit if any, after adjustment under sub-section (17), shall be carried forward to the next year or refunded, in the manner as may be prescribed. When the scheme of the Act provides for adjustment of excess Input Tax Credit and carried forward to the next year or refunded, necessarily the details furnished by the registered dealer have to be verified. Matching process has to be carried out by verifying various entries. When the scheme of the Act stipulates the excess Input Tax Credit of a year being adjusted for the outstanding tax liability or excess Input Tax Credit being carried forward or refunded for each financial year, necessarily the Assessing Authority has to complete the accounts. It is in consonance with the scheme of the Act.