Madras High Court· 24 July 2026

Can input tax credit under Section 19(2) of the TNVAT Act be claimed on a DEPB licence used to import plastic granules sold as granules?

M/s. P.I. Polymers v. Commercial Tax Officer, Pattaravakkam Assessment Circle

W.A.Nos.384 & 387 of 2020 · W.A.Nos.384 & 387 of 2020
Coram: Dr. G.Jayachandran; N. Mala; G. Jayachandran

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Answer

No. A DEPB licence is distinct from the goods imported on its strength; only the imported goods themselves, if taxed under the Act and listed in the First Schedule, can attract input tax credit, and the duty paid for the DEPB licence used for importing plastic granules does not fall under any of the categories in Section 19(2).

Headnote

Tamil Nadu Value Added Tax Act, 2006 — s.19 — Input Tax Credit — DEPB licence — Section 2(21) — meaning of goods — Tamil Nadu Value Added Tax Act, 2006 — s.19(1) — Input tax credit — restriction to goods specified in First Schedule — Held: Input tax credit under Section 19(1) of the TNVAT Act is available only where the tax paid or payable relates to taxable goods specified in the First Schedule, and a DEPB licence, though falling within the definition of goods under Section 2(21), is not itself listed in Part A, Part B or Part C of the First Schedule. (¶32) Tamil Nadu Value Added Tax Act, 2006 — s.19(2) — Input tax credit — DEPB licence excluded — no nexus with imported goods — Held further: A DEPB licence is distinct from the goods imported on its strength; only the goods actually imported using the licence, if taxed under the Act and listed in the First Schedule, can attract input tax credit under Section 19(1), and the duty paid on the DEPB licence itself does not qualify under Section 19(2). (¶33, 34) Precedent — binding effect of Division Bench ruling — per incuriam plea rejected — Held further: The Division Bench ruling in M/s.Sha Kantilal Jayantilal v. State of Tamil Nadu, which examined the scheme of Section 19 in detail and denied input tax credit on DEPB licences, is not per incuriam and remains binding on the question of entitlement to credit on DEPB purchases. (¶17-20, 22) Tamil Nadu Value Added Tax Act, 2006 — s.19 — Input tax credit — assessee not entitled — appeal dismissed — Held further: The assessee, having purchased DEPB licences and imported plastic granules sold as such, is not entitled to input tax credit on the tax borne on the DEPB licence for discharging output tax on sale of plastic granules, as DEPB licences are not goods specified in the First Schedule. Writ Appeals dismissed. (¶33, 23)

In the Court's own words

Paragraph 33DEPB licences do not even fall under any of the categories mentioned in section 19(2). The case of the petitioner does not even fall under sub- section (3) or sub- section (4) of section 19. Therefore, our answer to the first question of law would be that the Department was right in denying the benefit of input-tax credit in respect of the duty paid by the petitioner on the purchase of DEPB licences, despite the fact that these licences constitute goods within the meaning of section 2(21).

Paragraph 34Despite the fact that DEPB licences are goods, they are certainly different and distinct from the goods that can be imported on the strength of those licences. These licences confer a right upon the licensees to import goods at some concession. It is only the goods that are imported on the strength of these DEPB licences, that may fall within the ambit of section 19(1) provided a tax is payable or paid under the Tamil Nadu Value Added tax Act, 2006 on those goods and those goods are also listed in the First Schedule to the Act. (emphasis added)

Acts & Sections

Section 19 of the Tamil Nadu Value Added Tax Act, 2006Section 19(1) of the Tamil Nadu Value Added Tax Act, 2006Section 19(2) of the Tamil Nadu Value Added Tax Act, 2006Section 2(21) of the Tamil Nadu Value Added Tax Act, 2006Section 2(23) of the Tamil Nadu Value Added Tax Act, 2006Section 2(24) of the Tamil Nadu Value Added Tax Act, 2006Section 3(3) of the Tamil Nadu Value Added Tax Act, 2006Section 8 of the Central Sales Tax Act, 1956

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Also decided in this judgment

Under the TNVAT Act, is a DEPB licence goods under Section 2(21) but still ineligible for input tax credit under Section 19?Is the Division Bench ruling in Sha Kantilal Jayantilal denying input tax credit on DEPB licences per incuriam?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Madras High Court. Corrections