HC : Allows notional ITC on secondhand vehicles purchase; VAT discharge on first-sale mandatory

HC rules that dealer shall be entitled to adjust notional Input Tax Credit (ITC) claimed on purchase price of secondhand motor vehicles, when ultimately sold to his customers; Quashes assessment order which denied such ITC under Rule 20(3)(a) of Telangana VAT Rules on failure of assessee-dealer to produce tax invoice, observes that rule-making authority has consciously used the words “supported by documentary evidence” and not “supported by a tax invoice” in said Rule; Documentary evidence must be such so as to satisfy the Assessing Authority of purchase price actually paid by dealer to the vendor and also to show that the said vehicle has been subjected to levy of VAT under the Telangana VAT Act; As per Rule 20(3)(a), benefit of notional ITC is available only to vehicles registered under Motor Vehicles Act within the State (as they would have suffered VAT), therefore, new vehicles which are registered outside the State at the time of their first sale by an automobile dealer do not fall within the ambit of said Rule; Observes that granting benefit to secondhand vehicles on which no VAT has paid within the State would result in travelling beyond Section 16 of Act, thus rendering Rule 20(3)(a) ultra vires VAT Act : Telangana & Andhra Pradesh HC