Tamilnadu vat, composition scheme

I Have an query.

The dealer initially opt for composition scheme under tnvat and starting paying 2% on works contract amount received but later on he purchased goods from interstate by paying CST. The dealer did not take any C form in this regard.

The department is refused to accept it and compute the liabilty as per normal procedure but disallowed all the ITC on Local purchase.

So, what is the possible way to reduce the vat liability