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2017 (4) TMI 6 - KARNATAKA HIGH COURTInput tax credit - manufacture of cement - Whether the tax paid by the assessee, a manufacture of cement, is entitled to claim input tax credit in respect of the tax paid by it on the purchase of cement prior to its commencement of commercial production and such cement being used for laying the foundation and erection of cement manufacturing plant and machinery, in view of Sections 11 and 12 of the KVAT Act? Held that: - though the cement is specified in item No.5 of Fifth Schedule, since the cement in the present case was admittedly utilised for laying down of foundation and civil works for erection of cement manufacturing plant and machinery itself, such cement, along with the plant and machinery itself, should be deemed to be used for the purpose of manufacturing of other goods for sale, namely cement itself, after the commencement of commercial production. Therefore, it falls in exception of negative clause of Section 11 of the KVAT Act and the assessee would be entitled to input tax credit. While Section 11 of the KVAT Act provides for restriction on input tax credit, in its exception carved out under Section 11(a)(2) as well as Section 12 of the KVAT Act, providing for deduction of input tax credit in respect of the capital goods, both would support the case of the present assessee. Reliance was placed in the case of Maruti Suzuki Limited Vs. Commissioner of Central Excise, [2009 (8) TMI 14 - SUPREME COURT], where it was held that installation of electrical and electronic goods which have nexus to the manufacturing process like the Speeder System used in that case to provide backup electricity in the manufacturing process, the Court allowed the input tax credit in respect of the tax paid on such Speeder System under the provisions of KVAT Act dealing with Section 11(a)(2) and Fifth Schedule of the KVAT Act. The petitioner would be entitled to claim input tax credit in respect of the tax paid by it in respect of such cement purchased and used by it during the relevant period, prior to the commencement of its commercial production, for the purpose of erection of the plant and machinery - petition allowed - decided in favor of assessee.
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