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2012 (11) TMI 835 - HC - VAT and Sales TaxInput - Input tax credit - Whether tax paid on the inputs for generating power can be set off against the tax payable on sale of aluminum, aluminum ingot and sheet etc when electrical energy is necessary to produce/manufacture and sale of aluminum, aluminum ingot and sheet etc – Held that:- The process of manufacturing of aluminum reveals that energy is required in such process of manufacturing. Electrical energy which is generated with the use of coal and other materials is only an intermediate product which is used in the process of manufacturing of final product viz. aluminum, aluminum ingots and sheets etc. Coal, alum, caustic soda and other consumables purchased from market on payment of tax and used for generation of electrical energy in the Captive Thermal Plant of the petitioner which is used in the process of manufacture of finished product viz. aluminum, aluminum ingots and sheets etc. taxable under the OVAT Act. are input as defined under Section 2(25) of the OVAT Act and the tax which has been paid on such purchases can be claimed as input tax credit under Section 2(27) of the OVAT Act against the tax payable on sale of finished products i.e. aluminum, aluminum ingots and sheets etc. - Decided in favor of assessee. Whether imposition of penalty under Section 43(2) of the OVAT Act can only be levied if the escapement is without any reasonable cause - held that:- VAT is indirect tax on consumption of goods. It is the form of collecting sales tax under which tax is collected in each stage on the value added to the goods. The basic object of VAT Scheme is to provide voluntary and self-compliance. It goes without saying that to plug the leakage of revenue, the Legislature enacted law authorizing imposition of penalty for infraction of any statutory provision. penalty proceedings are quasi-judicial in nature. Quantification of penalty under Section 43 of the OVAT Act is dependent upon the tax assessed under that Section. Once the Assessing Officer comes to the conclusion that the dealer is indulged in fraudulent activities and assesses him under Section 43 of the OVAT Act, there is no need for the Assessing Officer to make further investigation to find out whether the escapement is without reasonable cause for the purpose of imposition of penalty under Section 43(2) of the OVAT Act. The Hon’ble Supreme Court in the case of [Union of India & Others vs Dharamendra Textile Processors 2008 (9) TMI 52 - SUPREME COURT] held that wilful concealment is not an essential ingredient for attracting civil liability or penalty - In the result, writ petitions are allowed.
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