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2016 (2) TMI 767 - HC - VAT and Sales TaxDenial of Input Tax and Credit (ITC) and levy of penalty - Gujarat Value Added Tax (GVAT) - company was using the entire purchase of castor oil seeds for production of castor oil it claims input tax credit - in the reassessment proceedings it was held by the AO that the company would not be entitled for input tax credit to the proportion of the waste used by the company or the manufacturer and would be liable to pay tax under Section 11(3)(b)(iii) since the same was used as fuel. Held that - it is clear that the entire purchase made by the company is intended to manufacture castor oil and oil based products. In the first phase when crushing of the seeds takes place only some portion of the seeds turn into oil. After the first process of crushing the seeds most of the oil is extracted. The said castor oil cake is again crushed and the remaining portion of the castor oil is extracted therefrom in the second process leaving the waste which is of no use to the company and therefore the same is used in the furnace as a fuel in the manufacture of castor oil as well as other products. Only the waste is used as fuel and that too again in the manufacturing process of oil. Therefore in our opinion it would not fall under proviso to Section 11(a) of the Act. As far as applicability of Section 11(3)(b)(iii) is concerned the same would not be applicable since the entire purchase of castor seeds were used in the manufacture of castor oil and only the waste product was used as a fuel that too in the manufacture of castor oil. It is not even the case of the appellant-State that the castor oil seeds or a part thereof was purchased for using them as fuel. Deoiled cake is a byproduct and therefore it cannot be said that the same was purchases for using as a fuel. Deoiled cake is an inevitable byproduct which the company can throw it away as waste or use it as a fuel. There is no deliberate attempt on the part of the Company to manufacture Deoiled cake so that the same can be used as fuel. - input tax credit allowed - Decided against the revenue.
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