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2016 (6) TMI 859 - KARNATAKA HIGH COURTInput Tax Credit - correct amount of input tax rebate - scope of inputs - manufacturing activity - It was submitted that if there is failure on the part of the Assessee to get the specified formula through the Commissioner, the input tax credit is not permissible and has been rightly denied as per Rule 131[3] of the Karnataka Value Added Tax Rules, 2005. Held that:- all electrical and electronic goods including air conditioners, air coolers, telephones, fax machines etc., used would fall in the category of the goods for which the input tax credit would be inadmissible for the purpose of input tax credit unless the goods are for resale or for manufacturing of any other goods for sale. To put it in other words, if the goods specified in Fifth Schedule are purchased and put to use for the purpose of resale or for manufacture or for the process of other goods for sale, the input tax credit would be available. Any input used for generation of electricity or steam, provided such electricity or steam is used within the factory for the manufacturing activity of the final product, the same would stand covered. - Decision in the case of MARUTI SUZUKI LIMITED [2009 (8) TMI 14 - SUPREME COURT] It is also true that in the decision of the Apex Court, the matter was pertaining to consumable item, namely, ‘naphtha’ and ‘diesel’ for generation of electricity. But, in our view, once the goods are purchased in furtherance to or for aiding the manufacturing process, the same will have a direct nexus to the manufacturing activity and there is no reason why the same could be treated as an independent capital goods disentitling the benefit. As such, the matter cannot be segregated just on a mere ground that it would be capital goods. If the various items mentioned at Sl. No.3 in the description of goods are considered, it does include air conditioner, air cooler, fax machines which can be broadly considered as capital goods. Further, the language for all electrical or electronic goods is inclusive and not exhaustive. Therefore, when the other goods specified can also be considered as capital goods, but to be used in the manufacturing activity, there would not be any justifiable ground if the speeder system is purchased and used to back up the electricity in the manufacturing process to treat it differently for the purpose of input tax credit. - Decided in favor of assessee.
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