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2016 (7) TMI 1125 - HC - VAT and Sales TaxInput tax credit - whether the tax which the assessee has paid on the purchase of raw material and packing material which is ultimately used in the manufacture and packing of goods is liable to be adjusted in full from the ultimate tax liability which a dealer may stand faced with or is it liable to be adjusted only to the extent of the taxable turnover. - Held that:- Applying the ratio of Bharat Petroleum [1992 (2) TMI 250 - SUPREME COURT OF INDIA] to the facts of the present case and the language of section 4BB, this Court finds the clear absence of a "quantitative correlation" to the total tax paid on the raw or packing material and their utilisation in the manufacture of taxable goods. Secondly this Court notes that the tax free sales effected by the revisionist was not of its own accord. These were sales effected in favor of units which had been granted exemption from payment of tax under section 4B. Surely the benefit of tax already paid by the revisionist could not be denied adjustment based upon the liability or otherwise of another dealer. Thirdly, the Court notes that the revisionist has effected a sale of goods to entities within the State. However since these enjoyed exemption under Section 4-B, no tax was collected on these sales. The mere fact that tax has not been collected, does not detract from the position that a sale of goods took place. Lastly, the Court notes that the section itself provided a facility of set off of tax already paid by a dealer in respect of input goods. It was therefore in the nature of a beneficial provision. It must, therefore, be accorded an interpretation which is in favour of the assessee. For the aforesaid reasons, this Court finds the action of the assessing authority in reducing the set off which was claimed by the revisionist to be unsustainable. The answer is thus entered in favour of the assessee and against the Department.
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