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2015 (10) TMI 291 - HC - VAT and Sales TaxInput tax credit - whether the Appellant Assessees are entitled to input tax credit on purchase of duty entitlement pass book scrips - DEPB Credit - Held that:- The resultant position was that input tax credit can be claimed in respect of the turnover of purchases made for all of the aforementioned periods except the period 1st April 2010 to 30th September 2011 in respect of the purchases arising in the course of the Assessee”s activities as a dealer. As already noticed hereinbefore the periods with which these two appeals are concerned are prior to 1st April, 2010. Therefore, during that relevant period the change brought about by the DVAT Amendment Act 2009, was not operational. - The case of the DTT is that unless the DEPB scrips are “used” in the imported goods which are then sold, no such input tax credit can be availed of. According to Mr. Satyakam, the mere using of DEPB scrips as cash to reduce the incidence of customs duty cannot constitute usage for the purposes of Section 9(4) of the Act. There can be no doubt that the price of the goods imported has an element of customs duty paid on such goods. The component of customs duty is reduced to the extent of the usage by the Assessee of the DEPB scrips. The reduced customs duty is embedded in the resale price of the imported goods. Thus, the use of the DEPB scrips is for the purpose of the Assessee selling the imported goods. 'Usage' in this context has to be seen as a use that affects the price of the goods although it may not be used tangibly in the goods themselves. There is no warrant to limit the understanding of the word “use” to an actual direct tangible or physical use in the imported goods. The usage by the Assessees, who are registered dealers, of the DEPB scrips purchased by them from another registered dealer after paying the input tax for reducing the incidence of customs duty should be held to constitute use of such DEPB scrip for the purposes of sale of the imported commodity. The DEPB scrip has contributed, if not directly then indirectly, to the price of the imported commodity sold by the Assessees in the market. There could be any number of intangibles that have an impact on the value of the final product like advertisement costs in respect of which input service tax credit may have been availed of, as was in the case of Coca Cola India Pvt. Ltd. (2009 (8) TMI 50 - BOMBAY HIGH COURT). All that is to be shown is that such input tax paid goods have contributed to the sale of the final product in some way directly or indirectly. In order to avail of the input tax credit in the present case it is not necessary that the Assessees have to be dealers in the same commodity, i.e. the DEPB scrips which were used in payment of customs duty on the imported goods in which they were dealing. Such an interpretation will negate the object of introducing the system of value added taxes, i.e. to reduce the cascading effect of multiple taxes at various stages. As long as it is shown that use of the DEPB scrip has impacted the cost of the product that is sold, either directly or indirectly, the credit of the input tax paid on the DEPB scrip cannot be denied to the Assessees. - demands created on the Appellant Assessees, forming the subject matter of these appeals, are held unsustainable in law. Consequently, the question of payment of penalty does not arise and the orders levying penalty on each of the Appellants are also set asid - Decided in favour of assessee.
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