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2016 (9) TMI 1161 - HC - VAT and Sales TaxProportionate dis-allowance of Input Tax Credit - Madhya Pradesh Value Added Tax Act, 2002 - by-product oil cake - commodity oil cake declared tax free under Section 16 by specifying in Entry No.3 of Schedule I of the Act - manufacture of oil - Input Tax for consumption or use of manufacture of oil, entitle the petitioners to Rebate of Input Tax (ITR) from the tax payable on sale of oil by such manufactures - explanation inserted, Sub Clause (6) of Clause (a) of Sub Section (1) of Section 14 of the Act stating where a manufacturing process results in the manufacture of Schedule I as well as Schedule II goods, Input Tax Rebate should be computed after apportioning the Input Tax in proportion to the value of Schedule I and Schedule II goods so manufactured - amendment then became an Act vide Madhya Pradesh Value Added Tax (Second Amendment) Act, 2014 with the modification that the explanation inserted in the Act by Ordinance has been given a retrospective effect from 01.04.2006. The effect of the above amendment is that the petitioners are deprived of the benefit of ITR in respect of Input Tax paid by them for purchase of raw material used or consumed by them for / in the manufacture of Schedule II goods, viz. 'oil' from oil seeds, which was available to the petitioners in terms of Section 14 (1) (a) (2) of the Act - whether retrospective amendment introduced with retrospective effect is justified and holds good? It is well settled that by inserting an Explanation in statute, the main provision of the Act cannot be defeated or enlarged. Ordinarily, the purpose of Explanation is to clarify that it is already enacted and not to introduce something new. The 2014 amendment was obviously introduced for the purpose of rectifying the obvious error in Section 14. The object which cannot be introduced by Explanation since an Explanation cannot be read as changing or as interfering with the incidence of the levy. It is not done, particularly when legislative clarity is required since the statutory provision imposes a tax, to untangle the legislative confusion. Explanation to Section 14 of the M.P. VAT Act, as introduced by Amendment Act of 2014 and amended in 2015, would apply prospectively. However, the legislature has power to validate the judicial invalid levy retrospectively by bringing Validation Act. Explanation to amendment of Section 14 to apply prospectively - writ petition allowed - decided in favor of petitioner.
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