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2019 (9) TMI 521 - JHARKHAND HIGH COURTInput tax credit - Inconsistent Rule with statutory provision - tax paid on purchase of coal which is used by it for generation of electricity in its captive power plant and in turn, electricity so generated - absence of production of statutory declaration form JVAT 404 - Jharkhand Value Added Tax Act, 2005 - Jharkhand Value Added Tax Rules, 2006. HELD THAT:- From the reading of the provisions of the JVAT Act, 2005 it would transpire that said provisions are in consonance with the scheme of Value Added Tax Regime introduced in the Country. From the scheme of JVAT, 2005 it would be thus evident that output tax liability of a dealer was required to be determined after subtracting therein the input tax paid by the dealer - Section 18 of the JVAT Act, 2005 provides for determination of the Input Tax Credit which is available to a dealer in respect of input tax paid by it on the goods. Whether the petitioner is entitled to ITC u/s 18(4)(iii) of the JVAT Act, 2005 on input tax paid by it on coal which was utilized for generation of electricity, which in turn, was exclusively used for manufacturing and processing of finished product of the petitioner for sale? - HELD THAT:- The Hon’ble Supreme Court in its decision in the case of JK. COTTON SPG. & WVG. MILLS CO. LTD. VERSUS SALES TAX OFFICER, KANPUR [1964 (10) TMI 2 - SUPREME COURT] was considering the provision of Section- 8(1) and 8(3)(b) of the Central Sales Tax Act, 1956 which is almost parametria to the provisions of Section 18(4)(iii) of the JVAT Act, 2005 and has held, in substance, that if a process or activity is so integrally related to the ultimate production of goods so that without that process or activity manufacture would be commercially inexpedient, goods required in that process would fall within the expression “ in the manufacture of goods”. Thus, it would be evidently clear that use of coal by the petitioner-Company for generation of electricity, which in turn, was used for manufacturing of finished product, was integrally connected with the ultimate finished goods. Under the said circumstances, coal used for generation of electricity is to be categorized as raw material for ultimate production of the finished goods of the petitioner i.e. Sponge Iron and M.S. Billet - it can be concluded that the petitioner has fulfilled requisite conditions of availing benefit of ITC on coal utilized by it for generation of electricity. Availability of benefit of ITC to the petitioner in absence of production of Statutory JVAT 404 Forms - HELD THAT:- It appears that from bare reading of Section 18(6) of the JVAT Act, 2005 would reveal that ITC can be claimed by a dealer on production of tax invoices in original containing the prescribed particulars of sale evidencing the amount of tax paid. Further, said section contemplates that even for good and sufficient reasons to be recorded in writing where a dealer is prevented from furnishing tax invoices in original the prescribed authority may even then allow ITC by recording its reason. Thus, Section 18(6) of the JVAT Act, 2005 does not contemplate production of JVAT -404 Forms as a mandatory condition for availing benefit of ITC. However, Rule 35(2) of the JVAT Rules, 2006 stipulates further condition of production of JVAT 404 Form as requirement for claiming benefit of ITC. To this extent, Rule 35(2) of the JVAT Rules, 2006 is inconsistent with the provision of Section 18(6) of the JVAT Act, 2005 and is required to be held directory in nature and not mandatory. It is always open for the State Tax Authorities on the strength of tax invoices produced before it by a dealer to verify the genuineness of said invoices and to ascertain that said dealer has in fact discharged liability of input tax on such invoices in respect of which ITC is being claimed. Thus, the production of JVAT- 404 Form for the purpose of claiming ITC is merely directory in nature and not mandatory. Application allowed.
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