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TMI Blog2010 (9) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... al and ultra vires. A further prayer has been made seeking for a declaration that sub-rule (3) of rule 11 of the OVAT Rules is ultra vires the provision of section 20 of the OVAT Act read with the definition of "input tax" and "input-tax credit" as defined in subsections (26) and (27) of section 2 of the Act. The petitioners have further sought for an injunctive order against opposite-party Nos. 1 and 2 and their officers restraining them not to enforce collection of tax in terms of sub-rule (3) of rule 11 of the OVAT Rules and statutory prescription in column No. 21(II) in VAT form 201 and annexure II to VAT form 201 urging various facts and legal contentions. The petitioners are all registered dealers under the OVAT Act. They have been allotted with tax identification numbers and they are submitting their returns in compliance with the provisions of the OVAT Act and the Rules. All the petitioners are claiming input-tax credit facility in conformity with the provisions of section 20 of the OVAT Act. They purchase the required raw materials, consumables and other allied items required for their busi ness activities both from inside as well as outside the State and while they sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-sections (3), (4) and (5) in such manner as may be prescribed. It is further stated that a bare reading of section 20 would reveal about the method of calculation for entitlement of input-tax credit. Rule 11 is the statutory prescription framed by opposite-party No. 2 which speaks about the calculation of input-tax credit. The sub-rule (3) has been inserted to the Rules by way of amendment which came into force with effect from February 25, 2009 through the OVAT (Amendment) Rules, 2009. It is further stated that a careful reading of the proviso (d) of sub-section (3) of section 20 would reveal that "input-tax credit" on purchases when sold in course of inter-State trade and commerce shall be allowed only to the extent of the Central sales tax payable under the Central Sales Tax Act, 1956. It is their further case that the said proviso is attracted for input-tax credit for purchase when sold in inter-State trade and commerce. In other words, the said provision is applicable to the registered dealers only when there is resale of their goods. "Resale" has been defined under section 2(4) of the OVAT Act which means a sale of goods in the same form in which they were purchased. Frami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le (3) of rule 11 enjoins that when the sale of goods falls under clause (a) during the tax period June 1, 2008 to February 27, 2009 results in CST payable, less than the corresponding input tax on the corresponding purchase of goods, input tax creditable for the tax period shall be reversed by the amount as calculated in annexure IIA of form VAT 201. It is stated that while framing sub-rule (3) of rule 11 of the Rules, the State Government exceeded its power conferred upon it in framing the VAT form 201. Opposite-party No. 2 prescribed certain information and requirements which are contrary to the express provision laid down under section 20(3) of the OVAT Act. The opposite-parties specified that the manufacturer of goods sold in inter-State trade and commerce is required to calculate the purchase value of those inputs as well as the input tax. In order to give effect to form VAT 201, opposite-party No. 2 inserted a new column 21(ii) which mandates about the reduction of input-tax credit in excess of the Central sales tax payable as per proviso (d) to sub-section (3) of section 20. A combined reading of the provisions laid down under the proviso (d) to sub-section (3) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stated in their petitions that they purchase goods which are used by them as "raw material/inputs" for the purpose of manufacture of various goods related to iron and steel. The statute does not restrict claiming set-off of input tax against output tax. The said input-tax credit in respect of inter-State sale has been restricted up to the extent of Central sales tax payable under the CST Act. It is further stated that clause (a) of sub-rule (3) of rule 11 is a mere repetition of proviso (d) of sub-section (3) of section 20 and other clauses of the said sub-rule are providing the manner and modalities to claim input-tax credit in respect of inter-State transactions. Clause (b) of sub-rule (3) of rule 11 refers to annexure II of form VAT 201 wherein the convenient mode to claim input-tax credit against Central sales tax payable has been prescribed. Under the said form the manufacturer is required to calculate the proportionate inputs (goods) used in the manufacture of goods sold in inter-State trade and calculate the purchase value of those input (goods) as well as the input tax. Form VAT 201 at serial No. 21 it is stated as reduction of input-tax credit in excess of Central sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered dealers and in favour of the State Government by assigning the following reasons: For the aforesaid purpose, it is necessary for us to extract the provisions of the OVAT Act, namely, the definitions of "input tax" and "input-tax credit" as in section 2(26), 2(27) and also the definition of "business" as in section 2(7) and proviso to clause (d) of sub-section (3) of section 20 which read thus: "2. (26) 'input tax' in relation to any registered dealer means the tax collected and payable under this Act in respect of sale to him of any taxable goods for use in the course of his business, but does not include tax collected on the sale of goods made to a commission agent purchasing such goods on behalf of such dealer. (27) 'input tax credit' in relation to any tax period means the setting off of the amount of input tax or part thereof under section 20 against the output tax, by a registered dealer other than a registered dealer paying turnover tax under section 16; (7) 'business' includes,- (a) any trade, commerce or manufacture; (b) any adventure or concern in the nature of trade, commerce or manufacture; (c) any transaction in connection with, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t facility in relation to any tax period means the setting off of the amount of input tax or part thereof under section 20 against the output tax by a registered dealer other than a registered dealer paying turnover tax under section 16. Section 18 provides for zero rated tax. When the goods are sold by a registered dealer in course of inter-State trade or commerce they are not liable to pay tax. Section 20 deals with input-tax credit which provides for determination under the aforesaid provision. We are concerned here with proviso (d) of sub-section (3) of section 20. Proviso (d) states that input-tax credit on purchase when sold in course of inter-State trade or commerce shall be allowed only to the extent of the Central sales tax payable under the CST Act. Constitutional validity of the aforesaid proviso in the OVAT Act has not been questioned by the petitioners. The said proviso was inserted with effect from June 1, 2008. In the absence of challenge to the said provision, the framing of rule 11(3) by the State Government in exercise of statutory power to frame subordinate legislation cannot be found fault with. Rule 11 provides the procedure regarding collection of input-tax cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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