TMI Blog2015 (4) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... be the Head of the Department, the manner, in which a particular return is to be assessed or a refund has to be granted or refused cannot be issued in the form of guideline or instruction to the Assessing Officer. - assessing officer cannot be solely guided by the impugned guidelines and has to exercise his quasi-judicial powers. In any event there is no cause of action to challenge the impugned circular. Question of quashing the impugned circular is unnecessary in the light of the stand taken by the respondents that the impugned circular is not statutory and at best could serve as guideline. A note of caution is added by observing that no Assessing Officer or Adjudication Authority exercising powers under the VAT Act or Rules framed thereunder can blindly follow the circular while considering a return or refund claim. Accordingly the challenge to the impugned circular is held to be unnecessary since the circular is a non-statutory circular and is in the nature of guideline and the prayer for quashing the circular is rejected Whether Section 18 of the TNVAT Act is a Scheme by itself or whether the benefit to a dealer under Section 18 is subject to the conditions prescribed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g input tax credit by applying Section 19 of the VAT Act and it is only then, the Authority can pass an order on a refund claim. Therefore, the processing of refund application under Form W is in effect akin to an assessment proceedings since the benefit which flows under claim in Form W, is in effect, the amount which the dealer avail as refund would be a credit if the transaction was not a zero rated sale. - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or adhoc basis stands set aside. However, liberty is granted to the concerned Assessing Officer to issue show cause notices to the petitioners clearly setting out the circumstances under which they propose to revise or call upon the petitioner to reverse refund sanctioned and after receiving their objections shall proceed in accordance with law. Section 18 of VAT Act is subject to the restrictions and conditions under Section 19 of VAT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further submitted that the yarn locally purchased from registered dealers had been put to a manufacturing process and therefore the petitioner availed Input Tax Credit of the VAT paid by them in purchases of yarn in terms of Section 19(1) read with Section 19(2)(ii) of the VAT Act. The resultant final product viz., Hosiery Garments being exported periodically, the petitioners made a claim for refund of Input Tax Credit on the purchases of yarn in terms of Section 18(2) read with 18(3) of the VAT Act. Such claim of refund was made in an application in Form W as prescribed under Rule 11(2) of VAT Rules, 2006. The refunds were granted to the petitioner periodically. While so, the place of business of the petitioners was inspected and the Inspecting Officers informed the petitioner that they have to pay VAT on the invisible loss, which was arrived at 5% of the total value of the yarn purchased by them. As that of the petitioner, the other persons, who were also involved in the same trade were required to pay VAT on the invisible loss of yarn emerging during manufacturing process. 4. Representation was made by the Textile Exporters Association to the Joint Commissioner of Commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased during a particular year. 5. The petitioners submitted their objections to the notice issued and thereafter for about two years nothing appears to have happened and during 2012, assessment proceedings were initiated, which compelled the petitioners to file writ petitions challenging the circular dated 20.10.2011 and in certain writ petitions, challenge is to the notices issued or proceedings initiated calling upon the petitioners to reverse the Input Tax Credit at uniform rate of 5% as well as consequential orders reversing the input tax credit availed to the extent of 4% / 5%. The other writ petitions viz., W.P.No.13901 of 2013 also challenges the impugned circular and only difference being the petitioner therein being the manufacture of S.G.Iron S.S.Pipe Fittings and selling the same to locally and to outside State Dealers. The petitioner in W.P.No.9275 and 9276 of 2014 are manufacturers of Alloy Steel and Cast Iron viz., MS Scrap, Ferrous and non Ferrous purchased from local registered dealers and also from other States and they are exporting furnished goods directly under Section 5(i) of the CST Act. Though the products manufactured and exported by each of the wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efund is processed is not as per the procedure stipulated under the Act; further the petitioners are not required to prove prior sufferance of tax at the hands of the vendor and in this regard, reliance was placed on the decision reported in [2013] 60 VST 283(Mad) [SRI VINAYAGA AGENCIES VS. ASSISTANT COMMISSIONER (CT), VADAPALANI-I ASSESSMENT CIRCLE, CHENNAI AND ANOTHER]. Further, by referring Section 19(9) of the VAT Act, it is submitted that the said provision is attracted when goods are damaged before manufacturing process and the term loss used in Section 19(9) cannot be isolated for / as invisible loss and a reading of the provision would clearly show that when goods are destroyed or there is theft and not used in the manufacture, hence goods are referred as essentially which are not gone through the process of manufacture. Learned counsel placed reliance on the decision in AIR 1981 SC 2101 [RAINBOW STEELS LTD AND ANOTHER VS THE COMMISSIONER OF SALES TAX, UTTAR PRADESH AND ANOTHER]. Further it is submitted that in the absence of enabling provisions, the Authorities cannot proceed as directed in the circular and the effect of the circular amounts to double taxation. Further it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it is submitted that paragraph 13 of the impugned circular is contrary to Section 19(9) and there is no provision to reverse ITC on wastage. Further it is submitted that Rule 9 and 10 does not empower reversal of ITC on manufacturing loss and further Section 19(9) of the VAT Act contemplates as loss prior to manufacture or in the intermediary stage and unless the Rules are amended, action initiated by the respondent cannot be taken as it is illegal. Further it is submitted that under the Maharashtra VAT Act, 2002, Rule 55(5) is available and there is no such Rule under the TNVAT Rules and therefore, there can be no power given to the Assessing Officer to reverse the credit availed. Further it is submitted that since Section 19(9) are applicable only to cases before manufacture and the Section does not provide any procedure which is normally provided by mentioning in the manner prescribed . The learned counsel raised alternative plea stating that under the provisions of VAT Act, or the Rules, there is no requirement of determining the percentage of loss or wastage or what is intermediary loss for various types of industries. Further it is submitted that Section 19(9)(i) alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly, the yarn purchased is used in the manufacture, then to contend, it is destroyed in the process of manufacture, falls foul of Section 18(2) of the VAT Act. Further it is submitted that destroyed/destruction is put to end and which is a deliberate act and not an invountary act. In this regard, learned counsel referred to the Websters Dictionary for the definition for the word destroyed as well as Black's Law Dictionary. 11. Alternatively, learned counsel submitted that even if it is the expression destroyed is stretched to mean manufacturing loss, Section 18 of the Act is a special scheme and Section 19 cannot be interpreted into Section 18 of the Act. By referring Section 18(3) of the Act, it is submitted that such a bar is not available under Section 19 and the benefit under Section 18 is a special benefit; with a condition, at this stage, it is to be noted that though the petitioner is not entitled to pay tax, yet, he is entitled to refund and that is why it is a special scheme. Further, it is submitted that Section 19 deals with Input Tax Credit and Sub Section (9) falls under Section 19 and it cannot be read into Section 18 and in this regard, relied on a deciso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the unreported decision of the Division Bench of this Court in T.C(R).1661 of 2008 dated 25.08.2010. It is further submitted that though there is wastage in the dyeing process, the value of the raw material goes along with it and therefore, reversing the credit does not arise. Further the word consumed used in Section 18(2) of the Act wouldalso include evaporation. Further it is submitted that the circular has absolutely no sanction and cannot be used to deny the credit. 14. M/s.Ananda Gomathy Sivakumar, learned counsel submitted that there was process loss in their case as visible and it is only sludge and cannot be used and there is no commercial value and this aspect of the matter was not considered by the respondent and arbitrarily they have applied circular. In other respects, the learned counsel adopted the submission of Mr.N.Sriprakash. 15. On the above submissions, the learned counsel for the petitioners prayed for quashing the circular and to set aside the reversal of ITC to the extent of 5% made on the assessees. 16. Dr.Anita Sumanth, learned Special Government Pleader (Taxes) assisted by Mr.Cibi Vishnu, learned Additional Government Pleader and Mr.A.R.Jayapra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Division Bench was not availed of by the petitioners and the present writ petitions are not maintainable. 18. Learned Special Government Pleader further submitted that the impugned orders in each of the writ petitions are revisable orders and the petitioner should be relegated to file a petition under Section 52 of the Act and the writ petition has to be dismissed as not maintainable. Further it is submitted that though there is no power under the VAT Act to issue circular, the impugned circular is not a statutory circular and it is in the form of guideline and the Assessing Officer has to consider each case and though the circular states that it should not be quoted by the Assessing Officer, nevertheless the circular is available in the official website of the Department, a public domain, and the petitioners have downloaded the circular from the official website. Therefore, it is submitted that the circular cannot be quashed on the grounds raised by the petitioners. Learned counsel referred to Clauses 10, 13 and 14 of the circular, which is in the nature of guideline and the VAT Rules provide for ascertaining quantities utilised to determine the input output ratio and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions. Further it is submitted that even in cases where there is inconsistency in the two special enactments, it has to be resolved on the basis of purpose and policy of enactment and intentment conveyed by the language, and as regards the language of the enactment, reference was made to the decision of the Honourable Supreme Court in the case of Ashoka Marketing Ltd., Vs Punjab National Bank and Others reported in 74 Company Cases 482 (SC). Therefore, it is submitted that even assuming Section 18 and 19 are two separate compartmens, the policy object and intent of the VAT Act has to be borne in mind. Distinguishing the decision relied on by the learned counsel for the petitioner in the case of Multimetals Ltd., Vs. Assistant Collector, Central Excise (Supra), it is submitted that the said decision arose out of a case interpreting notification issued by the Central Excise Rules 1944 and under the Cenvat Credit Rules; Rule 2(k) defines inputs to mean whether contained in the final product or not, it is in contradiction with the definition under the VAT Act in particular Section 2(23) and 2(24); onceagain referring to the decision of the Division Bench in the case of A.L.Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form W is not a provisional order and once credit has been granted, there is no mechanism to reverse. By referring to the decision in the case of Mathuram Agrawal Vs. State of Madhya Pradesh reported in AIR 2000 SC 109 in a Taxing Act, it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language; it is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal staute and equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute and the words cannot be added to or substituted. Further it is submitted that the illustration given under the FAQ supports the contention of the petitioner. Distinguishing the decision in the case of A.L.Murugan Chettiar (supra), it is submitted that the decision is not applicable to the petitioners case as it was different enactment and it is not dealing with credit. Further it is submitted that disposal of the earlier writ petition filed by the Association is not a bar to maintain these writ petitions since the writ petition was dismissed on the ground of lack of locus standi. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ascertain the quantum of loss, if any ? (4) If it is held that the relief under Section 18(2) of TNVAT Act is subject to Section 19 of TNVAT Act, whether the circumstances mentioned in Section 19(9)(i),(ii) and (iii) would cover manufacturing loss ? (5) Whether the respondent assessing authorities were justified in adopting a uniform percentage as invisible loss and calling upon the dealer to reverse the Input Tax Credit availed to that extent ? (6) Whether the petitioners/dealers are justified in contending that there is no machinery under the TNVAT Act to reverse the refund granted pursuant to an order passed on an application filed by the dealer in Form W under Rule 11(2) of the TNVAT Rules ? 24. Though the writ petitioners manufacture different products, all of them are exporters and availed benefit of Section 18 of the VAT Act, which covers zero-rated sales, defined under Section 2(44) of the VAT Act, which means sale of any goods, on which, no tax is payable, but credit for the input tax related to that sale is admissible. Broadly, the challenge in all these writ petitions are on two grounds, firstly, by contending that the Circular dated 20.10.2011 is illegal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department, the Assessing Officers, who are subordinate officers, cannot be expected to take a different view. In the light of the said finding, it was observed that there will be no necessity to avail the alternate remedy under the Act. 27. As noticed above, the respondent themselves admitted that the impugned circular has no statutory force. In such circumstances, the question of quashing the circular does not arise, as there was no power to issue such circular and this being not a statutory circular, not binding on the assessing authority. As pointed out in the case of Canon India (cited supra), the Assessing Officers, being Subordinate Officer to the Commissioner, cannot be expected to ignore the circulars. Therefore, the circulars, at best could be considered as a guideline for the Assessing Officer, but not a Rule Book , which the Assessing Officers should blindly follow without application of mind to the facts of each assessment or a claim for refund; at best, it could be construed as elucidating, the manner, in which the refund claims are to be processed. The impugned circular endeavours to ensure a procedure, by which the object behind which the circular issued was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of refunds with Banks/Treasury and (xix) Rectification of refund order. 30. The above is an overall view of the purport and intent of the circular issued by the Commissioner. The question now would be what is the effect of such circular on the refund claim made by the petitioner and whether the circular could be the starting point for issuance of notice to reopen the already sanctioned refund. 31. Now, we come to the first question framed for consideration. Viz., Whether the impugned Circular No.22/2011 dated 20.10.2011 is bad in law for want of jurisdiction to issue the same under the provisions of the TNVAT Act and the effect of such Circular on the assessments made by the Assessing Officer? The circular has been admitted to be a non-statutory circular, yet, having been issued by the Head of the Department would have an effect on the Assessing Authorities, therefore, is there a need to quash the circular. In the preceding paragraphs, the purpose and intent of the circular has been set out. The circular deals with various issues, one of which pertains to referred claims pertaining to zero-rated sales. Thus, reading the circular as a whole, apart from other issues, it app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the VAT Act. Therefore, at best, it could be a guideline issued to the Officers to wake up and get themselves reminded of all the statutory responsibilities cast upon them, while processing refund claims among other things. As stated earlier, the lapses, which have been mentioned in the circular, which appears to have to come to light during random check is illustrative and not exhaustive. There may be cases where random check did not reveal certain lapses; that does not mean those lapses are condoned as it has not been taken note of by the Commissioner while issuing circular; such interpretation would stifle the provisions of the Act. 33. The Honourable Division Bench in the case of Madras Granites (P) Limited Vs Commercial Tax Officer, Arisipalayam Circle, Salem and another reported in 146 STC 642 was considering the correctness of an order passed by the Tamil Nadu Taxation Special Tribunal. The contention was that the assessing officer solely proceeded to complete the assessment on the D-3 proposal given by the statutory officer. The Division Bench pointed out that the assessing officer is a quasi-judicial authority and in exercising his quasi-judicial function of comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of Chattisgarh Excise Act, 1915 and the question was whether the circular issued by the Commissioner of Excise in terms of Section 7 of the said Act could override the rule making power of the State. In my view, the decision is clearly distinguishable on facts and does not render support to the cases on hand. 38. In the light of the above, the question of quashing the impugned circular is unnecessary in the light of the stand taken by the respondents that the impugned circular is not statutory and at best could serve as guideline. A note of caution is added by observing that no Assessing Officer or Adjudication Authority exercising powers under the VAT Act or Rules framed thereunder can blindly follow the circular while considering a return or refund claim. Accordingly the challenge to the impugned circular is held to be unnecessary since the circular is a non-statutory circular and is in the nature of guideline and the prayer for quashing the circular is rejected. Question No.1 is answered accordingly. 39. Question No.2:- Whether Section 18 of the TNVAT Act is a Scheme by itself or whether the benefit to a dealer under Section 18 is subject to the condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as specified in sub-section (1), subject to such restrictions and conditions as may be prescribed. (3) Where the dealer has not adjusted the input tax credit or has not made a claim for refund within a period of one hundred and eighty days from the date of accrual of such input tax credit, such credit shall lapse to Government. Section 19:- 19. (1) There shall be input tax credit of the amount of tax paid or payable under this Act, by the registered dealer to the seller on his purchases of taxable goods specified in the First Schedule : Input tax credit. Provided that the registered dealer, who claims input tax credit, shall establish that the tax due on such purchases has been paid by him in the manner prescribed. (2) Input tax credit shall be allowed for the purchase of goods made within the State from a registered dealer and which are for the purpose of - (i) re-sale by him within the State; or (ii) use as input in manufacturing or processing of goods in the State; or (iii) use as containers, labels and other materials for packing of goods in the State; or 156 (iv) use as capital goods in the manufacture of taxable goods. (v) sale in the course of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding commercial vehicles, two wheelers and three wheelers and spare parts for repair and maintenance thereof, unless the registered dealer is in the business of dealing in such automobiles or spare parts; or (c) purchase of air-conditioning units unless the registered dealer is in the business of dealing in such units. (8) No input tax credit shall be allowed to any registered dealer in respect of any goods purchased by him for sale but given away by him by way of free sample or gift or goods consumed for personal use. (9) No input tax credit shall be available to a registered dealer for tax paid or payable at the time of purchase of goods, if such- (i) goods are not sold because of any theft, loss or destruction, for any reason, including natural calamity. If a dealer has already availed input tax credit against purchase of such goods, there shall be reversal of tax credit; or (ii) inputs destroyed in fire accident or lost while in storage even before use in the manufacture of final products; or 157 (iii) inputs damaged in transit or destroyed at some intermediary stage of manufacture. (10) (a) The registered dealer shall not claim input tax credit until the dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input tax credit, shall pay the amount availed on the date from which the order of cancellation of the registration certificate takes effect. Such dealer shall be liable to pay, in addition to the amount due, interest at the rate of one and a quarter per cent, per month, on the amount of tax so payable, for the period commencing from the date of claim of input tax credit by the dealer to the date of its payment. (16) The input tax credit availed by any registered dealer shall be only provisional and the assessing authority is empowered to revoke the same if it appears to the assessing authority to be incorrect, incomplete or otherwise not in order. (17) If the input tax credit determined by the assessing authority for a year exceeds tax liability for that year, the excess may be adjusted against any outstanding tax due from the dealer. (18) The excess input tax credit, if any, after adjustment under sub-section (17), shall be carried forward to the next year or refunded, in the manner, as may be prescribed. (19) Where any registered dealer has availed input tax credit and has goods remaining unsold at the time of stoppage or closure of business, the amount of tax availe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of refund. The terms input tax credit or refund occurring in Sub Section (1) of Section 18 is of relevance while interpreting the term refund contained in Sub Section (2) of Section 18. It is relevant to point out that under the VAT regime no dealer has a right to claim input-tax credit independent of the provisions of Section 19. It has been held set-off provided under the VAT Act is in the nature of concession. (See M.Mohammed Haji Vs. State of Kerala ([2013] 63 VST 317 (Ker)). The Division Bench in the case of Jayam Co. Vs. Assistant Commissioner (CT) Main Amaindakarai Assessment Circle, Chennai and another (and other cases), while considering the validity of Section 19(20) of TNVAT Act, pointed out that there was distinction between the scheme of tax on sale of goods both under the VAT regime and under the Sales Tax Act existing prior to that; under the Sales Tax Act, except a few items, all other goods were taxable at the point of first sale in the State, therefore, tax was levied and collected only from the first seller. Contrary to this, the scheme under the VAT regime is that the tax collected by the first seller is given as input-tax credit to the second seller, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly construed. 44. The Honourable Division Bench of the Bombay High Court in the case of Mahalaxmi Cotton Ginning Pressing and Oil Industries Vs. State of Maharashtra and Others reported in [2012] 51 VST 1 (Bom), considered the validity of Section 48(5) of the Maharashtra Value Added Tax Act, 2002 which states that in no case, the amount of set-off or refund on any purchase of goods shall exceed amount of tax in respect of the same goods, actually paid, if any, under the Act or any earlier law, into the Government treasury except to the extent where purchase tax is payable by the claimant dealer on the purchase of the said goods effected by him. While considering the validity of the said provision, among other things, it was pointed out that when the set-off constitutes a concession granted by the Legislature; in the absence of a set-off under Section 48(5), the selling dealer would be liable under the charging provision of the MVAT Act, 2002 to pay tax on the sale consideration. There is no independent right to a set-off apart from Section 48; the entitlement to a set-off is created by the taxing statute and the terms on which a set-off is granted by the legislation must be str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on any contingency and any of the conditions stipulated under Section 19 of the VAT Act are arguments, which are stated to be rejected. There is no such exception carved out in the statute. Section 18 of the VAT Act does not begin with a non-obstante clause, rather, a procedure prescribed for cases of zero rated sale. As already observed, the proper test to be applied is not the terminology used viz., refund, but, in essence, what amount refunded is undoubtedly a credit, which is being refunded as there is no tax liability in zero-rated sale. 46. The learned counsel for the petitioner relied on the decision of the Honourable Supreme Court in the case of J.K.Cotton Spinning Weaving Mills Co.Ltd., Vs. The Sales Tax Officer, Kanpur and Another reported in 1965 16 STC 563 (supra) emphasising on the expression in the manufacture of goods used in Section 8(3)(b) of the Central Sales Tax Act, 1956 and contended that what is required to be proved by the petitioner is that the goods purchased by them is used for the manufacture of goods, which were exported. On a careful reading of the decision of the Honourable Supreme Court, it is seen that the Honourable Supreme Court, while conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opper alloys in any crude form is used, exemption is granted as provided. Secondly, the emphasis is on the words in the manufacture of which duty paid copper or copper alloys in any crude form or manufacture thereof, are used. In my view, the correct interpretation would be to read the expression are used in conjunction in the manufacture of which and that would lead to the correct interpretation of the judgment, which does not render any assistance to the case of the petitioners. 48. The decision in the case of Steel Authority of India Ltd., Vs. Collector of Central Excise [1996 (88) E.L.T. 314 (SC)] is an appeal filed challenging the order passed by the CEGAT and the question was whether the appellant was entitled for concessional rate of duty. The exemption notification provided for exemption in respect of raw naphtha which is intended in the use of manufacture of fertiliser exempting the manufacturing process. It was held that raw naphtha is utilised in its plant for the manufacture of fertiliser and the benefit of exemption notification is extended. In the present proceedings, the petitioner has approached this Court by way of writ petitions challenging the circular as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the writ petition and the decision of the Honourable Supreme Court in the case of Ashoka Marketing Ltd., and another Vs. Punjab National Bank and others [74 Company Cases 482 (SC)] would fully support the conclusion arrived by this Court, wherein, the Honourable Supreme Court pointed out that disputed questions of fact cannot be adjudicated in the writ petition, more so, in taxation matters. Furthermore in none of the Writ Petition, there is any challenge to the statutory provisions of the TNVAT Act. 51. In the light of the above, Question No.2 is answered against the petitioners and it is held that Section 18 of the VAT Act is not an independent provision, not a scheme by itself and forms part of the statute. Consequently, the Input tax credit or refund, which is claimed under Section 18 of the VAT Act is subject to restrictions and conditions under Section 19 of the Act. 52. Question No.3:- Whether on the given facts and circumstances would it be sufficient for a dealer who claims refund under Section 18(2) of the TNVAT Act of the input tax paid on the purchase of the goods to show that those goods are used in the manufacture and nothing more ; Whether the Assessing Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases of capital goods in the use of manufacture of taxable goods and the manner in which input tax credit is permissible. Sub Section (4) of Section 19 deals with input tax credit on tax paid by him in the State on the purchase of goods, in excess of three per cent of tax relating to such purchases subject to such conditions. Sub Section (5) of Section 19 deals with sale of exempted goods under Section 15; allowability of tax paid in other States or Union Territories; input tax paid by any other States or Union Territories on goods brought into this State from outside the State and allowability of input tax on the purchase of goods sold as such or used in the manufacture of other goods and sold in the course of inter-State trade or commerce falling under sub section (2) of Section 8 of the Central Sales Tax Act, 1956. Sub Section (6) of Section 19 places a clear embargo stating that no input tax on purchase of capital goods, which are used in the manufacture of goods exempted under Section 15 and the proviso provides that the purchase of capital goods which are used in the manufacture of exempted goods and taxable goods, input tax credit shall be allowed to the extent of its usag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners, the respective Assessing Officers have reopened the refund claims already sanctioned or refused to process the refund claims and issued notices to the dealers. The dealers did not respond since some of the dealers viz., Hosiery manufacturers through their Association filed Writ Petition before this Court. The writ petition was dismissed on the ground that the association cannot canvass individual tax claims. The view taken was affirmed by the Honourable Division Bench. It is to be noted that the Hosiery Manufacturers in the earlier round of litigation stated that there is no loss of goods in the goods purchased by them and the entire material was converted into final product. However, in the present batch of cases, a different contention has been raised which appears to be a contradictory stand, wherein, the petitioners would admit that there is loss of input which occurs in the process of manufacture, which cannot be to the extent of 5% probably 0.5% which is invisible loss. Therefore it is the duty of the dealer to factually establish that the circumstances set out under Clauses (i) to (iii) in Section 19(9) are not attracted in their process of manufacture. The interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it availed to that extent ? In the light of the conclusion arrived in respect of Questions 1 to 4 in the preceding paragraphs, it is to be seen as to whether the respondent/Assessing Officers could have adopted a uniform percentage and taken that as a basis and reopened the refund claims. The answer to this question should be in the negative, since each Assessment proceedings is an independent proceedings, the Assessing Officer cannot ignore facts. He is expected to go through the books of accounts, the details furnished etc. In all these cases, the claim for refund is based on a statutory form viz., Form W, which states the information required to be furnished under three heads viz.,(1)Particulars of the goods exported, (2) Particulars of the Input tax paid and (3) Amount of refund claimed. Based on these particulars, the Assessing Officer has to independently apply his mind and ascertain as to what is the description of goods exported; the quantity of the goods exported; the value and other details to establish export. While coming to the particulars of the input tax paid, apart from the statutory requirements such as TIN Number of the seller etc., the quantity on which the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners placed reliance on the decision of the Honourable Supreme Court in the case of Union of India Vs. Indian Aluminium Co.Ltd., [1995 (77) ELT 268 (SC)], which arose out of the appeals filed by the Union of India Vs. Collector of Central Excise and the question regarding levy of excise duty on aluminium dross and skimmings, which were removed by the assessees without payment of duty. The Honourable Supreme Court examined the said manufacturing process and rendered the finding. The question whether in the manufacturing process, there is process loss is undoubtedly a question of fact. Whether lesser quantity of raw material would be sufficient to achieve the quantity of end product is also question of fact. Therefore, this decision in fact would render support to the conclusion of the Court stating that there cannot be a uniform percentage fixed by the authority and it has to be based on the individual manufacturing process. Hence, Question No.5 is answered in favour of the petitioners and it is held that the Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the said rule empowers the Assessing Authority to verify the correctness of the claim before issuing refund. The correctness of the claim deals with the particulars furnished relatable to the transaction. Therefore, the undertaking given by the dealer in Form W is with regard to information furnished for the purpose of verification to be done by the Assessing Officer under Rule 11(2) of the VAT Rules for being entitled to refund under Section 18(2). Therefore, it is not as if the Act does not provide a remedy in the event of a wrong or erroneous refund sanctioned as it has been held that the refund claim under Section 18 is subject to restrictions and conditions contained under Section 19. 61. Having held that Section 18 is not an island by itself but subject to restrictions and conditions laid down in Section 19 of VAT Act and having observed that there cannot be uniform yardstick in all types of manufacturing process; to ascertain as to whether there is process loss or manufacture loss or invisible loss, there is no necessity to examine as to what is stated to be a loss by the petitioner, whether it is invisible loss or whether it is destruction loss or whether it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er they fall within any of the restrictions contained in Section 19 of the VAT Act. The Assessing Officer has to conduct an exercise by which it is to be ascertained as to whether the representation made by the dealer is justified and is not hit by any any of the restrictions and conditions contained in Section 19 and in particular Section 19(9) of the VAT Act. (4) It is held that the Assessing Authorities are not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or on adhoc per centage stands set aside. However, liberty is granted to the concerned Assessing Officer to issue appropriate show cause notices to the petitioners clearly setting out under what circumstances they propose to revise or call upon the petitioner to reverse refund sanctioned and after inviting objections proceed in accordance with law. (5) The undertaking given by the dealer in Form W is with regard to information furnished for the purpose of verificat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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