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2015 (5) TMI 293 - GUJARAT HIGH COURT

2015 (5) TMI 293 - GUJARAT HIGH COURT - [2016] 87 VST 73 (Guj) - Denial of input tax credit - Whether the process undertaken by the dealer while converting Natural Sesame Seeds (NSS) to Huld Sesame (HS) can be said to be the process of ‘manufacture’ and will tantamount the 'manufacture' within the definition of Section 2(14) of the Act and consequently, the dealer on such process shall be entitled to the input tax credit or not - Held that:- From the order passed by the Assessing Officer as well .....

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, would now become eatable and marketable.

Process undertaken by the dealer can be said to be process of ‘manufacture’ within the meaning of Section 2(14) of the Act and, therefore, as such, no error has been committed by the learned Tribunal in holding that the process undertaken by the dealer to convert the NSS to HS can be said to be the process of ‘manufacture’ within the meaning of Section 2(14) of the Act and consequently, the dealer would be entitled to the input tax credit. A .....

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MR. S.H.VORA, JJ FOR THE APPELLANT : MS VACHA DESAI AGP JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. As common question of law and facts arises in this group of appeals and as such, the appeals arising out of the impugned common judgment and order passed by the learned Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as the Tribunal ) and as the dispute is with respect to same dealer (except in case of Tax Appeal No.233 of 2015) but with respect to different assessmen .....

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referred to as NSS ) converting them into Huld Sesame (hereinafter referred to as HS ) is the process of manufacture and hence, the dealer is entitled to input tax credit paid on purchases of fuel, machinery parts, packing material and other consumable and processing material, if any and consequently, deleting levy of penalty and charging of interest on additional dues, the common appellant - State of Gujarat has preferred the present tax appeals with the following proposed questions of law:- ( .....

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ome of the appeals before the learned Tribunal, the appeals were against the final order passed by the first Appellate Authority and, therefore, in some of the appeals, though the order passed by the first Appellate Authority dismissing the appeals were on non-deposit of predeposit, the learned Tribunal has decided the appeals on merits along with the other second appeals which were arising out of the final decision on merits by the first Appellate Authority, Ms.Vacha Desai, learned A.G.P. appea .....

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ut with respect to different assessment years, the Assessing Officer passed the reassessment order denying the input tax credit to the dealer by observing that the process undertaken by the dealer from converting NSS to HS cannot be said to be the process of manufacture and, therefore, the dealer is not entitled to the input tax credit on the purchases of fuel, machinery parts and packing material and other consumable material and the processing material, if any. The Assessing Officer also levid .....

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, while converting the NSS to HS cannot be said to be process of manufacture and, therefore, the dealer is not entitled to the input tax credit. 4.3. Feeling aggrieved and dissatisfied with the respective orders passed by the first Appellate Authority dismissing the appeals on merits (in some of the appeals) and dismissing the appeals on non-deposit of pre-deposit (in some of the appeals), the dealer preferred the appeals before the learned Tribunal being Second Appeal Nos.65 of 2013, 980 of 201 .....

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er is entitled to the input tax credit, as claimed. Consequently, the learned Tribunal has quashed and set aside the penalty levid and charging of interest on the additional dues. Similar is in the case of M/s.Keshav Till Factory (Second Appeal No.65 of 2013) but with respect to the different product. 4.5. Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the learned Tribunal, the State has preferred the present tax appeals with the aforesaid proposed subst .....

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n of word 'manufacture' contained in Section 2(14) of the Gujarat Value Added Tax Act (hereinafter referred to as the 'Act'). 5.2. It is submitted that the learned Tribunal has materially erred in not properly appreciating the ratio of the decision of the Division Bench of this Court in the case of Laxmi Oil Mills Ltd. (supra). It is submitted that in the facts of the present case the learned Tribunal has materially erred in applying the decision of the Division Bench of this Cou .....

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the Gujarat Sales Tax Act (hereinafter referred to as GST Act ). 5.4. It is submitted that in the present case, the process undertaken by the dealer is cleaning, drying and brushing with chemicals and removing of upper layer only and, therefore, the said process cannot be said to be process of manufacture . It is submitted that only by use of chemical while cleaning, drying and brushing, there is no new product manufactured and the seeds would remain seeds. It is submitted that, therefore, the a .....

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jarat reported in (1993) Vol.91 587 in support of her submission that the process undertaken by the dealer in the present case while converting the NSS to HS, will not fall within the definition of 'manufacture' as provided under Section 2(14) of the Act. 5.6. Ms.Desai, learned A.G.P. has also relied upon the decision of the Hon'ble Supreme Court in the case of State of Maharashtra V/s. Shiv Datt and Sons reported in (1992) Vol.84 STC 497 in support of her submission that every proce .....

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bove submissions and relying upon the above decisions, it is requested to admit/allow the present tax appeals. 6. Heard Ms.Desai, learned A.G.P. appearing on behalf of the State at length. We have also considered the impugned common judgment and order passed by the learned Tribunal as well as the orders passed by the Assessing Officer as well as the first Appellate Authority. 7. The short question which is posed for consideration of this Court is whether the process undertaken by the dealer whil .....

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s the first Appellate Authority and even from the impugned common judgment and order passed by the learned Tribunal, it appears that while converting the NSS to HS, the dealer was required to undertake the process of cleaning, drying and brushing with chemicals and removing the upper layer of NSS. That after the purchase of NSS, the following process is being undertaken by the dealer to convert the NSS to HS:- "(i) After purchase of the NSS the same are dropped in a machine where the NSS ar .....

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ith the help of machines. (v) After washing with caustic soda, the NSS enter the process of drying. The NSS are dried with the help of blower machine and to blow the heat, the machine utilizes LPG. Upon blowing the NSS become dry. (vi) After the NSS are dried, the upper layer (fotri) is removed from the NSS and the NSS are converted into Huld Sesame (HS). The HS is different from the original NSS in its quality as well as uses. (vii) After the production of HS from NSS, HS are packed in the pack .....

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inition of Section 2(14) of the Act or not is to be considered. 10. Identical question came to be considered by the Division Bench of this Court in the case of Laxmi Oil Mills Ltd. (supra) which has been relied upon by the learned Tribunal while passing the impugned common judgment and order. In the case before the Division Bench of this Court, the Division Bench was considering the definition of manufacture defined under Section 2(16) of the GST Act and Rule (3) of the Gujarat Sales Tax Rules, .....

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is observed that, therefore, the ordinary meaning of the word "manufacture" would be of no relevance and the statutory meaning given to the word "manufacture" under sub-section (16) of section 2 is required to be considered in each case. In the said decision, the Division Bench of this Court also considered the meaning of the word "processing". In the said decision, the Division Bench of this Court considered the decision of the Hon ble Supreme Court in the case of .....

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sed in the provision under consideration. It is further observed that (i) whenever a commodity undergoes a change as a result of some operation performed on it and in regard to it, such operation would amount to processing of the commodity; (ii) each step towards production would be a process in relation to the "manufacture"; (iii) that the natural meaning of the word "process" is a mode of treatment of certain materials in order to produce a good result, a species of activit .....

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ed to hereinabove, the process undertaken by the dealer can be said to be process of manufacture within the meaning of Section 2(14) of the Act and, therefore, as such, no error has been committed by the learned Tribunal in holding that the process undertaken by the dealer to convert the NSS to HS can be said to be the process of manufacture within the meaning of Section 2(14) of the Act and consequently, the dealer would be entitled to the input tax credit. As observed hereinabove, as such, by .....

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ision would not be applicable to the facts of the case on hand and/or the same shall not be of any assistance to the appellant. In the case before the Hon ble Supreme Court considering the process undertaken, the Hon ble Supreme Court opined that the process of removing the electrolyte and plates from the batteries cannot be said to be the process of manufacture and will not come within the definition of the manufacture . While holding so, the Hon ble Supreme Court has specifically observed that .....

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