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TMI Blog2015 (8) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter referred to as the 'Rules') and clarification, Annexure P-4, ultra vires and/or inapplicable to the input tax credit already earned. Counsel for the petitioner submits that Section 13(1) of the Punjab Value Added Tax Act, 2005 (hereinafter referred to as the 'Act') provides that a taxable person i.e. a dealer, is entitled to input tax credit on purchases made during the tax period, subject however to such conditions as may be prescribed. The first proviso to Section 13 of the Act, before it was amended, clarified that input tax credit shall not be available unless the goods are "for sale" within the State or in the course of inter-State trade or commerce etc. Section 13(5) of the Act places certain impediments on the right to claim input tax credit i.e. sets out a negative list which does not apply to iron and steel merchants. Section 15 of the Act which bears the title "Net tax payable by a taxable person" provides that the net tax payable for the tax period shall be determined by deducting the amount of input tax credit available to such person and would include input tax credit carried forward from the preceding tax period, if any. The input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State that input tax credit is not relatable to the reduced rate of tax. Counsel for the petitioner further submits that the petitioner-association made a representation to the Government but instead of accepting the illegality perpetuated by the amendment, a clarification has been issued which further complicates the matter. Counsel for the State of Punjab submits that input tax credit is available only when the dealer further sells the goods. This apart, Section 13 of the Act clearly postulates that input tax credit can be earned in such manner and subject to such conditions as may be prescribed. The State was, therefore, well within its power to notify Rule 21(8) of the Rules and prescribe further terms and conditions for availing input tax credit. The amendment applies only to the rate prevalent on the date of sale of stock in hand and, therefore, does not in any manner affect the rights of a dealer or in any manner reduce input tax credit on transactions that have already concluded. Counsel for the State of Punjab relies upon the following judgments: - 1. United Riceland Limited Vs. State of Haryana and another (2011) 2 SCC 423 2. R.K.Garg Vs. Union of India and others ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod" means a period for which a person is required to pay tax under this Act or the rules made thereunder." Section 13 (as it existed before the amendment) INPUT TAX CREDIT (1) A taxable person shall be entitled to the input tax credit, in such manner and subject to such conditions, as may be prescribed, in respect of input tax on taxable goods, including capital goods, purchased by him from a taxable person within the State during the tax period: Provided that such goods are for sale in the State or in the course of inter-State trade or commerce or in the course of export or for use in the manufacture, processing or packing of taxable goods for sale within the State or in the course of inter-State trade or commerce or in the course of export: Provided further that a taxable person shall be entitled to partial input tax credit in any other event, as may be provided in this section in such manner and subject to such conditions as may be prescribed: Provided further that if, purchases are used partially for the purposes specified in this sub-section and the taxable person is unable to identify the goods used for such purposes, then the input tax credit shall be allowed proporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of such goods; (f) air-conditioning units, air circulators and refrigeration units, unless the taxable person is in the business of dealing in such goods or where air-conditioning, air circulating or refrigeration is essential for sale or storage of taxable goods or in the manufacturing process of taxable goods; (g) weigh bridge, except when installed inside the manufacturing premises for use in the manufacturing process of taxable goods; (h) goods used in manufacture, processing or packing of goods specified in Schedule 'A'; (i) goods used in generation, distribution and transmission of electrical energy unless such generation, distribution and transmission of electrical energy is for captive consumption, in which case, it would be allowed subject to the provisions of subsection (4) of this section; (j) the provisions of food, beverage and tobacco products, unless the taxable person is in the business of selling food, beverage and tobacco products; and (k) goods used for personal consumption or gifts. (6) A person, who was earlier registered for VAT and has subsequently got himself registered for TOT, shall reverse the input tax credit availed by him before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate in force at the time of purchase of taxable goods. Section 2(p) of the Act defines "input tax credit" to mean the credit of any tax available to a taxable person thereby clarifying that value added tax paid at the time of purchase of taxable goods meant for resale or "for manufacture" etc. to be credited to the account of the taxable person shall be the "input tax credit" available to such a person. Section 2(s) defines the term "output tax". Section 2(zc) defines the word "return" and Section 2(zd) defines the words "return period". Section 2(zm) defines "tax period" to mean the period for which a person is required to pay tax under the Act or the Rules. Section 13 of the Act titled as "input tax credit" sets out the parameters for availing input tax credit. The first proviso (relevant for the present controversy), as it existed i.e. on the date of introduction of Rule 21(8) before it was amended w.e.f. 01.04.2014, provided that input tax credit shall not be "available" unless the goods are "for sale" within the State etc., thus, postulating that input tax credit already earned would be available if the goods are for sale etc. Section 13(5) of the Act notifies a negative li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased for resale within the State of Punjab, the right to avail input tax credit @ 4% per annum stood crystalised, as a determinate right subject to availing this right during the return period or by carrying it forward. The State, however, by enacting Rule 21(8) of the Rules, has reduced the admissible amount of input tax credit already earned from 4% to 2%. We cannot possibly dispute the legislative competence of the State in the exercise of its power of delegated legislation to enact such a rule but the question, as we have also noticed, is not the legislative competence of the State but is whether on 21.01.2014 there was any provision in the statute that empowered the State of Punjab to notify Rule 21(8) of the Rules to provide that goods that have already earned input tax credit would avail input tax credit at the reduced rate of taxation applicable on the date of sale thereby reducing input tax credit already earned on goods lying in stock by reference to the reduced rate of tax prevalent on the date of their sale etc. A perusal of the Act reveals that on 21.01.2014 there was no provision in the Statute that empowered the State to enact a rule to provide that input tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our considered opinion, did not empower the State, in the exercise of its power of delegated legislation to notify Rule 21(8) of the Rules on 21.01.2014. We, therefore, have no hesitation in holding that on the date of introduction of sub Rule (8) of Rule 21 of the Rules, the State did not possess any power, emanating from the Act, to confine the availing of input tax credit to the reduced rate of tax on stock in trade i.e. transactions that had concluded with the dealer already earning input tax credit. A further perusal of the amendment in the first proviso to Section 13 of the Act reveals that it is not retrospective but applies to transactions after 21.01.2014. The amendment in the rule, which came into effect prior to the amendment the Act could, therefore, not be enforced, by the respondents before 01.04.2014 to take away a vested right already determined without statutory sanction. We, therefore, allow the writ petitions and hold that in the absence of any provision in the statute enabling the State of Punjab to notify Rule 21(8) of the Rules w.e.f. 21.01.2014, the said provision would come into effect from 01.04.2014. However, since the notification by which Rule 21(8) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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