TMI Blog2015 (8) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 21(8) of the Rules. 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 credit already earned on goods lying in stock shall now be availed and calculated by reference to the reduced rate of taxation prevalent on the date of their sale. The amendment conferring such a power by amending the first proviso to Section 13 of the Act, admittedly, came into force on 01.04.2014 by deleting the words "are for sale" etc. and replacing them with the words "unless such goods are sold" etc., thereby for the first time linking the availing of input tax credit to the rate prevalent on the date of the "sale of goods" etc. to the rate of taxation in force on the date of sale. The amendment in the first proviso to Section 13 of the Act introducing the words "are sold" etc. came into effect on 01.04.2014. The State of Punjab was, therefore, empowered in the exercise of its power of delegated legislation to notify a rule linking the availing of input tax credit already earned, to their sale, on 01.04.2014. Rule 21(8) of the Rules which resonates the first proviso to Section 13 of the Act by l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014, CWP-8095-2014, CWP-8141-2014, CWP-9229-2014, CWP-26767-2014, CWP-322- 2015 and CWP-371-2015 as counsel for the parties state that common questions of law arise for adjudication. For the sake of convenience, facts are being taken from CWP-5625-2014. The petitioner-association prays for issuance of a writ of certiorari, declaring Rule 21(8) of the Punjab Value Added Tax Rules, 2005 (hereinafter 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The State of Punjab has, however, applied Rule 21(8) of the Rules, before the amendment of the proviso to Section 13 of the Act. Counsel for the petitioner refers to the tax payers' guide issued by the State of Punjab to assert that it is clearly recorded that there is no condition that goods covered by purchases should be sold or used, thereby clearly inferring an admission on the part of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax received from the seller of goods on purchases in respect of which input tax credit is claimed; (ii) Goods, returned subsequent to availing the input tax credit; (iii) Goods, subsequently not used in accordance with the conditions prescribed for availing input tax credit; and (iv) Having availed the credit required to reverse the same in accordance with the provisions of sub sections (8) and (9) of section 13. (zm) tax period 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such automobiles or spare parts; (b) petrol, diesel, aviation turbine fuel, liquefied petroleum gas and condensed natural gas, unless the taxable person is in the business of selling such products; (c) civil structure and immovable goods or properties; (d) office equipment and building material, unless the taxable person is in the business of dealing in such goods; (e) furniture fixtures including electrical fixtures and fittings, unless the taxable person is 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut prejudice to any action or penalty provided for in this Act. (15) The onus to prove that the VAT invoice on the basis of which, input tax credit is claimed, is bonafide and is issued by a taxable person, shall lie on the claimant. Section 2(o) of the Act defines input tax as the value added tax paid or payable on the purchase of taxable goods meant for resale or for use to manufacture, process or pack taxable goods in the State, thereby postulating that input tax is tax paid or payable at the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to goods lying in stock the input tax credit already earned shall be admissible at the reduced rate i.e. the rate of taxation prevalent on the date of their sale. As referred to above, the rate of taxation was reduced from 4% to 2% from 21.01.2014. The input tax credit already earned would, therefore, be availed with respect to goods lying in stock, at 2%. The petitioner-members, as is apparent from the facts, had paid tax @ 4% while purchasing the goods and had earned input tax credit @ 4%. The goods having been 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, prevalent at the time of sale/manufacture etc. of goods that had already earned a determinate amount of input tax credit. The State may be well within its power to alter the terms conditions of availing input tax credit by a piece of subordinate legislation but as subordinate legislation may only be notified if it is relatable to statutory power enabling the State to notify such a rule, but the absence of such a provision in the statute, empowering the State to notify such a rule, between 21.01.2014 and 01.04.2014, in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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