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2015 (8) TMI 1292

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..... f MODVAT, CENVAT or “input tax rebate” can be claimed. Meaning thereby, it is not necessary that the goods purchased from the registered dealer which is known as “input” should be used directly for manufacture of the final product. It is sufficient if the input is used in respect of or in relation to a plant or machinery or a equipment which is ultimately used for manufacturing the final product. That in fact, should be the interpretation of the provisions of the Section. From the order of the assessment it is seen that the Assessing Authority holds that if the components produced after manufacturing and processing of the material purchased from M/s Vijay Steels, is sold by the petitioner, they are entitled to rebate on input tax under Section 14 but because they have consumed it for use as a plant and machinery, they are not entitled to this benefit. This according to us cannot be the correct interpretation of Section 14(1)(a) sub rule (2) and (4). If that be the intention of the legislature in giving input rebate to a dealer then it would be beyond the legislative purpose if the intention of the legislature is interpreted as done by the department by holding that the materi .....

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..... f the final manufacturing product i.e. the motor vehicle body. It is a case of the petitioner that the material purchased from M/s Vijay Steel Yard were tax paid and are converted into components which is used for creating the final product, therefore, the benefit of rebate on input tax as provided under Section 14 of the VAT Act is to be granted to the petitioner. However, as the revenue has held in the impugned assessment order that the material so purchased from M/s Vijay Steel Yard are consumed by the petitioner and not sold, the benefit of Section 14 or rebate on the input tax cannot be granted. 4. Shri S. Ganesh, learned Senior Advocate invited our attention to the provisions of Section 2(o) of the VAT Act, i.e. the definition of Input Tax as detailed herein under :- 2(o) input tax means an amount paid or payable by way of tax under Section 9 by a registered dealer in respect of the purchase of any goods specified in Schedule II, to a selling registered dealer and who is liable to pay tax under the said section on the sale of such goods . And argued that the aforesaid definition of input tax means all and such Schedule II tax paid goods which are purchased by .....

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..... ntained in the Central Excise Act and rules framed therein with regard to grant of Input tax credit known as MODVAT and subsequently now known as CENVAT have been interpreted in various judgments but as the benefit of input tax on similar analogy under Section 14 of the VAT Act is yet to be decided, it is argued that petitioner is entitled to file the writ petition before this Court without resorting to the statutory remedy of appeal provided in the VAT Act. He argues that the following substantial questions are involved in the matter and therefore, petition should be entertained :- (1) Can the benefit of Section 14 be denied on input steel materials, where VAT has already been paid on purchase from another dealer and the materials so purchased are used to fabricate plant and machinery which is then used for the manufacture of the end products sold by the petitioner ? (2) Whether benefit of Section 14 can be extended to goods purchased for fabrication of plant and machinery in order to produce the finished product ? (3) Whether denial of benefit under Section 14 to purchases used for fabricating plant and machinery, which will ultimately be used for manufacturing the f .....

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..... ection and the conditions and restrictions that may be specified in the notification: Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted. Explanation.- For the purposes of this rule, inputs includes (a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products, (b) paints and packaging materials, and (c) inputs used as fuel, but does not include --- Rule 57C. Credit of duty not to be allowed if final products are exempt - No credit of the specified duty paid on the inputs used [in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export- Oriented Unit)] shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Rule 57F. (1) : The inputs in respect of which a credit of duty has been allowed under rule 57A - (i) may be used in, or in relation to, the manufacture of final products for which such inputs have been brought into the factory; or .....

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..... gainst the excise duty on a final product manufactured on the very day that it becomes available. (Emphasis Supplied) Thereafter, he took us through another judgment of the Supreme Court in the case of Escorts Ltd. Vs. Commissioner of Central Excise, Delhi (2004)7 SCC 214 and argued that in this case the assessee was a manufacturer of tractor and the final product that came out was the tractor. The intermediate product were the part which were manufactured, and then were used in producing final product of tractor. It was said that the intermediate product which was used for manufacturing the Tractor would not be the final product. In this case also benefit of MODVAT credit was granted. He invited our attention to the principles laid down in para 9 in support of his contention, so also para 10 where other judgments of the Supreme Court have been considered. Para 9 and 10 of the judgment in this case reads as under :- 9. In cases of manufacturers like the appellants, the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus, Rule 57C would .....

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..... y. Important questions of law with regard to interpretation of statutory provision are involved and when such a question is involved, a Writ Court can always interfere in such matters and for the said purpose relegating the petitioner to take recourse to the alternate remedy available is not necessary. In support of the aforesaid contention, he invites our attention to the judgment of the Supreme Court in the case of Paradip Port Trust Vs. Sales Tax Officer and others (1998)4 SCC 90; a judgment of the Delhi High Court in W.P.(C) 10726/2006 Glaxo Smithkline Asia P.Ltd. Vs. Assessing Authority, Special Zone Trade and Tax Department Anr. decided on 24th May, 2007; another judgment of the Supreme Court in the case of Bharat Sanchar Nigam Ltd. And another Vs. Union of India and others (2006)3 SCC Pg.1 to say that even if such an alternate remedy is available, if a substantial legal question for interpretation is involved, the Writ Court or the Supreme Court under Article 32 of the Constitution, can directly interfere, as such Courts are more competent or equipped to decide questions of law rather than quasi judicial authorities discharging statutory functions. 8. Shri Samdars .....

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..... re disputed questions of facts involved in the matter, we are of the considered view that as far as the question of grant of benefit of rebate of input tax to the petitioner is concerned, it is a question to be decided on admitted facts for which no dispute or enquiry into factual aspects of the matter is called for. It is an admitted position that the assessee purchased certain material from M/s Vijay Steels amounting to ₹ 97,99,69,327/-, (VAT paid) and claimed the rebate on input tax under Section 14. This material purchased, was used for creating the plant and machinery which is ultimately used for making the final product and the duty was paid on the final product. According to the Revenue, because the material purchased from M/s Vijay Steels was consumed by the assessee in its plant and machinery to be used for making the final components and as this component (i.e. plant and machinery) which was created from the material purchased was not sold, they are not entitled for benefit of rebate on input tax. These are the simple and admitted facts and as its application for the purpose of granting benefit under Section 14 of the VAT Act is only required to be adjudicated by us .....

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..... t paramateria with each other. Except for some difference in the words used if the provisions of Rule 57(A)(1)(a) of the Excise Rules is taken note of, it speaks about applicability of the provision to such finished excise goods (i.e. the final product) as may be specified in the notification, duty paid goods used in relation to the manufacture of the said final product. The words are used in relation to the manufacture of the final product . Similarly in the Explanation (a) the word input has been explained to include inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products . Here again, the words are use or in manufacture of final product . Likewise is Rule 57(F)(1)(i) also the words used are in relation to the manufacture of final products . Similarly, if the said provisions are compared with Section 14, we find that the words used in Section 14(1)(a) and (4) are used as plant, machinery, equipments and parts thereof, in respect of goods, instead of using the word in relation to as contained in the Excise Act, the words used here i.e. in VAT Act are in respect of goods . Therefore, as per both th .....

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..... cause they have consumed it for use as a plant and machinery, they are not entitled to this benefit. This according to us cannot be the correct interpretation of Section 14(1)(a) sub rule (2) and (4) in view of the reasons and interpretation given by us in the preceding para. 13. That apart, in somewhat similar situation in the case of Escorts (supra) also the appellant therein where manufactures of Tractors they purchased duty paid inputs and used then for bringing out the final product i.e. Tractor. Here also the final product was the tractor and the intermediate product was infact the part which was manufactured in the first factory for being used for making the final product i.e. tractor. While considering this question the Supreme Court held after interpreting the provisions of Rule 57A and C that the intermediate product which was ultimately used for manufacturing product which was input for manufacturing the final product tractor, was liable to be granted the benefit of MODVAT. In the case of Escorts Ltd.(supra) another judgment of Supreme Court in the case of CCE Vs. Hindustan Sanitaryware Industries (2002)7 SCC 515 has been considered. In the case of Hindustan San .....

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