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M/s Commercial Engineers & Body Building Company Ltd. Versus Divisional Dy. Commissioner, Commercial Tax Office & another

2015 (8) TMI 1292 - MADHYA PRADESH HIGH COURT

Input tax credit - MP VAT - Maintainability of writ petition - Input purchased from a registered dealer used by the assessee in manufacturing of bodies of motor vehicle - Infact, the components purchased was used for fabricating plant and machinery which is then used for manufacturing of the final manufacturing product i.e. the motor vehicle body. - Held that:- Leaving it to the revenue to decide such a question may not be proper. Instead, it would be more appropriate if we deal with such questi .....

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benefit of 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.

Fr .....

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hat 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 material used or consumed should be sold and should not be further used in respect of anything for the making of a final product which is ultimately sold. This could never be the intention of the legislature. - Benefit of input tax credit allowed - Decided in favor of assessee / .....

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ment in accordance to the provisions of Madhya Pradesh Value Added Tax (hereinafter referred to as the VAT ). The legal question canvassed by the petitioner in this petition is as to whether the petitioner is entitled to Input tax credit while determining their liability under the VAT Act ? And as to what is the exact meaning of certain provisions contained in Section 14 of the M.P. VAT Act providing for Input tax credit? The issue is as to whether the petitioner is entitled to Input Tax credit .....

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nufacturing and sale of these articles job work on behalf of the railway administration is also carried out in the business premises of the petitioner. 3. It is a case of the petitioner that for the purpose of manufacturing bodies of motor vehicle, petitioner had purchased certain components for a total amount of ₹ 97,99,69,327/- from a registered dealer M/s Vijay Steel Yard. The components so purchased are ultimately used in the manufacturing of the final product. Infact, the components p .....

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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 purcha .....

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nd accordingly, the concept of input tax is applicable on such a sale. He thereafter referred to Section 14 of the VAT Act which contemplates a provision for rebate on income tax rebate on input tax, the said provision reads as under :- Sec.14. Rebate of Input tax (1) Subject to the provisions of sub-section (5) and such restrictions and conditions as may be prescribed, a rebate of input tax as provided in this section shall be claimed by or be allowed to a registered dealer in the circumstances .....

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the territory of India; or (3) …..... (4) use as plant, machinery, equipment and parts thereof in respect of goods specified in Schedule II; or …....... (Emphasis Supplied) According to Shri Ganesh, learned Senior Counsel, a bare perusal of Section 14(1)(a)(2) and (4) clearly indicates that rebate shall be permissible when the good purchased are utilized for consumption or use for / in the manufacturing or processing of mining of goods. Further Section 14(1)(a)(4) provides for reba .....

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maintainable as it is only this Court which can interpretate and decide such a complicated question of law. It is said that even though similar provision are contained 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 entitle .....

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he 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 finished product, would amount to double taxation thereby defeating the very purpose and object of VAT Act ? 5. Shri Ganesh, learned Senior Counsel took u .....

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ponent which was made have been produced from the machinery of the petitioner itself and thereafter sold. The department according to Shri Ganesh feels that the components purchased from the M/s Vijay Steels Yard, Jabalpur has been consumed by the petitioner in its plant and machinery which is then used for making of the final product and therefore, Section 14 is not applicable. Shri Ganesh argues that this approach of the department is totally incorrect and unsustainable. He says that even thou .....

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after referred to as the "final products", as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the "special duty") paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referr .....

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xplanation.- 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 .....

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t Commissioner of Central Excise having jurisdiction over factory and obtaining a dated acknowledgment of the same from the factory for home consumption or for export under bond. Provided that where the inputs are removed from the factory for homes consumption on payment of duty of excise, such duty excise shall be the amount of credit that has been availed in respect of such inputs under rule 57A (Emphasis Supplied) He submits that if the aforesaid provision is read it would be seen that it is .....

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observations of the Supreme Court in para 18 thereof in support of his contention. Para 18 of the said judgment reads as under :- 18. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on th .....

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e product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. (Emphasis Supplied) Thereafter, he took us through another judgmen .....

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it 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 produc .....

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CCE Vs. Hindustan Sanitaryware & Industries wherein, in respect of this very notification, this Court has held that so long as duty is paid on the final product, the mere fact that duty was not paid on the intermediate product would not disentitle the manufacturer from the benefit of Notification No.217/86-CE dated 2.4.1986. In that case, the input was plaster of Paris, the intermediate product was moulds made out of the plaster of Paris, the final product was sanitaryware. In our view, the .....

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i-VI and 1998 (99) ELT 54 (Tribunal) - SIEL Sugar Vs. Commissioner of Central Excise, Meerut in support of his contention. Shri Ganesh accordingly argued that merely because the inputs purchased by the petitioner from M/s Vijay Steels was not directly used for manufacturing of the final product but as it was converted into a material (plant and machinery) which was ultimately used for manufacturing of final product, it is said that contention of the respondent cannot be accepted. It is argued th .....

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e 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. As .....

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d to decide questions of law rather than quasi judicial authorities discharging statutory functions. 8. Shri Samdarshi Tiwari, learned counsel for the respondents submits that once the remedy of appeal under the statute i.e. Section 46(1) of the VAT Act is available and when the statutory authority are functioning, interference directly by this Court is not called for. In support of his contention he invites our attention to the judgment in the case of Zunaid Enterprises Vs. State of M.P. And ot .....

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e Assessing Authority to emphasis that the question involved is not a pure question of law, it is mixed question of both law and fact and therefore, jurisdiction should not be exercised directly, that apart he argued that the interpretation of the department is correct and the benefit of input tax credit cannot be availed of by the petitioner for the simple reason that the material purchased after payment of tax is not directly used for manufacturing of the final product but is consumed by the p .....

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lable to a party, discretionary jurisdiction under Article 226 of the Constitution are not exercised, particularly if questions of facts which are in dispute are also required to be scrutinized while deciding the matter. However, there are exceptions to this normal rule and there are large number of cases where bypassing the remedy of statutory appeal available, jurisdiction is exercised by the High Court under Article 226 of the Constitution. Even though Shri Samdarshi Tiwari tried to emphasize .....

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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 ent .....

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involves interpretation of statutory provision instead of living it to the Taxing Authorities to interpret such a provision. In the case of Bharat Sanchar Nigam Ltd. (supra) the Hon'ble Supreme Court while exercising its jurisdiction under Article 32 of the Constitution had rejected similar objection with regard to availability of alternate remedy when competency of the State to levy Sales Tax in telecommunication service was questioned. In the case of Glaxo Smithkline Asia P.Ltd. (supra), .....

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the aforesaid case and taking note of the jurisdiction to be exercised by us in this petition, we are of the considered view that leaving it to the revenue to decide such a question may not be proper. Instead, it would be more appropriate if we deal with such questions and decide it in this petition under Article 226 of the Constitution as it is a question with regard to interpretation of statutory provision and no disputed question of fact as canvassed by Shri Samdarshi Tiwari are available. Th .....

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of Rule 57A explanation thereto along with Rule 57C and 57F indicates that both the provisions are infact 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 .....

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ind 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 these provisions, if inputs or goods purchased are used in relation to manufacture of final product and even if its use may be as a plant or machinery or equipments or part thereof, in respect of the goods, sp .....

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of the Section. 12. In fact, Section 14 of the VAT Act contemplates a provision for rebate of Input tax. Under Section 2(o) of the VAT Act, input tax it is 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. Admittedly, the goods purchased by the present petitioner from M/s Vijay Steels, a regis .....

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ts thereof, in respect of case specified in Schedule II. Admittedly, in this case petitioner has purchased the goods from a registered dealer which was tax paid and the goods so purchased has been used by the petitioner as plant and machinery, which in turn has been put to use for making the final product as is specified in Schedule II i.e. the motor vehicle body which is sold and duty is paid. From the order of the assessment it is seen that the Assessing Authority holds that if the components .....

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uation 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 th .....

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ds were made out and these moulds were used for making final product i.e. sanitary ware. The Plaster of Paris was purchased after payment of duty and therefore, it was held that the assessee is entitled for benefit of MODVAT/ CENVAT. If the case of the present petitioner assessee is analyzed in the backdrop of judgment of Supreme Court in the case of Escorts Ltd. (supra) and Hindustan Sanitaryware (supra), we find that the material purchased from M/s Vijay Steels was used by the assessee petitio .....

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nesh. Similar is the position with regard to manufacturing of sugar and various other products, considered and decided in similar manner by various Excise Tribunals in the judgment relied upon by Shri Ganesh. 14. The intention of the legislature in providing a provision for grant of rebate of input tax as contained in the VAT Act is akin to the provisions of MODVAT credit and CENVAT Credit applicable in Excise Law and when sub section 2 and 4 of Section 14(1)(a) indicates that the goods purchase .....

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