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M/s Khanna Paper Mills Ltd. Versus The State of Punjab and another

2016 (8) TMI 249 - PUNJAB AND HARYANA HIGH COURT

Input tax credit - purchases of pet coke where it is used for generation of electrical energy for captive consumption - Punjab VAT - Held that:- While the scope of goods to be used in captive generation of power has been extended in Section 13(5)(i) of the Act, the same has to be given full meaning. The only restriction is that the benefit has to be subject to the provisions of Section 13(4) of the Act. While harmoniously constructing both the provisions, the only conclusion which can be arrived .....

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n. - The substantial question of law is answered in positive in favour of the assessee holding that the appellant shall be entitled to full input tax credit of the tax paid on purchase pet coke, where it is used for generation of power for captive consumption. - Decided in favor of assessee. - VATAP No. 12 of 2016 (O&M) - Dated:- 4-8-2016 - MR. RAJESH BINDAL AND MR. HARINDER SINGH SIDHU, JJ. For The Appellant : Mr. K. L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate For The Respond .....

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sed for generation of electrical energy for captive consumption? (ii) Whether on the facts and in the circumstances of the case, the restrictions mentioned in Section 13(5)(i) read with Section 13(4) are applicable on the purchase of pet coke? (iii) Whether on the facts and in the circumstances of the case, the impugned order is violative of principles of natural justice as all the issues raised before the Tribunal have not been dealt in the order? (iv) Whether on the facts and in the circumstan .....

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mption? Learned counsel for the appellant submitted that the appellant is a manufacturer of paper and paper products. Its factory is situated at Fatehgarh Road, Amritsar. During the course of manufacturing process, the appellant uses various raw materials including waste paper, chemicals, packing material and pet coke. The goods manufactured by the appellant are either sold during the course of intra-state or inter-state trade. Pet coke is purchased by the appellant for generation of power for c .....

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ner for clarifying the issue regarding entitlement of the appellant to input tax credit on the transactions, as referred to above. The Excise and Taxation Commissioner, vide order dated 26.4.2014, clarified that the appellant will not be entitled to benefit of input tax credit as the same is available on the goods mentioned in Section 13(4) of the Act. The order was challenged before the Tribunal, who vide its order dated 4.12.2015 dismissed the appeal relying upon an earlier judgment of this co .....

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The only exceptions are provided for in Section 13(5)(b) of the Act and with reference to the amount of tax and goods on which input tax credit can be claimed are mentioned in Section 13(4) of the Act. He further submitted that there is already a clarification issued by the Excise & Taxation Commissioner in the case of Avon Ispat and Power Ltd., Ludhiana on 2.12.2011 regarding entitlement of full input tax credit on heavy petroleum stock. In that case, the Excise & Taxation Commissioner .....

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n diesel, which is an item specifically mentioned in the exception clause in Section 13(5)(b) of the Act, hence, not applicable. On the other hand, learned counsel for the State submitted that Section 13(1) of the Act is a general section providing for input tax credit, however, the same will have to give way to the special provision providing for input tax credit on the goods, which are used for generation of power for captive consumption, for which Sections 13(4) and 13(5)(b)(i) of the Act are .....

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ding capital goods, purchased by him from a taxable person within the State during the tax period: PROVIDED THAT the input tax shall not be available as input tax credit unless such goods are sold within the State or in the course of inter-State trade or commerce or in the course of export or are used 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: xx xx xx (4) Input tax credit on .....

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and condensed natural gas, unless the taxable person is in the business of setting such products; xx xx xx (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 provisions of sub-section (4) of this section: xx xx xx The appellant in the present case is purchasing pet coke for the purpose of generation of power for captive .....

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course of inter-State trade or commerce or in the course of export outside the territory of India. Sub -section (4) of Section 13 of the Act restricts the benefit of input tax credit over and above 5% on furnace oil, transformer oil, mineral turpentine oil, water methanol mixture, naphtha and lubricants, if these goods are used in production of taxable goods or captive generation of power. Sub-section (5) of Section 13 of the Act provides for a negative list stating that a taxable person shall .....

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tax credit is not available, unless such generation, distribution and transmission of electrical energy is for captive consumption. In that case, the benefit is allowable subject to provisions of Section 13(4) of the Act. It is not in dispute that the goods purchased by the appellant, which are used in generation of power for captive consumption are not mentioned either in Section 13(4) or in Section 13(5)(b) of the Act. Though Section 13(5) of the Act contains the list of goods on which input .....

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4) of the Act enumerates certain specific goods for the purpose of entitlement of input tax credit in case those are used in production of taxable goods or for captive generation of power. It further provides that benefit shall be available only in case the tax already paid exceeds 5%. The fact is that provision has been made in Section 13(5)(i) of the Act for permitting input tax credit on all goods used for generation, distribution and transmission of electrical energy if used for captive cons .....

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ns of Section 13(4) of the Act. While harmoniously constructing both the provisions, the only conclusion which can be arrived is that on the goods specifically mentioned in Section 13(4) of the Act, the benefit shall be available to the extent provided therein, whereas on the other goods, there would be no restriction as such for claiming the benefit of input tax credit, except those specifically mentioned in Section 13(5)(b) of the Act, namely, petrol, diesel, aviation turbine fuel, liquefied p .....

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