TMI Blog2011 (12) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... merely byproduct Section 18 of the Act of 2003 does not make any distinction between such byproduct or final product, which are taxable goods for the manufacture of which the raw material, namely, wheat was used. Input tax credit in the present case, was rightly reduced and was allowed only proportionately to the extent of manufacturing and sale of taxable goods by the assessee in the present case, namely, "Aata", "Maida" and "Suji", manufactured out of raw material (wheat) and such input tax credit could not be allowed to the extent of sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar), which has been assessed by the Assessing Authority to the extent of 25% of the input tax credit and reverse tax has been imposed on the respondent-assessee. Revision petition disposed off - decided partly in favor of Revenue. - S.B. Civil Sales Tax Revision Petition Nos. 193 and 194 of 2009 - - - Dated:- 8-12-2011 - Dr. Vineet Kothari, J. For the Petitioner/Revenue :- G.R. Punia, AAG and Sr. Advocate with Mahendra Choudhary, Advocate For the Respondent/assessee :- Sanjeev Johari, Advocate JUDGMENT Dr. Vineet Kothari, J. The petitioner - Revenue has filed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Revenue's appeals before the learned Tax Board, Ajmer also failed and by the impugned order dated 13.03.2009, the learned Tax Board held that the assessee was entitled to full input tax credit and the same could not be proportionately reduced merely because the wheat bran (Chaff/Chokar) was produced as a byproduct in the process of manufacture by using the wheat as raw material for manufacture of taxable goods, namely, Aata , Maida and Suji . The learned Tax Board also relied upon aforesaid two decisions of the Hon'ble Supreme Court in the case of Bharat Petroleum Corporation Ltd. (supra) and Punjab Haryana High Court in the case of Sharda Cotton Ginning Pressing Factory (supra). Thus, being aggrieved of the same, the Revenue has filed present revision petitions before this Court. 5. Mr. G.R. Punia, learned AAG Senior Advocate assisted by Mr. Mahendra Choudhary, submitted that in view of clear and unambiguous provisions of Section 18 of the VAT Act of 2003, the assessee was not entitled to input tax credit to the extent of manufacture of VAT exempted goods, namely, wheat bran (Chaff/Chokar); and the Assessing Authority was justified in proportionately re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax credit, representing the VAT paid by the assessee on the purchase of wheat, deserved to be allowed to the assessee and the same could not be proportionately reduced by 25%. The byproduct, which simply came out in the manufacturing process or obtained during such process and sold by the assessee having some commercial value, even though exempted from payment of tax as per Schedule-I (Entry No.3), the intention of legislature in allowing the full input tax credit, cannot be said to be defeated and same was allowable to the assessee in the present case. He also urged that unless the raw material is intended to be used in manufacture of tax exempted goods as such, the full input tax credit cannot be denied to the assessee and no bifurcation or proportionate reduction can be made in this regard. He again relied upon the aforesaid two judgments in favour of respondent-assessee in support of his contention as aforesaid. He also urged that even if two views are possible, while interpreting these provisions of Section 18 of the Act, a view favouring the assessee should be taken in this regard as per well the settled rule of interpretation of taxing statutes and in any case no penalty c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e . Inserted vide Notification No. F.12 (63) FD/Tax/2005-3 dated 11.4.2006 w.e.f. 1.4.2006. 11. Admittedly, for the period in question before this Court in the present case, namely, 01.04.2006 to 30.06.2006 is prior to the amendment w.e.f. 02.04.2008 and, therefore, bran of wheat or Chaff/Chokar was exempted goods under Schedule-I of the VAT Act and there is no dispute on this from the side of the assessee. 12. Now as far as the Hon'ble Supreme Court decision in the case of Bharat Petroleum Corporation Ltd. (supra) is concerned, reproduction of relevant portion of the said judgment is considered appropriate here : Turning now to the main question, we are inclined to agree with respondents' counsel that they are entitled to a set-off of the entire tax paid by them on the purchases of sulphuric acid and cotton, respectively. The only condition under the rule is that the goods purchased on payment of tax should have been used in the manufacture of taxable goods for sale. Their concurrent user for the manufacture of another item of goods which may or may not be taxable is immaterial though we may point out that in the Bharat Petroleum case, the kerosene was also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omerated with them to constitute 3541.485 M.T. of acid sludge. Having regard to the nature of the interactions here, it is controvertible that the entire sulphuric acid purchased has gone into the manufacture of the sludge. The rules do not require that the purchased goods must have been used only for the manufacture of taxable goods for sale. In this situation, it is not possible to cut down the quantum of relief clearly outlined in the rule on the basis of some general principle claimed to underlic the provision. As Sri Bodbe rightly pointed out, the basis for the relief provided is not every clear-cut. Various reliefs have been provided in a group of rules which come in for application in various situations. The relief may be based on the principle that the manufactured product is taxed either in the hands of the same assessee or in someone else's hands, or that the manufactured goods are exported which may yield no tax but earn foreign exchange, or even that the purchases are utilised for manufacture of goods in the State thus contributing to the industrial development of the State. It is, therefore, difficult to read into the provision a quantitative correlation of the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial, namely, wheat was used. Therefore, in the face of specific provision, the ratio of Supreme Court decision in the case of Bharat Petroleum Corporation Ltd. (supra), would support the contention of the petitioner-Revenue rather than the assessee. 15. As far as Punjab Haryana High Court decision in the case of Sharda Cotton Ginning Pressing Factory (supra) is connected, the Division Bench of Punjab Haryana High Court relying upon the Supreme Court decision in the case of Bharat Petroleum Corporation Ltd. (supra) also noticed that same Tribunal in its earlier view in the case of Jyoti Luxman Roller Flour Mills P. Ltd., Rohtak v. State of Haryana, in which facts were almost similar to the facts of the present case, as the assessee there was also engaged in manufacturing of Aata , Maida and Suji by holding that assessee was entitled to full rebate or set- off of tax paid by him on wheat, even though wheat bran was a tax-free item yet since the Tribunal took the subsequent view against the assessee, specially the same Presiding Officer of the Tribunal, the Division Bench of Punjab Haryana High Court set aside the subsequent order of Tribunal and remanded the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order fully supports the case of the petitioner. I therefore, taking matter suo motu under section 41 (3) hold that this case needs re- examination regarding rebate/refund of tax paid on wheat even if concurrently wheat was used in the manufacture of wheat bran which is tax-free commodity. ......... In view of these detailed observations, I do not find it tenable and proper to refer the aforesaid two questions to the High Court. Instead, I decide these two questions under section 41 (3) of the Haryana General Sales Tax Act, 1973 as these are covered by the judgments of the High Court/honourable Supreme Court and remand this case to the Assessing Authority for fresh decision in view of (1992) 85 STC 220, Commissioner of Sales Tax, Bombay v. Bharat Petroleum Corporation Ltd. and in view of the Hindi notification referred to above..... 9. However, in the petitioner's case, the same presiding officer of the Tribunal rejected the claim of total rebate by making the following observations : I have considered the matter carefully and have also seen the facts on record, judgments relied upon by both the parties and the authorities below. The Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the collateral Tribunal in S.T.A. Nos. 600-601 of 1998-99 decided on May 28, 1999 and a number of other cases. The judgments relied upon by the counsels are not strictly applicable to the facts of the present cases. In view of these clear facts on record and the judgments referred to above the orders of the lower authorities do not call for any interference and are accordingly upheld. The appeals are therefore, dismissed. 10. In our opinion, the orders passed by the Tribunal in the case of Jyoti Luxman Roller Flour Mills (S.T.M. Nos. 10-11 of 1999-2000 decided on June 22, 2000) and the petitioner are ex facie contradictory and the only proper course to remove the resultant discrimination qua the petitioner is to quash the impugned order with a direction to the Tribunal to decide the petitioner's appeal afresh. 17. The Hon'ble Supreme Court upholding the said remand order of Punjab -Haryana High Court in State of Haryana v. Satish Oil General Mills, reported in (2005) 10 SCC 271, held in Para 4 as under : In our view, the High Court was right in setting aside the decision of the Tribunal both on the ground that the Tribunal should have followed its earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the process of converting domestically purchased cotton into exportable yarn manufactured by the appellant. 9. In CST v. Bharat Petroleum Corpn. Ltd. this Court held that where a subsidiary product is turned out regularly and continuously in the course of manufacturing business and is also sold regularly from time to time, there may be attributed an intention to the manufacturer to manufacture and sell not merely the main item but also the subsidiary products. This Court relied on an earlier decision in State of Gujarat v. Raipur Mfg. Co. Ltd. in support of the position that manufacture was involved in that situation. Cotton waste generated was hence held to be by a process of manufacture. For the appellant it is submitted that the manufacture of a product may involve several processes and various changes on the raw material at different stages. Manufacture would occur at the point where the changes take the product to a point that commercially, it cannot be regarded as the original commodity, but, instead, recognised as a new distinct article. The decision of this Court in J.G. Glass Industries is relied on in support. 10. The scope of the expanded definition of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see would in fact support the case of the Revenue, and as a necessary corollary, it deserves to be held following these aforesaid judgments, that input tax credit in the present case, was rightly reduced and was allowed only proportionately to the extent of manufacturing and sale of taxable goods by the assessee in the present case, namely, Aata , Maida and Suji , manufactured out of raw material (wheat) and such input tax credit could not be allowed to the extent of sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar), which has been assessed by the Assessing Authority to the extent of 25% of the input tax credit and reverse tax has been imposed on the respondent-assessee. 21. Therefore, as far as impugned order of learned Tax Board dated 13.03.2009 to the extent of setting aside the imposition of reverse tax disallowing the proportionate input tax credit is concerned, the same cannot be sustained and deserves to be quashed by this Court, and to that extent the revision petitions filed by the petitioner-Revenue deserve to be allowed. 22. However, as far as question or penalty u/s 61 of the Act is concerned, the Imposition of the same by the Assessing Authority u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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