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2017 (9) TMI 1307

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..... der Section 11(3)(b) would accede 4%. It is a mega tax credit scheme which is provided under the VAT Act meant for all kinds of manufactured goods. The material in question, namely, furnace oil, natural gas and light diesel oil are admittedly subject to VAT under the VAT Act. The Legislature, however, has incorporated the provision, in the form of Section 11, to give tax credit in respect of such goods which are used as inputs/ raw material for manufacturing other goods. Rationale behind the same is simple. When the finished product, after manufacture, is sold, VAT would be again payable thereon. This VAT is payable on the price at which such goods are sold, costing whereof is done keeping in view the expenses involved in the manufacture of such goods plus the profits which the manufacturer intends to earn. Insofar as costing is concerned, element of expenses incurred on raw material would be included. In this manner, when the final product is sold and the VAT paid, component of raw material would be included again. Keeping in view this objective, the Legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstan .....

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..... after referred to as the raw material or inputs ) from its registered dealers. These fuels are used for the aforesaid manufacturing activities. On purchase of the raw material, VAT is paid at varying rates. On furnace oil, 4% VAT is payable as per the VAT Act, whereas on natural gas and light diesel oil rate of VAT prescribed and payable is 12.5%. Since these inputs are used for manufacturing of the final products, there is a provision in the VAT Act for giving credit on the VAT which is paid at the time of purchase of these inputs. The manner in which this credit is to be given is prescribed under Section 11 of the VAT Act. Section 11 reads as under: 11. Tax Credit. : (1) (a) A registered dealer who has purchased the taxable goods (hereinafter referred to as the purchasing dealer ) shall be entitled to claim tax credit equal to the amount of, - (i) tax collected from the dealer by a registered dealer from who he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period, or (ii) tax paid by him during the tax period under sub-section (1), (2)(5) or (6) of section 9 or; .....

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..... taxable goods consigned or dispatched by dealer for branch transfer or to his agent outside the State is less than four per cent, then the amount of tax credit in respect of such dealer shall be reduced by the amount of tax calculated at the rate of tax set out in the Schedule on such goods on the taxable turnover of purchases within the State (4) The tax credit shall not be claimed by the purchasing dealer until the tax period in which he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice (in original) containing particulars as may be prescribed under sub-section (1) of section 60 evidencing the amount of tax. (5) Notwithstanding anything contained in this Act, tax credit shall not be allowed for purchases (a) made from any person other than a registered dealer under this Act; (b) made from a dealer who is not liable to pay tax under this Act; (c) made from a registered dealer who has been permitted under section 14, 14A, 14B, 14C or 14D to pay lump sum amount of tax in lieu of tax; (d) made prior to the relevant date of liability to pay tax as provided in sub-section (3) of section 3; (dd) made prior to .....

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..... in accordance with the rules made in this behalf is not available with purchasing dealer or there is evidence that the same has not been issued by the selling dealer from whom the goods are purported to have been purchased. (i) Notwithstanding anything contained in clause (a) or (b) in this sub-section and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit in respect of purchase tax paid by him under sub-section (1) or (2) of section 9. (ii) Notwithstanding anything contained in clause (d) or (dd) in this sub-section and subject to such conditions and in such manner as may be prescribed, a registered dealer shall be allowed to claim tax credit for the taxable goods held in stock on the date of registration which are purchased after 1st April, 2008 and during the period of one year ending on the date of registration. (iii) Notwithstanding anything contained in clause (nn) of this sub-section and subject to such conditions and in such manner as may be prescribed, a registered dealer, whose permission to pay lump sum tax under section 14, (a) Is no longer valid on account of total turnover exceeding rupees fifty la .....

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..... ny period in respect of which the purchase of goods relates, becomes either short or excess, he shall compensate such short of excess by adjusting the amount of tax credit allowed to him in respect of the tax period in which the credit note or debit note has been issued or goods are returned, subject to such conditions as may be prescribed. (11) A registered dealer shall apply fair and reasonable method to determine, for the purpose of this section, the extent to which the goods are sold, used, consumed or supplied, or intended to be sold, used, consumed or supplied. The Commissioner may, after giving the dealer an opportunity of being heard and for the reasons to be recorded in writing, reject the method adopted by the dealer and calculate the amount of tax credit as he deems fit. (12) Subject to the exceptions as may be prescribed by the rules, any dealer including the Commission agent shall not be permitted to transfer his tax credit to any other dealer or as the case may be, the principal. Explanation :- For the purpose of this section, the amount of tax credit on any purchase of goods shall not exceed the amount of tax actually paid or payable under this Act .....

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..... aforesaid view can be captured from the following discussion contained in the impugned judgment: It is not in dispute that in the present case, the taxable goods purchased by the respondent assessee satisfy the description of sub-clause (ii) and (iii) of section 11(3)(b). Despite this, in our view, the Tribunal came to a correct conclusion that denial of tax credit by 4 per cent as provided in clause (b) would have to be done only once. We say so for several reasons. Firstly, clause (b) of section 11(3) pertains to reduction of tax credit otherwise available under section 11. Such reduction is to be applied if the goods satisfy the descriptions contained in sub-clause (i) to (iii) thereof. After clause (i), the Legislature has used the word or . We are conscious that at end of clause (ii) and beginning of clause (iii), the Legislature has not once again used the word or , but has also not added the expression and . Plain reading of the said provisions thus makes it clear that the reduction of tax credit had to be applied to any case which satisfy the description contained in sub-clauses (i) to (iii) not every time such description is satisfied. Further, reduct .....

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..... and to what extent. But for such a provision, the assessee did not have any right to claim tax credit and thus the question of double deduction does not arise at all. It was also argued that sub-clause (ii) as well as sub-clause (iii) are attracted in different circumstances and, therefore, the reduction stipulated therein could not be treated as double taxation. The learned counsel proceeded to argue that insofar as sub-clause (ii) is concerned, it would be attracted on satisfying the twin conditions, namely: (a) when taxable goods are used as raw material in the manufacture or in the packing of goods; and (b) these goods are dispatched outside the State in the course of branch transfer or consignment or to the agent of the manufacturer outside the State. On the other hand, sub-clause (iii) was attracted in those cases where fuel is used for the manufacture of goods. It is possible, in a given case, that both sub-clauses (ii) and (iii) become applicable (as it has happened in the instant case). However, in such cases the Legislature clearly intended that reduction at the rate of 4% has to be applied in each of the circumstances. Number of judgments were cited on interpretation .....

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..... s well. Sub-section (1) thereof mentions the contingencies when a registered dealer would be entitled to claim tax credit which is equal to the amount of tax collected from the dealer by a registered dealer or tax paid by him during the tax period or tax paid by the purchasing dealer under the Gujarat Tax On Entry of Specified Goods into Local Area Act, 2001. In nutshell, clause (a) of sub-section (1) of Section 11 entitles the registered dealer to claim tax credit of the amount of VAT or entry tax which was paid. However, this tax credit is subject to sub-sections (2) to (12) of Section 11. In this hue, we have to examine the provisions of sub-section (3) around which the entire case hinges upon. 13) Clause (a) of sub-section 3 lays down certain conditions which have to be fulfilled in order to claim the tax credit. First condition is to give the tax credit in those cases where taxable goods are purchased. Thus, it is not admissible where the purchased goods are non-taxable inasmuch as in those cases no tax was paid and thus the question of giving credit would not arise. Second condition mentions that these goods are intended for specific purposes which are stipulated in sub-cl .....

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..... se (i) is concerned, it pertains to trading activity and there is no question of any overlap between sub-clause (i) on the one hand and sub-clauses (ii) and (iii) on the other. Further, insofar as sub-clauses (i) and (ii) are concerned, same are disjunctive as the word or is inserted between these two clauses. However, when we come to clauses (ii) and (iii), where there is a possibility of overlap (as it has happened in the instant case as well), there is no word or used between clauses (ii) and (iii). Sub-clause (ii) finishes with the punctuation mark full stop and then sub-clause (iii) starts. This depicts the intention of the Legislature, namely, reduction is not confined to one of the aforesaid two sub-clauses and it can occur under both these provisions. It is rightly pointed out by the appellant State that these are event based sub-clauses and two events are totally different. Sub-clause (ii) is attracted in those cases where taxable goods are used as raw material (which may not necessarily be fuel but all raw materials are included) and also the other condition which is to be fulfilled is that these goods are dispatched outside the State in the course of branch tra .....

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..... of a statute, and very little attention is paid to it by English courts. When a statute is carefully punctuated and there is doubt about its meaning, a weight should undoubtedly be given to the punctuation. 70. In our view the Full Bench of the Punjab and Haryana High Court was right in giving emphasis and meaning to semicolon in Entry 3 of the list after the words administration of justice in Rajinder Singh. Semicolon after the words administration of justice in Entry 11-A, in our view, has significance in dealing with the topic whether administration of justice includes conferring general jurisdiction on High Court in addition to the subordinate courts within the State. 17) Moreover, there is no quarrel about the well-settled proposition of law that taxing statutes are to be interpreted literally {See Commissioner of Income Tax-III v. Calcutta Knitwears, Ludhiana (2014) 6 SCC 444 , State of Madhya Pradesh v. Rakesh Kohli Anr. (2012) 6 SCC 312 and V.V.S. Sugars v. Government of Andhra Pradesh Ors. (1999) 4 SCC 192 }. 18) The aforesaid discussion leads us to the conclusion that it is a mega tax credit scheme which is provided und .....

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..... f sales effected within the State of Maharashtra. It cannot levy or collect tax in respect of goods which are despatched by the appellant to his branches and agents outside the State of Maharashtra and sold there. In law (apart from Rules 41 and 41-A) the appellant has no legal right to claim set-off of the purchase tax paid by him on his purchases within the State from out of the sales tax payable by him on the sale of the goods manufactured by him. It is only by virtue of the said Rules - which, as stated above, are conceived mainly in the interest of public - that he is entitled to such set-off. It is really a concession and an indulgence. More particularly, where the manufactured goods are not sold within the State of Maharashtra but are despatched to out-State branches and agents and sold there, no sales tax can be or is levied by the State of Maharashtra. The State of Maharashtra gets nothing in respect of such sales effected outside the State. In respect of such sales, the rule-making authority could well have denied the benefit of set-off. But it chose to be generous and has extended the said benefit to such out-State sales as well, subject, however to deduction of one .....

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