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TMI Blog2023 (9) TMI 1627X X X X Extracts X X X X X X X X Extracts X X X X ..... interest can be levied and charged, even though full amount of tax due from the dealer under the Act according to returns has been deposited and as such, interest on differential tax determined on reopened assessment could be validly and legally charged?" 2. As common issue is involved in all these STRs, with the consent of the parties, they were heard together and are now being decided by way of this common order. STR No. 13/2019 is taken as lead file to peruse the facts. 3. Brief facts leading to these STRs are that the petitioner-assessee is a manufacturer of various types of bearings used for automotive, industrial and railway purposes. The Anti-Evasion Authorities surveyed the business premises of the appellant on 23.08.2016 and found that the appellant has purchased DEPB / Duty Free Licenses / Duty Credit Scrip within the State and has claimed and availed the ITC of the tax paid on purchase of these intangible goods. The enquiry officer found that no ITC is available on these items if the same are not disposed off in accordance with Section 18 of the RVAT Act. Accordingly, a case of tax-evasion was made out and it was transferred to the adjudicating/assessing officer (for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. and Ors. vs. Commissioner of Trade and Taxes reported in (2015) 223 DLT 571. 5. Per contra, supporting the concurrent findings of the authorities below, learned counsels for the revenue submits that no question of law worth consideration arises in the present STRs. Learned counsel for the revenue further submits that as per scheme of Section 18 of the RVAT Act, the ITC is allowed only in cases as enumerated under clause (a) to (g) of sub-section (1). Since the goods in question, i.e. DEPB / Duty Free Licenses / Duty Credit Scrip, have been utilized against payment of the custom duty on imports of machinery/raw material, which does not fall under any of the clauses of Section 18 (1) of the RVAT Act and therefore the ITC was rightly disallowed. In support of his submissions, learned counsel for the revenue has placed reliance on Division Bench judgment of Madras High Court in the case of Sha Kantilal Jayantilal vs. The State of Tamilnadu reported in (2017) 97 VST 295 (Mad). Learned counsel for the revenue has also relied on Apex Court judgment of Jayam and Co. vs. Assistant Commissioner and Ors. reported in (2016) 15 SCC 125 to submit that the dealer has no vested right to claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purchased are used partly for the purposes specified in this sub-section and partly as otherwise, input tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section. (2) The input tax credit under sub-section (1) shall be allowed only after verification of the deposit of tax payable by the selling dealer in the manner as may be notified by the Commissioner. ... (emphasis supplied)" 9. It is settled and undisputed that DEPB / Duty Free License / Duty Credit Scrip are 'goods' for the purpose of RVAT Act. The said legal position has been settled by the Hon'ble Supreme Court in Vikas Sales Corporation (supra) and Yasha Overseas and Ors (supra). 10. It is an admitted position that the petitioner-assessee, a registered dealer, had purchased the goods in question from another registered dealer after payment of VAT. Therefore, the petitioner-assessee has satisfied the first condition mentioned in Section 18 (1) of the RVAT Act. The goods in question were then admittedly used for import of raw materials. The bone of contention in the present case is the second condition mentioned in Section 18 (1) of the RVAT Act, which presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply shall be deemed to be a sale and the word "purchase" or "buy" shall be construed accordingly; Explanation.-Notwithstanding anything contained in this Act, where any goods are sold in packing, the packing material in such case shall be deemed to have been sold with the goods; (36) "sale price" means the amount paid or payable to a dealer as consideration for the sale of any goods less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any statutory levy or any sum charged for anything done by the dealer in respect of the goods or services rendered at the time of or before the delivery thereof, except the tax imposed under this Act; Explanation I.-In the case of a sale by hire purchase agreement, the prevailing market price of the goods on the date on which such goods are delivered to the buyer under such agreement, shall be deemed to be the sale price of such goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (1) of this section and partly for other purposes, the amount of the tax credit shall be reduced proportionately." 19. There can be no doubt that the price of the goods imported has an element of customs duty paid on such goods. The component of customs duty is reduced to the extent of the usage by the Assessee of the DEPB scrips. The reduced customs duty is embedded in the resale price of the imported goods. Thus, the use of the DEPB scrips is for the purpose of the Assessee selling the imported goods. 'Usage' in this context has to be seen as a use that affects the price of the goods although it may not be used tangibly in the goods themselves. There is no warrant to limit the understanding of the word 'use' to an actual direct tangible or physical use in the imported goods. 20. It is possible in this context to draw an analogy with CENVAT or MODVAT credit, the purpose of which, like VAT, was to mitigate the cascading effect of multiple taxes at various stages of the trade in goods. In Oil & Natural Gas Corporation Limited v. Commissioner of Central Excise, Sales Tax & Custom, Raigad: 2013 (32) STR 31 (Bom) the facts were that the Appellant set up a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of goods then the final product would be entitled for input rebate." The High Court rejected the contention of the Department that the material on which input tax was paid should itself be sold and should not be further used in respect of anything for the making of a final product which is ultimately sold. 22. In Coca Cola India Pvt. Ltd. v. Commissioner of Central Excise Pune-III: 2009 (15) STR 657 (Bom.) it was held in the context of CENVAT credit that service tax paid on advertisement sales promotion and market research was admissible as credit for payment of excise duty on the soft drink concentrate particularly when such expenses formed part of the price of the final product on which excise duty was paid. In para 13 of the said judgement it was held "in order to avoid the cascading effect the benefit of CENVAT credit on input stage goods and services must be ordinarily allowed as long as a connection between the input stage goods and services is established. Conceptually as well as a matter of policy, any input service that forms a part of the value of the final product should be eligible for the benefit of CENVAT credit." 23. Other decisions which hold likewise inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of such DEPB scrip for the purposes of sale of the imported commodity. The DEPB scrip has contributed, if not directly then indirectly, to the price of the imported commodity sold by the Assessees in the market. There could be any number of intangibles that have an impact on the value of the final product like advertisement costs in respect of which input service tax credit may have been availed of, as was in the case of Coca Cola India Pvt. Ltd. (supra). All that is to be shown is that such input tax paid goods have contributed to the sale of the final product in some way directly or indirectly. 25. The Court also rejects the other contention of the DTT that input tax credit cannot be availed of unless the Assessees are themselves dealing in DEPB scrips. In other words, in order to avail of the input tax credit in the present case it is not necessary that the Assessees have to be dealers in the same commodity, i.e. the DEPB scrips which were used in payment of customs duty on the imported goods in which they were dealing. Such an interpretation will negate the object of introducing the system of value added taxes, i.e. to reduce the cascading effect of multiple taxes at var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat wherever any particular State intended to allow the ITC on DEPB for any use, the specific provision was made in their statutes. So, had the State Legislature any intent to allow input credit on purchase of DEPB/Duty Entitlement Scrips, which is subsequently used against payment of customs duty, the express provisions could have been incorporated. But the language of the section 18 does not provide any such availability of ITC. Therefore, it is held that ITC shall not be allowed on purchase of DEPB/Duty Entitlement Scrips when the same is used for payment of Customs duty. In the backdrop of the legal position discussed above, the AO has rightly disallowed the ITC and has rightly levied interest on non-deposit of the due tax. Therefore, the appellate order on this issue is confirmed and appeals of the appellant on this issue are rejected." 15. Having gone through the material on record extensively and after careful consideration of the arguments advanced, this Court is of the view that the case of the petitioner-assessee is covered by Section 18 (1)(e) of the RVAT Act, and therefore this Court is not in agreement with the view taken by the Tax Board, for the following reasons: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tamil Nadu VAT Act, 2006 because the DEPB License, though held to be goods, did not find its place in the taxable goods specified in the First Schedule to the Tamil Nadu VAT Act, 2006, also has no application in the facts and circumstances of the present case as the DEPB License in the case in hand are held to be covered under the broad definition of 'raw material' and included under Section 18 (1)(e) of the RVAT Act. 15.7) Although the judgment of Jagriti Plastics Ltd. (supra) is based on provisions which are not pari materia to Section 18 of the RVAT Act, the fact remains that the underlying principle / jurisprudence of ITC has been outlined in great detail and this Court is in complete agreement with the view adopted by the Division Bench of Delhi High Court. Applying the principles which emerge therein to the provisions of RVAT Act, the inevitable consequence would be that the petitioner-assessee would be held entitled to the benefit of ITC under Section 18 (1) (e) of the RVAT Act, especially when there is no specific exclusion qua the same. 16. In view of the foregoing analysis, the questions of law framed herein-above have to be answered in favour of the petitioner-asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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