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TMI Blog2025 (5) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... bottles, Coolers, stores and spares during the year 2004-05. 2. The request of the petitioner, i.e., M/s. Pearl Beverages Limited for the tax paid under APGST for a claim of relief of Rs. 12,65,333/- on purchase of coolers and amount of Rs. 1,98,224/- on Stores, spares, and Rs. 9,75,085/- on glass bottles is disallowed on the ground that the coolers are not for resale purpose and the claim of glass bottles purchased for Rs. 2,43,77,122/- is verified and noticed that during this year, the breakages are estimated to be Rs.1 crore, hence, the claim of Rs. 4,00,000/- is disallowed and the other claim of Rs. 1,98,224/- being taxes paid on stores, spares, etc., is also disallowed, as there is no provision in the Act, vide proceedings dated 06.09.2025 by the Assistant Commissioner, Large Tax Payer Unit, Guntur Division. 3. Against the said proceedings, the petitioner herein has made a representation dated 27.09.2005 to the Assistant Commissioner (CT), Large Tax Payer Unit, adverting that under Section 13 (1) of the AP VAT Act, tax paid on purchase of all taxable goods in an eligible input tax credit, if such goods are for use in the business of a VAT dealer, that the definition of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, the capital goods, raw materials, consumables are eligible for Input Tax Credit and coolers purchased by them are neither capital goods, nor raw materials nor consumables and the coolers are given to retail outlets only after collecting full value from the outlet and they are not used in their business. Hence, their claim was not accepted by the Commercial Tax Officer. 6. Accordingly, the Input Tax Credit from the glass bottles was also rejected on the ground that they had opening stock of Rs. 17.31 crores and then they have purchased Rs.2.30 crores worth of bottles during 2004-05 and out of this total stock of Rs.19.61 crores worth of bottles, there was a breakage of bottles worth of Rs.1.02 crores and further observed that the FIFO principle should be followed and in that case, the breakages are from stocks purchased prior to 31.03.2004 only is eligible and it is further observed that a new bottle may be broken on the day of purchase/receipt, nobody can given guarantee or say that the bottle is not over and hence it cannot be broken. It is only a chance. Even old bottles may not be broken for years together. Hence FIFO, i.e., 'first-in first-out' principle was denied as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adesh. 10. The second contention raised with regard to the breakages of bottles was rejected on the ground that the broken bottles cannot be said to be the goods purchased during the year 2004-05 and held that the broken bottles are not eligible for tax relief. 11. Aggrieved by the orders of the Joint Commissioner (CT) (Legal), the petitioner has filed appeal before the Andhra Pradesh Value Added Tax Appellate Tribunal, Visakhapatnam, on the rejection/disallowance of the claim on the ground that the coolers are not meant for resale purpose, and the petitioner contended that the coolers are the assets in the business and form part of their block of assets for the purpose of depreciation and the coolers purchased during the year 2004-05 put to use in their business. Inter alia, it is contended that claiming Input Tax Credit is use of goods in the business which is a wide expression under the Act and the Input Tax Credit is not confined to goods meant for trading alone as construed in the revision order and the capital goods, raw materials, consumables are all eligible for Input Tax Credit, except those which are disqualified under Rule 20 (2) and the coolers are not mentioned in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to clause (n), based on the judgment of the composite High Court in Asian Peroxide Limited vs. State of Andhra Pradesh, was not accepted on the ground that the said judgment related to clause (h) and not clause (n). The revision petitioner argues that the issue (case) falls under clause (n). He submits that, by the same notification, clause (n) was also added with retrospective effect from 01.04.2005. Consequently, the said judgment would equally apply to clause (n), and no retrospective effect could be given so as to adversely affect the revision petitioner's case. The Tax Revision Case has now been taken up for consideration on 11.03.2025 by this Court. 17. The challenge in this tax revision case is that the delegated legislation of amendment to Rule 20 (2) (n) vide, G.O.Ms.No.2201, Rev. (CT-II) Dept. dated 29.12.2005, introduced under section 13 (1) of the VAT act denying the ITC for coolers would not effect retrospectively. 18. Clause (n) to sub-rule (2) of Rule 20 of the AP VAT Rules envisages that refrigerators, coolers and deep freezers purchased by Soft Drink Manufacturers not for use in their manufacturing premises are not entitled for the Input Tax Credit. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hief and defect for which the amendment was necessitated is required to be considered and borne in mind and the Parliament's intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the Court to give the statute a purposeful or a functional interpretation. 26. In Koteswar Vittal Kamath Vs. Rangapa Baliga & Co., reported in (1969) 1 SCC 255 a three-Judge Bench of the Hon'ble Apex Court emphasised the distinction between "supersession" of a rule and "substitution" of a rule and held that the process of substitution consists of two steps: first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place." With respect to the presumption against retrospective operation, it is observed and held as under in para 14 and 15:- 14. The presumption against retrospective operation is not applicable to declaratory statutes.... In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. A validating clause coupled with a substantive statutory change is only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent. 28. The Hon'ble Apex Court following the observations from the decision of the Constitutional Bench in S.G.Jaisinghani Vs. Union of India and Others reported in (1967) 65 ITR 234 and Kumari Shrilekha Vidyarthi Etc. Vs. State of U.P. and others reported in (1991) 1 SCC 212 held that "In this context, it is important to emphasise that the absence of arbitrary power is the first essential of the rule of law upon which our whole con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued and become vested under Section 13 (2) of the AP VAT Act can be revoked retrospectively. Relevant provisions are extracted for facility and affective disposal of the issue raised in the case. Credit for Input Tax is available Under Section 13 (2) (a): reads thus: (2) (a) A dealer registered as a VAT dealer on the date of commencement of the Act, shall be entitled to claim for the sales tax paid under APGST Act, 1957 (Act VI of 1957) [on the stock held in any form in the State] [Substituted for 'On the Stock held in the state' by Act No. 34 of 2006, w.r.e.f.1-4-2005.]on the date of commencement of the Act subject to the conditions and in the manner as may be prescribed: Provided that such goods should have been purchased from 1.4.2004 to 31.03.2005 and are goods eligible for input tax credit. (b) Subject to the conditions if any, prescribed, input tax credit shall be allowed to a VAT dealer on registering as VAT dealer if any input tax is paid or payable in respect of all purchases of taxable goods, where such goods are for use in the business as VAT dealer, provided the goods are in stock on the effective date of registration and such purchase occurred not more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the Asian Peroxide Limited vs. State of Andhra Pradesh (referred supra) it was held after referring plethora of judgments of the Apex Court "thus a right accrued to the assessee on the date when they paid the tax on the materials or the inputs and the right would continue until the facility available there gets work out or until the goods existed. 37. According to a plain reading of Rule 20 (2) of the AP VAT Rules, 2005, the revision petitioner, M/s Pearl Beverages, is entitled to and eligible for the Input Tax Credit (ITC) on refrigerators, coolers, and deep freezers purchased by manufacturers of soft drinks and ice cream. This is because the right was taken away due to an amendment made under Section 37 of the AP VAT Act, which introduced provision (n) to the negative list without providing any justification. The amendment is not clarifying, and since a vested cannot be taken away retrospectively, it is unfair, and arbitrariness applies. 38. The Sales Tax Appellate Tribunal has given different meaning to the retrospective effect and contrary to the judgment of the Hon'ble Apex Court and to the law laid in Asian Peroxide Limited Vs. State of Andhra Pradesh (supra). Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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