2007 (7) TMI 595 - AT - VAT and Sales Tax

Summary

Issues involved: Application u/s 8 of West Bengal Taxation Tribunal Act, 1987 for declaration of illegality of orders dated November 18, 2005 and February 28, 2006 regarding input tax credit under West Bengal Value Added Tax Act, 2003.

Details of the Judgment:

1. Furnace Oil as Consumable Stores:
- Applicant, a manufacturer of acrylic fibre, sought input tax credit (ITC) for furnace oil as consumable stores under VAT Act.
- Respondent No. 1 allowed only partial ITC, which was confirmed by respondent No. 2.
- Applicant argued that furnace oil is essential in the manufacturing process of acrylic fibre, citing legal precedents.
- State Representative contended that furnace oil is not directly used in manufacturing and is only a fuel.
- Tribunal analyzed the definition of "consumable stores" and relevant legal decisions to determine eligibility for ITC.
- Ruling in favor of the applicant, the Tribunal held that furnace oil qualifies as consumable stores under the VAT Act, allowing ITC on its purchase.

2. Entitlement to Input Tax Credit:
- As a registered dealer of acrylic fibre, the applicant was entitled to ITC on opening stock of raw materials and consumable stores.
- Application for ITC was filed, specifying the amounts for furnace oil and raw materials.
- Respondent No. 1's order denying ITC on furnace oil was challenged based on its essential role in the manufacturing process.
- Tribunal examined the legislative intent and previous legal interpretations to support the claim for ITC on furnace oil.
- Considering the necessity of furnace oil in manufacturing acrylic fibre, the Tribunal set aside the orders of respondent Nos. 1 and 2, granting the applicant the entitlement to ITC.

3. Legal Interpretation and Precedents:
- Legal arguments revolved around the interpretation of consumable stores, direct relation to manufacturing, and eligibility for ITC.
- Reference was made to various court decisions highlighting the importance of goods used in the manufacturing process.
- The Tribunal emphasized the significance of furnace oil in the manufacturing of acrylic fibre, aligning with the principles established in previous legal cases.
- The subsequent legislative amendment excluding furnace oil from ITC further supported the Tribunal's decision to allow ITC on furnace oil purchases made before the amendment.

4. Final Decision:
- Considering all arguments and legal precedents, the Tribunal substantiated the application and set aside the impugned orders.
- The orders dated November 18, 2005 and February 28, 2006 were overturned, granting the applicant the benefit of input tax credit on furnace oil.
- The case was disposed of without imposing any costs on either party.