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2009 (5) TMI 866 - HC - VAT and Sales TaxWhether LPG cylinders are covered by entry 58 of Schedule B appended to the Punjab VAT Act, 2005 read with item 202 of List attached with that entry and therefore taxable at four per cent? Whether, on the facts and in the circumstances of the case, LPG cylinders being used for supply of gas to the consumers are capital goods in the hands of the purchaser-company? Whether the LPG cylinders are for use in the packing of taxable goods for sale within the State and therefore ITC is admissible to the purchaser who has purchased goods from the appellant? Whether the appellant has requisite locus standi to move an application before the Excise and Taxation Commissioner for determination of questions under section 85? Held that - In agreement with the view expressed by the Tribunal that empty LPG cylinders are not their capital goods but stock-in-trade. Accordingly we may clarify that in so far as the manufacturers and producers of the empty gas cylinders are concerned, they cannot claim that the LPG cylinder is either packing material and covered by item No. 202 of the List appended to entry 58 of Schedule B of the VAT Act or that in their hands the LPG cylinders are the capital goods . Thus answer to the first question is liable to be given in favour of the Revenue. LPG gas cylinders in the hands of Indian Oil Corporation and other corporations have to be treated as capital goods and assessable according to the rate of tax as per the provisions of the VAT Act. Thus the second question is answered in favour of the dealer-appellants and against the Revenue. While discussing question No. (ii) we have found that the property in the goods is not transferred when gas cylinders are used for supply of gas to the customers.The dealer-appellants would be entitled to ITC once the capital goods are considered as plant by virtue of definition of expression plant used in section 2(d) read with section 13(1) of the VAT Act. The gas cylinders company is sufficiently aggrieved if the purchaser of its product, namely, empty gas cylinders, are given the benefit of ITC or not granted that benefit. The gas cylinders company would be directly affected by any such decision. Therefore, we hold that it has locus standi to file application under section 85 of the VAT Act. Its locus standi cannot be doubted merely because they are manufacturer of empty gas cylinders, which are neither capital goods in their hands nor packing materials. Therefore, the question is answered in favour of the gas cylinders company and against the Revenue.
Issues Involved:
1. Taxability of LPG cylinders under entry 58 of Schedule B of the Punjab VAT Act, 2005. 2. Classification of LPG cylinders as capital goods in the hands of the purchaser-company. 3. Eligibility for Input Tax Credit (ITC) on LPG cylinders used for packing taxable goods. 4. Locus standi of the appellant to move an application before the Excise and Taxation Commissioner under section 85 of the VAT Act. Issue-wise Detailed Analysis: Issue 1: Taxability of LPG Cylinders The court examined whether LPG cylinders are covered under entry 58 of Schedule B of the Punjab VAT Act, 2005, and thus taxable at 4%. The appellant argued that LPG cylinders should be considered packing material and taxed at 4%. However, the court agreed with the Tribunal's finding that LPG cylinders are not included in item 202 of the List appended to entry 58 of Schedule B, which specifies "plastic containers, tin containers, and glass containers." The court held that LPG cylinders are not packing material as they are returnable and only the LPG filled in the cylinder is sold. Consequently, LPG cylinders are taxable at 12.5%, not 4%. Issue 2: Classification as Capital Goods The court considered whether LPG cylinders used by the Indian Oil Corporation (IOC) are capital goods. The appellant argued that these cylinders should be treated as capital goods and eligible for ITC. The court referred to section 2(d) of the VAT Act, defining capital goods as any plant, machinery, or equipment used in manufacturing, processing, or packing taxable goods for sale. The court concluded that LPG cylinders could be considered equipment used for processing taxable goods for sale and thus qualify as capital goods in the hands of IOC. The court cited the Patna High Court's decision in Steel City Beverages Ltd., which held that bottles and crates are plants, supporting the view that LPG cylinders are capital goods. Issue 3: Eligibility for ITC The court analyzed whether IOC is entitled to ITC on LPG cylinders used for packing taxable goods. It was argued that ITC should be available as per section 13(1) of the VAT Act. The court found that since LPG cylinders are considered capital goods, IOC is entitled to ITC. The Tribunal's refusal to apply the Patna High Court's judgment was deemed erroneous. The court concluded that IOC is eligible for ITC on LPG cylinders used in the supply of gas to consumers. Issue 4: Locus Standi The court addressed whether the appellant (Gas Cylinders Company) had the locus standi to move an application before the Excise and Taxation Commissioner under section 85 of the VAT Act. The Tribunal had ruled that the appellant had no locus standi as the issue did not relate to them. However, the court held that the Gas Cylinders Company is directly affected by the determination of the rate of tax and the entitlement of ITC to the oil companies. Thus, the appellant has the requisite locus standi to file the application. Conclusion The appeals were disposed of with the following conclusions: 1. LPG cylinders are not covered by entry 58 of Schedule B and are taxable at 12.5%. 2. LPG cylinders are considered capital goods in the hands of IOC. 3. IOC is entitled to ITC on LPG cylinders used for packing taxable goods. 4. The Gas Cylinders Company has the locus standi to move an application under section 85 of the VAT Act.
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