2015 (8) TMI 1292 - HC - VAT and Sales Tax

Input tax credit - MP VAT - Maintainability of writ petition - Input purchased from a registered dealer used by the assessee in manufacturing of bodies of motor vehicle - Infact the components purchased was used for fabricating plant and machinery which is then used for manufacturing of the final manufacturing product i.e. the motor vehicle body. - Held that - Leaving it to the revenue to decide such a question may not be proper. Instead it would be more appropriate if we deal with such questions and decide it in this petition under Article 226 of the Constitution as it is a question with regard to interpretation of statutory provision and no disputed question of fact as canvassed by Shri Samdarshi Tiwari are available. - writ petition is maintainable. If inputs or goods purchased are used in relation to manufacture of final product and even if its use may be as a plant or machinery or equipments or part thereof in respect of the goods specified as the final product the benefit of MODVAT CENVAT or input tax rebate can be claimed. Meaning thereby it is not necessary that the goods purchased from the registered dealer which is known as input should be used directly for manufacture of the final product. It is sufficient if the input is used in respect of or in relation to a plant or machinery or a equipment which is ultimately used for manufacturing the final product. That in fact should be the interpretation of the provisions of the Section. From the order of the assessment it is seen that the Assessing Authority holds that if the components produced after manufacturing and processing of the material purchased from M/s Vijay Steels is sold by the petitioner they are entitled to rebate on input tax under Section 14 but because they have consumed it for use as a plant and machinery they are not entitled to this benefit. This according to us cannot be the correct interpretation of Section 14(1)(a) sub rule (2) and (4). If that be the intention of the legislature in giving input rebate to a dealer then it would be beyond the legislative purpose if the intention of the legislature is interpreted as done by the department by holding that the material used or consumed should be sold and should not be further used in respect of anything for the making of a final product which is ultimately sold. This could never be the intention of the legislature. - Benefit of input tax credit allowed - Decided in favor of assessee / petitioners.

Issues Involved:

1. Entitlement to Input Tax Credit under Section 14 of the M.P. VAT Act.
2. Interpretation of provisions in Section 14 of the M.P. VAT Act.
3. Applicability of rebate on input tax for goods used in manufacturing plant and machinery.
4. Maintainability of the writ petition under Article 226 despite the availability of a statutory remedy of appeal under the VAT Act.

Detailed Analysis:

Entitlement to Input Tax Credit under Section 14 of the M.P. VAT Act:

The petitioner challenged the order dated 28.2.2015 by the Divisional Deputy Commissioner, Commercial Tax, Jabalpur, which imposed a tax liability on the petitioner's establishment. The main legal question was whether the petitioner is entitled to Input Tax Credit (ITC) for tax paid on inputs purchased from a registered dealer used in manufacturing the final product. The petitioner argued that the components purchased from M/s Vijay Steel Yard, which were used to fabricate plant and machinery for manufacturing motor vehicle bodies, should qualify for ITC under Section 14 of the VAT Act.

Interpretation of Provisions in Section 14 of the M.P. VAT Act:

The petitioner's counsel referred to Section 2(o) of the VAT Act, which defines "input tax," and Section 14, which provides for a rebate of input tax. Section 14(1)(a)(2) and (4) was emphasized, indicating that rebate is permissible when goods purchased are utilized for manufacturing or as plant, machinery, equipment, and parts thereof. The counsel argued that the material purchased was used for creating plant and machinery, which in turn was used for manufacturing the final product, thus qualifying for the rebate.

Applicability of Rebate on Input Tax for Goods Used in Manufacturing Plant and Machinery:

The court compared the provisions of Section 14 of the VAT Act with Rule 57A, 57C, and 57F of the Central Excise Rules, which are similar in nature. The court noted that both sets of provisions allow for credit on inputs used in relation to the manufacture of the final product. The court cited the Supreme Court judgments in the cases of *Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd.* and *Escorts Ltd. vs. Commissioner of Central Excise, Delhi*, which supported the petitioner's contention. These judgments established that credit is available even if the inputs are used for creating plant and machinery, which is then used for manufacturing the final product.

Maintainability of the Writ Petition under Article 226:

The respondents argued that the writ petition should not be entertained due to the availability of a statutory remedy of appeal under Section 46(1) of the VAT Act. However, the court held that the issue at hand was purely a question of law regarding the interpretation of statutory provisions, which justified the exercise of jurisdiction under Article 226. The court cited precedents where writ petitions were entertained despite the availability of alternate remedies, especially when substantial legal questions were involved.

Conclusion:

The court rejected the objection regarding the maintainability of the writ petition and proceeded to decide on the merits. It held that the petitioner is entitled to the benefit of rebate on input tax under Section 14 of the VAT Act. The court directed the Assessing Officer to reconsider the matter in light of the interpretation provided and grant the input rebate to the petitioner. The petition was allowed and disposed of accordingly.

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