2015 (9) TMI 1512 - HC - VAT and Sales Tax

Reversal of input tax credit towards exempted goods - manufacturing and sale of taxable goods by the assessee - Aata , Maida and Suji - sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar) - in the case of CTO Vs. M/s. Durgeshwari Food Limited, Shri Ganganagar 2011 (12) TMI 654 - RAJASTHAN HIGH COURT , the court has reversed the order of tax board and allowed credit - when similar view has already been taken by this Court on identical facts, there is no reason to deviate with the judgment rendered in CTO Vs. M/s. Durgeshwari Food Limited, Shri Ganganagar. Matter is pending before the Apex Court. - The revision petition stands dismissed in the light of judgment rendered in the case of M/s. Durgeshwari Food Limited, Sri Gangangar, with a rider that in case the judgment by Hon ble Apex Court is decided in favour of the assessee in that case then this revision petition will be governed by the verdict of the Hon ble Apex Court in SLP in the case of Durgeshwari Food Limited, Shri Ganganagar.

Summary

Issues:
1. Input tax credit reduction and imposition of reverse tax.
2. Validity of penalty under Section 61 of the Act.

Analysis:

Issue 1: Input tax credit reduction and imposition of reverse tax
The High Court, in the present petition, discussed the impugned order of the Tax Board regarding the input tax credit issue. Referring to a previous case, the court held that input tax credit should only be allowed proportionately to the extent of manufacturing and sale of taxable goods. The court emphasized that input tax credit cannot be claimed for VAT exempted goods. The court ruled that the imposition of reverse tax disallowing the proportionate input tax credit was unjustified and needed to be quashed. The revision petitions filed by the petitioner-Revenue were allowed in this regard.

Issue 2: Validity of penalty under Section 61 of the Act
Regarding the penalty imposed under Section 61 of the Act, the court found that the penalty of double the amount of tax could not be sustained. The court reasoned that since the question was debatable and the respondent-assessee had raised legitimate concerns before the appellate forums, it could not be concluded that the assessee had deliberately provided incorrect information or acted with malice. Therefore, the court decided in favor of the respondent-assessee, granting the benefit of doubt and deleting the penalty imposed under Section 61 of the Act.

In conclusion, the High Court dismissed the revision petition based on the judgment in a previous case, with the condition that the fate of the petition would be governed by the decision of the Hon'ble Apex Court in a related Special Leave Petition (SLP) concerning the same issue.