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2015 (3) TMI 176 - HC - VAT and Sales TaxDenial of benefit of set-off as provided under the provisions of sections 14(1)(a), (2) and 26A(7) of the M.P. VAT Act - petitioner used soya seeds in the manufacture of edible oil and DOC - Denial of benefit on the ground that DOC, a by-product, is not taxable, hence, the petitioner is not entitled the benefit of set-off as provided under sections 14(1)(a), (2) and 26A(7) of the VAT Act and the petitioner is liable to pay tax at four per cent in accordance with the provisions of section 26A(5) of the VAT Act - whether in such circumstances, the petitioner is entitled to the benefit of set-off as provided under sections 14(1)(a), (2) and 26A(7) of the VAT Act on entire purchase of soya seeds. Held that - It is an admitted fact that soya oil and other by-products; sludge are taxable, however, there is no tax on DOC. - Section 14 of the VAT Act prescribes rebate on input tax subject to the provisions of sub-section (5). A rebate of tax shall be claimed or to be allowed to a registered dealer under certain circumstances subject to restrictions prescribed under sub-section (5). Sub-section (5) says that if it is consumed or used for/in the manufacture or processing or packaging of goods declared tax-free under section 16. Refinery would be entitled to set-off to the entire tax paid by it on the purchase of raw material. - manufacturer is eligible the benefit of set-off on the entire amount of tax paid on purchase of raw material and principle of apportionment could not be invoked. In the facts and circumstances of the present case, the judgment of the honourable Supreme Court is applicable because the DOC, a by-product is tax-free and another by-product sludge and main product oil are taxable. Hence, the authority cannot apportion the tax liability after deducting the percentage of proportionate manufacture of DOC, which has been done in the present case. - petitioner is eligible to get set-off on entire raw material purchased by it. - Following decision of COMMISSIONER OF SALES TAX, BOMBAY Versus BHARAT PETROLEUM CORPN. LTD. 1992 (2) TMI 250 - SUPREME COURT OF INDIA - Matter remanded back - Decided in favour of assessee.
Issues Involved:
1. Entitlement to the benefit of set-off under sections 14(1)(a), (2), and 26A(7) of the M.P. VAT Act. 2. Applicability of the principle of apportionment. 3. Availability of alternative remedy. Issue 1: Entitlement to the Benefit of Set-Off The petitioner, a private limited company engaged in the manufacture of edible oil, disputed the additional tax demand of Rs. 45,49,483 for the assessment year 2009-2010. The primary contention was the denial of the benefit of set-off for the purchase of raw materials (soya seeds, mustard seeds, and crude oil) used in manufacturing soya oil and de-oiled cake (DOC). The taxing authority argued that since DOC, a by-product, is tax-free, the petitioner was not entitled to the set-off benefit under sections 14(1)(a), (2), and 26A(7) of the VAT Act. The court examined section 14, which provides a rebate on input tax under certain conditions, and section 26A, which deals with the deduction of tax at source and the non-eligibility of input-tax rebate for certain goods. Issue 2: Applicability of the Principle of Apportionment The court referenced the Supreme Court judgment in Commissioner of Sales Tax v. Bharat Petroleum Corporation Ltd., which held that a manufacturer is entitled to set-off the entire tax paid on the purchase of raw materials, even if the raw materials are used to produce both taxable goods and tax-free by-products. The Supreme Court emphasized that the rules do not require a quantitative correlation between the purchased goods and the manufactured taxable goods. The court applied this principle to the present case, stating that the petitioner is entitled to set-off on the entire amount of tax paid on the purchase of raw materials, as the DOC is a by-product and the main product, oil, is taxable. Issue 3: Availability of Alternative Remedy The respondents argued that the petitioner should have pursued an alternative remedy. However, the court noted that the Commissioner of Income Tax had issued a circular indicating the applicability of the principle of proportionality. The court cited Supreme Court judgments in Filterco v. Commissioner of Sales Tax and State of Tripura v. Manoranjan Chakraborty, which held that if a higher authority has expressed a view, the availability of an alternative remedy does not bar the court from exercising its jurisdiction, especially when the appellate authority is subordinate to the higher authority. The court concluded that directing the petitioner to avail of an alternative remedy would be futile. Conclusion: The court disposed of the petition with the following directions: 1. The petitioner is eligible to get set-off on the entire raw material purchased. 2. The impugned order dated March 31, 2012, is quashed, and the matter is remanded back to the assessing officer to pass an order of assessment based on the court's findings. No order as to costs.
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