2016 (1) TMI 869 - HC - VAT and Sales Tax

Input Tax Credit on the capital goods - crushing of stone is manufacturing activity or not. - TNGST - for the purpose of quarrying operations, crushing plants, excavators and front end loaders and its spare parts and accessories are purchased within the State as well as from other States against Form C under the Central Sales Tax Act, 1956. - Held that - the crusher machine cannot be treated as capital goods - this Court is not inclined to interfere with the impugned orders and these Writ Petitions are liable to be dismissed. - Decided against the assessee.

Issues Involved:
1. Reversal of Input Tax Credit (ITC) availed by the petitioner.
2. Levying of penalty on the petitioner.
3. Definition and applicability of 'manufacture' under Section 2(27) of the Tamil Nadu Value Added Tax (TNVAT) Act.
4. Eligibility of capital goods for ITC.
5. Maintainability of the writ petition in light of alternative remedies.

Detailed Analysis:

Reversal of Input Tax Credit (ITC) availed by the petitioner:
The petitioner, a registered dealer engaged in construction activities, availed ITC on capital goods like 'excavators' and 'front end loaders' and their spare parts. The Enforcement Officials inspected and reported that the petitioner was not entitled to ITC on the spare parts as there was no manufacture. Based on this report, the assessment for years 2011-12 to 2013-14 was reopened, and the ITC was reversed, demanding tax and penalty.

Levying of penalty on the petitioner:
The 1st Respondent issued orders reversing the ITC and levying penalties for the assessment years 2011-12 to 2013-14. The petitioner contended that the reversal and penalties were contrary to law, arguing that their activities amounted to 'manufacture' under Section 2(27) of the TNVAT Act.

Definition and applicability of 'manufacture' under Section 2(27) of the TNVAT Act:
The petitioner argued that using 'excavators' and 'front end loaders' for excavation and processing rocks into jelly and chakkai amounted to 'manufacture' as defined under Section 2(27) of the Act. The court referred to several judgments to determine whether the petitioner's activities constituted 'manufacture'. The court noted that the term 'manufacture' implies a transformation into a commercially different and distinct commodity. However, the court concluded that merely crushing boulders into smaller sizes did not amount to 'manufacture' as no new commodity was created.

Eligibility of capital goods for ITC:
The petitioner claimed ITC on purchases of crushing plants, excavators, and front-end loaders, asserting these were used in mining activities. The court examined the definitions under Sections 2(11) and 2(27) of the TNVAT Act and concluded that ITC on capital goods is permissible only if the activity amounts to manufacture. Since the petitioner's activity did not result in a new commodity, the court held that the petitioner was not entitled to ITC on the capital goods.

Maintainability of the writ petition in light of alternative remedies:
The respondents argued that the petitioner had an alternative remedy available and that the issue raised was a question of fact, making the writ petition not maintainable. The court agreed, noting that the petitioner should approach the appellate authority to address the factual aspects. The court emphasized that factual disputes could not be decided under Article 226 and that the proper recourse for the petitioner was to approach the appellate authority.

Conclusion:
The court concluded that the petitioner's activities did not amount to 'manufacture' under Section 2(27) of the TNVAT Act, and thus, the petitioner was not entitled to ITC on the capital goods. The court also held that the writ petition was not maintainable due to the availability of an alternative remedy. Consequently, the writ petitions were dismissed, and the petitioner was advised to approach the appellate authority for further recourse.

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