2014 (10) TMI 1014 - HC - VAT and Sales Tax

Input tax credit - LPG stock transferred to places at outside the State from the Devanagunthi bottling plant - maintenance of separate records - rule 131 (3) of KVAT Rules, 2005 - HELD THAT - In order to decide the questions of law which are framed in these petitions, there should not be any dispute of facts. The assessee contends from Devanagunthi bottling plant in respect of non domestic LPG, there are no stock transfers. All that LPG is purchased within the State sold within the State as is reflected from the invoices. The authorities have not applied their mind to these contentions nor have recorded any finding based on facts. Under the circumstances the proper course is to set aside the order impugned in these petitions - matter remanded back to the first appellate authority to consider the documents produced by theassessee and then decide from Devanagunthi Bottling plant, whether there is a stock transfer in respect of non domestic LPG purchased from local registered dealer and if there is no such stock transfer and if all these purchases is sold within the State, then whether the assessee is entitled to the benefit of input tax credit. Appeal allowed in part by way of remand.

Summary

Issues:
1. Input tax credit on LPG stock transferred outside the State.
2. Application of Rule 131(3) of KVAT Rules for calculating non-deductible input tax credit.

Analysis:
1. The petitioner, a public sector undertaking, challenged the order passed by the Tribunal regarding input tax credit on LPG stock transferred outside the State from the Devanagunthi bottling plant. The assessing authority rejected the claim for input tax credit on local purchases of LPG, applying Rule 131(3) of KVAT Rules. The first appellate authority remanded the matter for re-computation, focusing on purchases made by the Devanagunthi bottling plant. The Tribunal confirmed this finding, leading to the petitioner's appeal before the High Court.

2. The High Court considered whether the petitioner, by maintaining separate accounts for LPG purchases, was entitled to deduction of the full amount of input tax paid or if the formula under Rule 131(3) of KVAT Rules should be applied. The Court observed that the authorities had not properly considered the contention that all LPG purchased from the local dealer was sold within the State, with no stock transfers from the Devanagunthi bottling plant for non-domestic LPG. The Court set aside the impugned order and remanded the matter to the first appellate authority for a detailed review based on the documents produced by the petitioner.

In conclusion, the High Court allowed the petitions in part, setting aside the impugned order and remitting the matter back to the first appellate authority for a thorough reconsideration in light of the observations made in the order.