2010 (2) TMI 1325 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of the definition of 'purchase price' u/s 2 (gg) of U.P. Trade Tax Act, disallowance of amount paid for plant and machinery as fixed capital investment, treatment of Central Excise Duty charged on sale invoices, impact of incentives under Central Excise Act on purchase price, consideration of subsidies or incentives on capital goods, disallowance of capital investment in car parking u/s 4-A of U.P. Trade Tax Act.

Interpretation of 'purchase price' u/s 2 (gg) of U.P. Trade Tax Act:
The revision was filed against the tribunal's order disallowing the amount paid for plant and machinery as fixed capital investment. The counsel argued that the investment in plant and machinery should be considered as part of the purchase price as defined in the Act. The court held that the grant of Modvat does not alter the price paid for goods purchased and should be included in fixed capital investment. Therefore, questions (i), (ii), and (iii) were answered in favor of the assessee.

Treatment of Central Excise Duty on sale invoices:
The department disallowed the fixed capital investment by considering the Central Excise Duty charged on sale invoices as part of the purchase price. The counsel contended that the investment in plant and machinery should be recognized as per the Act's definition of purchase price. The court ruled that incentives like Modvat do not diminish the investment made by the assessee, which should be included in fixed capital investment. Questions (i), (ii), and (iii) were decided in favor of the assessee.

Impact of incentives on capital goods:
The court emphasized that any subsidy or incentive given to a manufacturer should not reduce the purchase price of essential capital goods. The tribunal's decision to exclude the amount paid for plant and machinery from fixed capital investment due to Modvat was deemed unjustified. The court ruled in favor of including the investment in fixed capital, aligning with the definition provided in the Act.

Disallowance of capital investment in car parking u/s 4-A of U.P. Trade Tax Act:
Regarding the obligation to provide car parking as per the regulations of the Ghaziabad Development Authority, the tribunal disallowed the capital investment made by the assessee in car parking. However, the court acknowledged the statutory requirement for car parking and ruled in favor of including this investment as part of fixed capital investment. The revision was allowed, modifying the tribunal's order accordingly.