2016 (4) TMI 179 - HC - VAT and Sales Tax

Input tax credit - Whether stock transfer is covered by the proviso of Section 6(3)(d) - Non consideration of the effect of the use of word or in Section 6(3)(d) of the Uttarakhand Value Added Tax Act while discussing the appeal - Held that - the use of the word or , in the context of this case, is intended to convey the meaning that the sale may be within the State, an intra-State transaction in Uttarakhand, or the sale may be in the course of inter-State trade or commerce. The proviso clearly provides with reference to Clause (d) that where the finished goods, mentioned in Clause (d), are dispatched outside the State other than by way of sale, the consequences provided therein will follow. This would clearly mean that the legislature intended to cover the cases of sale in the course of inter-State trade or commerce in Section 6(3)(d) of the Uttarakhand VAT Act. Any other view would render the words in the proviso meaningless. In other words, when goods are sent by way of stock transfer in the course of inter-State trade, the case would not be covered by Section 6(3)(d) of the Uttarakhand VAT Act. The intention of the legislature was to provide limited relief of providing input tax credit, but confined to raw materials, which are used in the manufacture or processing of finished goods, which are sent by way of stock transfer as a case of stock transfer cannot be treated as a case of sale. In such circumstances, the proviso would appear to be an independent provision and the concept of sale would apply to both an intra-State sale, as also, inter-State trade and commerce within the meaning of Section 6(3)(d) of the Uttarakhand VAT Act. In other words, the case of stock transfer would not fall within the ambit of Section 6(3)(d) of the Uttarakhand VAT Act. Therefore, the case of stock transfer is squarely covered by the proviso and no input tax credit is vouchsafed in respect of packing materials used in connection with finished products, which are stock transferred outside the State in course of inter-State trade or commerce. - Decided against the appellant

Summary

Issues:
- Dismissal of writ petitions seeking various reliefs under the UKVAT Act

Analysis:
1. Dismissal of Writ Petitions:
- The appellant filed writ petitions which were dismissed, seeking reliefs such as setting aside an Impugned Order, Circular, and challenging Section 6(3)(d) of the UKVAT Act.
- The Single Judge dismissed the petitions, stating that statutory remedies were available and following a previous Division Bench decision against similar claims.
- The appellant appealed, arguing that the dismissal was based on the Apex Court's rejection of special leave petitions without reasons, indicating no merger of law.

2. Interpretation of Section 6(3)(d) of UKVAT Act:
- The appellant contended that the use of the word "or" in Section 6(3)(d) should be interpreted disjunctively, allowing input tax credit for goods used in manufacturing for intra-state sale or inter-state trade.
- Reference was made to a Supreme Court judgment emphasizing the limited scope of a proviso to the main enactment, supporting the appellant's argument.
- However, the Court found that Section 6(3)(d) intended to cover raw materials for finished goods sold within Uttarakhand or in inter-state trade, with the proviso clarifying the treatment of goods sent outside the state not by sale.

3. Application of Proviso and Legislative Intent:
- The Court concluded that the proviso in Section 6(3)(d) was an independent provision, limiting input tax credit for goods used in manufacturing finished products for sale within or outside Uttarakhand.
- Stock transfers in inter-state trade were distinguished from sales, with the proviso providing specific conditions for claiming input tax credit.
- The Court rejected the appellant's arguments, upholding the previous interpretation and dismissing the appeals with no costs awarded.

In summary, the High Court of Uttarakhand upheld the dismissal of writ petitions challenging the UKVAT Act provisions, particularly Section 6(3)(d), interpreting the legislative intent to restrict input tax credit based on the nature of sales and transfers of finished goods within and outside the state.