2016 (8) TMI 249 - HC - VAT and Sales Tax

Input tax credit - purchases of pet coke where it is used for generation of electrical energy for captive consumption - Punjab VAT - Held that - While the scope of goods to be used in captive generation of power has been extended in Section 13(5)(i) of the Act, the same has to be given full meaning. The only restriction is that the benefit has to be subject to the provisions of Section 13(4) of the Act. While harmoniously constructing both the provisions, the only conclusion which can be arrived is that on the goods specifically mentioned in Section 13(4) of the Act, the benefit shall be available to the extent provided therein, whereas on the other goods, there would be no restriction as such for claiming the benefit of input tax credit, except those specifically mentioned in Section 13(5)(b) of the Act, namely, petrol, diesel, aviation turbine fuel, liquefied petroleum gas and condensed natural gas, as even many of those goods may be used in generation of power for captive consumption. The substantial question of law is answered in positive in favour of the assessee holding that the appellant shall be entitled to full input tax credit of the tax paid on purchase pet coke, where it is used for generation of power for captive consumption. - Decided in favor of assessee.

Summary

Issues Involved:
1. Entitlement to input tax credit on purchases of pet coke for generation of electrical energy for captive consumption under Punjab VAT Act 2005.

Analysis:
The appellant filed an appeal challenging the order of the Value Added Tax Tribunal, Punjab, seeking input tax credit on pet coke purchases for power generation. The Tribunal dismissed the appeal based on a previous judgment. The main issue before the High Court was whether the appellant is entitled to input tax credit on pet coke purchases for captive power generation. The appellant, a paper manufacturer, argued that Section 13 of the Act allows input tax credit on goods used for captive power generation. They cited a clarification by the Excise & Taxation Commissioner in a similar case supporting full input tax credit. The State contended that specific provisions in Section 13(4) and 13(5)(b) override general provisions, denying input tax credit on pet coke for captive power generation. The High Court analyzed Section 13 of the Act, highlighting restrictions on input tax credit for specific goods and exceptions for captive power generation.

The Court noted that Section 13(1) allows input tax credit on taxable goods purchased within the State if used for manufacturing or sale. Section 13(4) restricts input tax credit on certain goods to 5% if used for production or captive power generation. Section 13(5) lists goods where input tax credit is not available, including petrol and diesel. However, Section 13(5)(i) allows input tax credit on goods used for captive power generation, subject to Section 13(4). The Court emphasized the importance of harmoniously interpreting both provisions to allow input tax credit on goods used for captive power generation not specified in Section 13(4) or 13(5)(b). The Court cited a previous clarification by the Excise & Taxation Commissioner supporting full input tax credit on goods not listed in Section 13(4) or 13(5)(b).

Regarding a previous judgment on diesel, the Court distinguished it as diesel is specifically mentioned in Section 13(5)(b) for restricting input tax credit. In contrast, pet coke was not listed in Section 13(5)(b), allowing the appellant to claim full input tax credit. Therefore, the Court allowed the appeal, holding that the appellant is entitled to full input tax credit on pet coke purchases for captive power generation.