2017 (8) TMI 7 - HC - VAT and Sales Tax

Jurisdiction - input tax credit - sale of taxable goods as well as on exempted goods - Whether under the facts and circumstances of the present case the Rajasthan Tax Board has not exceeded its jurisdiction in giving directions to the petitioners to appear before the Commissioner, Commercial Taxes, Rajasthan, Jaipur on 14.02.2013 by invoking provisions of Section 85 of the Rajasthan Value Added Tax Act, 2003? - Held that - this court held that the input tax credit could not be allowed to the extent of sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar), which had been assessed by the Assessing Authority to the extent of 25% of the input tax credit and reverse tax has been imposed on the respondent-assessee and this Court allowed the claim of the revenue in the aforesaid case. There is a judgment of this Court in the case of Durgeshwari Foods Limited 2011 (12) TMI 654 - RAJASTHAN HIGH COURT holding that the assessee was not entitled to claim Input Tax Credit or Input Tax Credit could not be allowed to the extent of sale of VAT exempted goods namely; wheat bran (Chaff/Chokar) which had been assessed by the Assessing Authority to the extent of 25% of the Input Tax Credit and reverse tax had been imposed on the respondent-assessee. Counsel for the petitioner also accepts that the finding of this Court in the case of Durgeshwari Foods Limited is squarely applicable on the facts of the instant case. Once this is an admitted fact that the judgment is squarely applicable even the Tax Board irrespective of directing the Commissioner in my view, could have directed that in the light of the judgment in the case of Durgeshwari Foods Limited, the claim was not required to be allowed and for the purposes of calculating as to how much input tax credit is to be allowed/disallowed, the matter could have been restored back to the Assessing Officer. The powers of the Tax Board are wide enough. On perusal of section 83 quoted herein before and sub-section (10) of section 83 states that the Tax Board after opportunity of being heard shall pass such order as it thinks fit which in my view, gives power to the Tax Board even to direct the Commissioner u/Sec. 85 to revise an order. In my view, even the inherent power is available with the Tax Board to pass an appropriate order as it thinks fit which would mean even directing the Commissioner u/Sec.85 to pass an appropriate order. Admittedly, the Commissioner is an Authority subordinate to the Tax Board and the Tax Board can certainly give directions to correct a wrong undone in the matter. The directions given by the Tax Board to the Commissioner cannot be said to be contrary to the provisions of the Act and the Tax Board was within its competence to give certain directions. Once it is an admitted fact that the judgment of this Court in the case of Durgeshwari Foods Ltd governs the case, it is binding upon all the Subordinate Authorities and particularly when the matter was pending before the Tax Board and the judgment of this Court was available by the time when the appeal came up for hearing before the Tax Board. Appeal dismissed - decided against assessee.

Summary

Issues Involved:
1. Jurisdiction of the Rajasthan Tax Board in directing the petitioners to appear before the Commissioner, Commercial Taxes, Rajasthan.
2. Legitimacy of input tax credit claims on the purchase of Mustard seed and DOC (De Oiled Cake).

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Rajasthan Tax Board:
The primary issue addressed is whether the Rajasthan Tax Board exceeded its jurisdiction by directing the petitioners to appear before the Commissioner, Commercial Taxes, Rajasthan, invoking Section 85 of the Rajasthan Value Added Tax Act, 2003. The court examined Section 83 and Section 85 of the RVAT Act, which outline the powers of the Tax Board and the Commissioner.

The court noted that Section 83(10) allows the Tax Board to pass such orders "as it thinks fit," which includes directing the Commissioner to revise an order. The inherent power available to the Tax Board to pass appropriate orders was emphasized, and it was concluded that the Tax Board's direction to the Commissioner was within its competence. The Commissioner, being subordinate to the Tax Board, can be directed to correct any wrongs in the matter.

Additionally, Section 85 permits the Commissioner to act "suo-moto or otherwise," indicating that the Commissioner can take action based on information from any source, including the Tax Board. Therefore, the court found that the directions given by the Tax Board to the Commissioner were not contrary to the provisions of the Act.

2. Legitimacy of Input Tax Credit Claims:
The court addressed the legitimacy of the input tax credit claims made by the petitioner on the purchase of Mustard seed and DOC. The petitioner claimed input tax credit after the extraction of Solvent Oil, which was disputed by the Assessing Officer. The Assessing Officer allowed only a portion of the input tax credit and disallowed the rest, leading to an appeal by the petitioner.

The Deputy Commissioner (A) initially ruled in favor of the petitioner, directing the Assessing Officer to allow the input tax credit based on the value of the goods. However, the Tax Board overturned this decision, referencing the judgment in CTO (A-E), Sriganganagar vs. M/s. Durgeshwari Food Ltd., which held that input tax credit could not be allowed on the sale of VAT-exempted goods.

The court upheld the Tax Board's decision, noting that the judgment in M/s. Durgeshwari Food Ltd. was applicable to the present case. The input tax credit could not be allowed to the extent of sale of VAT-exempted goods, and the Tax Board was justified in directing the Commissioner to take appropriate action under Section 85 of the RVAT Act. The court concluded that the Tax Board's directions were within its powers, and the petitioner's claims were not in accordance with the law.

Conclusion:
The court dismissed the petition, ruling in favor of the revenue and against the assessee. The petitioner was directed to appear before the Commissioner, Commercial Taxes, Rajasthan, who was to pass an appropriate order within three months. The court found that the Tax Board acted within its jurisdiction and that the input tax credit claims were not legitimate under the applicable legal provisions.