2022 (4) TMI 197 - HC - VAT and Sales Tax

Interpretation of statute - Section 18(8) (ix) of the JVAT Act - Partial disallowance of Input Tax Credit - petitioner could not produce Form JVAT-404 - period 2012 -2013 - HELD THAT - From bare perusal provisions of Section 18(8) (ix) of the JVAT Act, it manifest that Section 18(8)(ix) of the JVAT Act is only applicable in case when some manufacturing activity is undertaken by the dealer - In the present case, admittedly, no manufacturing activity is carried out by the Petitioner in the State of Jharkhand. It is only a trader and hence Section 18(8)(ix) cannot be applied in the case of the Petitioner. The categorical averments made in paragraph 22, 29 30 of the writ application to the extent that petitioner is not a manufacturer has not been denied by the respondent authority. Further, the fact that the Petitioner is not a manufacturer is also admitted in the assessment order, appellate order and the revisional order. The unimpeachable evidence in this regard is the registration certificate of the Petitioner. For the Respondent authorities, to apply Section 18(8)(ix) of the JVAT Act in the case of the petitioner; the burden was on them to establish that the Petitioner was engaged in manufacturing activity in the State of Jharkhand. However, such burden was not discharged by them. Moreover, it has not been alleged that the Petitioner is a manufacturer in the State of Jharkhand - It is well settled that in a taxing statute there is no room for intendment - Further, the finding that scrap batteries could only have been used for processing or manufacturing is also incorrect, inasmuch as, a dealer such as the Petitioner is also free to trade in the said scrap batteries, i.e., sale and re-sale. It is incorrect to presume that scrap batteries can only be used for processing or manufacturing. If the interpretation of the Ld. Tribunal is accepted, then several traders would be debarred from eligible ITC since all products are ultimately processed or manufactured. The word trader would itself lose its meaning. It is held that Section 18(8) (ix) of the JVAT Act is not applicable in the case of this Petitioner. Consequently, the instant Writ Petition is allowed

Issues Involved:
1. Quashing of the Judgment and Order dated 28.07.2021 by the Commercial Taxes Tribunal.
2. Quashing of the order dated 19.10.2016 by the Joint Commissioner of Commercial Taxes (Appeal).
3. Quashing of the Assessment order dated 05.10.2015 by Respondent No.2.
4. Interim order to stay the operation and effect of the aforementioned orders until the final disposal of the writ petition.

Issue-wise Detailed Analysis:

1. Quashing of the Judgment and Order dated 28.07.2021 by the Commercial Taxes Tribunal:
The petitioner challenged the Tribunal's decision, arguing that the orders from the Assessing Officer, Appellate Authority, and Revisional Authority were based on an incorrect interpretation and erroneous application of Section 18(8)(ix) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act). The Tribunal dismissed the revision petition by confirming the applicability of Section 18(8)(ix) of the JVAT Act, which disallowed the Input Tax Credit (ITC) claimed by the petitioner. The Tribunal's judgment was criticized for not considering the supplementary affidavit filed by the petitioner, which highlighted that the petitioner was not engaged in manufacturing activities within Jharkhand, thus making Section 18(8)(ix) inapplicable.

2. Quashing of the order dated 19.10.2016 by the Joint Commissioner of Commercial Taxes (Appeal):
The Joint Commissioner partly allowed the appeal but confirmed the disallowance of ITC amounting to ?15,98,658/- based on Section 18(8)(ix) of the JVAT Act. The petitioner argued that the Appellate Order erroneously applied Section 18(8)(ix) without any evidence of manufacturing activities within Jharkhand. The petitioner was engaged only in trading activities, as evidenced by the registration certificate under the JVAT Act, 2005, which clearly indicated "Wholesale Trade" as the nature of business.

3. Quashing of the Assessment order dated 05.10.2015 by Respondent No.2:
The Assessing Officer disallowed ITC amounting to ?15,98,657.48/- by applying Section 18(8)(ix) of the JVAT Act, based on the petitioner's interstate stock transfers. The petitioner contended that the assessment order did not specify which goods were transferred interstate and did not allege that the petitioner was engaged in manufacturing activities within Jharkhand. The assessment order was challenged for its incorrect application of Section 18(8)(ix), as it failed to establish that the petitioner consumed goods for manufacturing within the state.

4. Interim order to stay the operation and effect of the aforementioned orders until the final disposal of the writ petition:
The petitioner sought an interim order to stay the operation and effect of the Tribunal's judgment, the Joint Commissioner's order, and the Assessment order until the final disposal of the writ petition. The court considered the arguments and found that the orders were based on an incorrect interpretation of Section 18(8)(ix) of the JVAT Act, as the petitioner was not engaged in manufacturing activities within Jharkhand.

Conclusion:
The court concluded that Section 18(8)(ix) of the JVAT Act is applicable only when manufacturing activities are undertaken by the dealer. Since the petitioner was only engaged in trading activities within Jharkhand, Section 18(8)(ix) could not be applied. The court quashed the Judgment and Order dated 28.07.2021 by the Commercial Taxes Tribunal, the order dated 19.10.2016 by the Joint Commissioner of Commercial Taxes (Appeal), and the Assessment order dated 05.10.2015 by Respondent No.2. The writ petition was allowed, and the impugned orders were set aside.

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