2022 (4) TMI 1034 - HC - VAT and Sales Tax

Denial of Input Tax Credit - spare parts of loader and tipper - denial of credit on the ground that loader and tipper are 'vehicles' - integral part of manufacturing process or not - HELD THAT - The facts are not in dispute that tipper and loader are said to be used captively within the mining area. After mining/extraction, the boulders are shifted to the stone crushing plant with the help of tipper and after which the boulders are loaded on the hopper of the stone crushing plant by the loader. The Hon'ble Supreme Court in the case of CHOWGULE CO. PVT. LTD. VERSUS UNION OF INDIA 1980 (11) TMI 61 - SUPREME COURT has held that if any machinery or vehicle is used for carrying from mining site to the place of processing, which covers for inclusion in the registration certificate, as without which the entire operation of mining and processing work cannot be done and is to be treated as one integral process. Further, this Court in the case of THE COMMISSIONER, COMMERCIAL TAX, LKO. VERSUS S/S ANAND TYRES, JHOKHAN BAG, JHANSI 2015 (2) TMI 430 - ALLAHABAD HIGH COURT , while considering the issue as to whether hydraulic excavator is machinery or a motor vehicle, has held that hydraulic excavator will come within the purview of machinery . The Hon'ble Supreme Court in the case of BOSE ABRAHAM VERSUS STATE OF KERALA AND ANOTHER (AND OTHER APPEALS) 2001 (2) TMI 890 - SUPREME COURT has treated excavators and roadrollers as motor vehicles required registration for the purpose of Motor Vehicle Act, liable for levy of entry tax. The Hon'ble Apex Court in the said judgement dealt with the issue with regard to levy of entry tax or not on excavators and road rollers. On the said background, the Hon'ble Court was pleased to hold that merely because of motor vehicle is put to a specific use, such as, being confined to enclose premises, will not render the same to be a different kind of vehicle as they are registered under the Motor Vehicle Act and liable for payment of entry tax - The issue in hand is entirely different. The issue in hand is not the levy of tax, but the issue is as to whether purchase of loader and tipper can be considered as capital goods within the meaning of section 2(f) of the VAT Act or not. The levy of tax is not in dispute in the case in hand and therefore, the judgement in the case of Bose Abraham will not be of any help to the Revenue and the same is distinguishable on the facts circumstances of the present case. The Revenue has failed to bring on record any material that the tipper was used beyond the shifting of boulders from the mining area upto the point of crushing plant or loader was not used for loading boulders on hopper of crushing plant. Therefore, it was captively being used as inter-dependent or integral part of the processing operation. It is not the case of the Revenue that the applicant is selling boulders. It only sales gitti and bhassi after crushing the boulders, which could be said to be the final product of the applicant. Prior to coming into existence of gitti, boulders cannot, by any stretch of imagination, be said to be goods so far as the applicant is concerned as its raw material. Therefore, the exclusion clause will not be applicable in the case in hand - the tipper and loader are captively used for manufacturing activity within the mining area where the stone crushing plant is situated, are covered under the definition of capital goods , is entitled for Input Tax Credit under section 13(1)(b) of the U.P. VAT Act. Revision disposed off.

Summary

Issues Involved:
1. Denial of Input Tax Credit (ITC) on spare parts of loader and tipper under Section 13(1)(b) of the U.P. VAT Act, 2008.
2. Consideration of loader and tipper as 'vehicles' under the Motor Vehicle Act, 1988.
3. Applicability of the definition of 'vehicle' under the U.P. VAT Act versus the Motor Vehicles Act.
4. Integral role of loader and tipper in the manufacturing process.

Issue-wise Detailed Analysis:

1. Denial of Input Tax Credit (ITC) on spare parts of loader and tipper under Section 13(1)(b) of the U.P. VAT Act, 2008:
The applicant contested that the loader and tipper should be treated as capital goods, essential for the manufacturing process of gitti and bhassi from boulders. The Tribunal had denied ITC on the purchase of these spare parts, arguing they were not capital goods. However, the Court noted that the loader and tipper were integral to the manufacturing process within the mining area, thus qualifying as capital goods under Section 2(f) of the U.P. VAT Act. The Court emphasized that these machines were used captively within the mining area, supporting the applicant's claim for ITC.

2. Consideration of loader and tipper as 'vehicles' under the Motor Vehicle Act, 1988:
The Court examined the definitions under the Central Motor Vehicle Rules, 1989, specifically Rule 2(ca) which defines "construction equipment vehicle." The loader and tipper, used for off-highway operations in mining, were covered under this definition. The Court distinguished between the general use of vehicles for transportation and the specific use of loader and tipper in the manufacturing process within the mining area, thus not treating them as regular vehicles for transportation of goods.

3. Applicability of the definition of 'vehicle' under the U.P. VAT Act versus the Motor Vehicles Act:
The applicant argued that the Tribunal erred in applying the definition of 'vehicle' from the Motor Vehicles Act instead of the U.P. VAT Act. The Court agreed, noting that the definitions under the two Acts are substantially different. The U.P. VAT Act's definition of 'vehicle' pertains to modes of transportation used for carriage of goods, which does not align with the specific use of loader and tipper in the mining and manufacturing process. The Court emphasized that the loader and tipper should be considered as machinery and equipment under the U.P. VAT Act.

4. Integral role of loader and tipper in the manufacturing process:
The Court referred to the Supreme Court judgment in the case of Chowgule & Company Private Limited & Another Vs. Union of India & Others, which held that machinery used for transporting materials within an integrated process of mining and manufacturing is essential and should be considered as part of the manufacturing process. Similarly, the loader and tipper, used for shifting boulders to the crushing plant and loading them into the hopper, were deemed integral to the applicant's manufacturing process. The Court also referenced the case of CCT Vs. M/s Anand Tyres, Jhansi, which supported the classification of hydraulic excavators as machinery.

Conclusion:
The Court concluded that the loader and tipper, used captively within the mining area, qualify as capital goods under Section 2(f) of the U.P. VAT Act, entitling the applicant to ITC. The case was remanded to the Tribunal for a decision on whether the mining and crushing operations were conducted captively, forming an integral part of the process. The Tribunal was directed to expedite the decision within three months. The revision was disposed of with the expectation that the Tribunal would consider the applicant's integrated use of the loader and tipper in the manufacturing process.