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2012 (8) TMI 818 - HC - VAT and Sales TaxClaim of 100% set off for tax paid on the coal purchased - whether the coal used in the process by the assessee was used as a raw material or as fuel ? - Held that - Considering the Report of Head of the Department Metallurgical and Materials Engineering Visvesvaraya National Institute of Technology, Nagpur indicates that to convert iron ore into sponge iron the noncoking coal is used. It must be mentioned that the orders passed by the authorities did not use the specific word Non-coking coal - The report specifically mentions that inside the bed the Non-cooking coal plays the role of a reductant and that non-coking coal provides the gas carbon mono-oxide for satisfying the heat requirements of the process. On account of this, the author of the report has observed It indirectly plays a role of fuel in the rotary kiln process . It is seen that chemical qualities of Noncooking coal to generate heat are used. Merely because heat is generated in the process it cannot be a ground to hold that Noncooking coal so used was used as fuel. The above observations clearly shows that the coal used in the process of manufacturing of sponge iron is used as a raw material and not as a fuel - in favour of assessee. Entitlement to claim set off as regards purchase of HSD Oil - Held that - Considering the provisions of Rule 54(b), it is clear that the use of HSD Oil i.e. motor spirit as a fuel does not fall within the aforesaid provisions for the purpose of claiming set off. On account of this specific provision which permits claiming of set-off under peculiar circumstances mentioned in Rule 54(b) of said Rules, the provisions of Rule 52 and Rule 53 cannot applied in favour of the assessee - The Assessing Officer as well as the Appellate Authority has rightly declined to grant set off to the respondent in regard to the HSD Oil - against assessee.
Issues Involved:
1. Entitlement to 100% set-off for tax paid on coal used in manufacturing sponge iron. 2. Entitlement to set-off for tax paid on HSD Oil used as fuel under MVAT Rules. Issue-Wise Detailed Analysis: 1. Entitlement to 100% Set-Off for Tax Paid on Coal: The primary issue was whether the respondent dealer was entitled to 100% set-off for the tax paid on coal used in manufacturing sponge iron, under Rule 53 of the MVAT Rules, 2005. The respondent, a manufacturer of sponge iron, claimed 100% set-off on the coal used, arguing it was utilized as a raw material. The assessing officer, however, concluded that coal was used both as a raw material and as fuel, granting only 50% set-off. The Joint Commissioner of Sales Tax (Appeals) upheld this decision. Upon appeal, the Maharashtra Sales Tax Tribunal allowed the respondent's claim for 100% set-off, treating the coal as a raw material. The Tribunal's decision was based on a report from the Head of the Department of Metallurgical and Material Engineering, VNIT Nagpur, which indicated that coal played a role of a reductant and indirectly as a fuel in the rotary kiln process. The High Court, after reviewing the report and submissions, concluded that the non-coking coal used in the manufacturing process was indeed a raw material and not fuel. The court held that the Tribunal rightly allowed the respondent's claim for 100% set-off, thereby answering the first question in favor of the respondent assessee. 2. Entitlement to Set-Off for Tax Paid on HSD Oil: The second issue was whether the respondent was entitled to set-off for tax paid on HSD Oil used as fuel, under Rule 52(1)(a) of the MVAT Rules, 2005. The assessing officer denied the set-off, a decision upheld by the Joint Commissioner of Sales Tax (Appeals). The Tribunal, however, granted the set-off under Rule 52, reducing it by 4% as per Rule 53(1), since HSD Oil was purchased from a registered dealer. The High Court examined the provisions of Rule 52, Rule 53, and Rule 54(b) of the MVAT Rules. It noted that Rule 54(b) creates an embargo on claiming set-off for purchases of motor spirits (including HSD Oil) unless the conditions specified in Rule 54(b) are met. Since the use of HSD Oil as fuel did not fall within these conditions, the court concluded that the Tribunal erred in granting set-off. The court held that the assessing officer and the appellate authority were correct in denying the set-off for HSD Oil, thus answering the second question in favor of the appellant, the State of Maharashtra. Conclusion: The High Court disposed of the appeals with the following orders: - The question regarding the entitlement to 100% set-off for coal was answered in favor of the respondent assessee. - The question regarding the entitlement to set-off for HSD Oil was answered in favor of the appellant, the State of Maharashtra. - No order as to costs was made.
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