2016 (6) TMI 140 - HC - VAT and Sales Tax

Power of state of restrict or deny input tax credit (ITC) claim, circular bearing no. 4411 dated 23.01.2013 and Section 6(3)(d) of the UKVAT Act - Admissibility of ITC claim - packaging material, containers etc. - finished goods are removed by way of branch transfer - Held that - since an alternate remedy is available to the petitioners before Joint Commissioner (Appeals) in respect of impugned order denying ITC claim, therefore, the petitioners can avail the statutory remedy available to them. So far as reliefs relating to setting aside circular dated 23.01.2013, Section 6(3)(d) of the UKVAT Act, does not restrict/deny ITC claim on packaging material, containers etc. purchased locally, used in the manufacture of goods in Uttarakhand and sent outside the State otherwise than by way of sale , Section 6(3)(d) of the UKVAT Act denies ITC on packaging material etc. in case of transactions other than by way of sale; issue any writ, order or direction striking down Section 6(3)(d) of the UKVAT Act as being ultra vires or Article 301 and 304 of the Constitution of India, directing the respondent no. 2 to continue to issue Form XVI as provided under Rule 26(3) of Uttarakhand VAT Rules which are required by the petitioner for import of raw material as well as finished products and direction declaring that the respondent no. 2 has no authority in law to stop issuance of Form XVI as provided under Rule 26(3) of Uttarakhand VAT Rules are concerned, those reliefs have been dealt with by learned Single Judge while deciding WPMS no. 532 of 2013, WPMS no. 1526 of 2014 and WPMS no. 2282 of 2014 on 06.04.2015. The State only wished to provide the benefit of ITC in a limited manner even in respect of raw materials used for production of finished goods, which are stock transferred. We cannot deny the right of the State with its plenary powers of legislation within the field of legislation, which is admittedly and legitimately exercised by it otherwise, the right to raise taxes. It has already been mentioned that special appeals were filed on behalf of Hindustan Unilever Limited against the judgment and order of learned Single Judge without meeting any success. Furthermore, when the SLPs were preferred before the Hon ble Supreme Court, the same were also dismissed on 07.12.2015. Since the propositions of law have already been dealt with and discussed by learned Single Judge and Hon ble Division Bench of this Court and SLPs against which have also been dismissed, therefore, no useful purpose will be served by discussing those provisions again. There is no merit in the aforementioned writ petitions. - Decided against the petitioner

Summary

Issues Involved:
1. Validity of the impugned order rejecting ITC claims.
2. Validity of the impugned Circular.
3. Interpretation of Section 6(3)(d) of the UKVAT Act.
4. Vires of Section 6(3)(d) of the UKVAT Act in relation to Articles 301 and 304 of the Constitution of India.
5. Issuance of Form XVI under Rule 26(3) of Uttarakhand VAT Rules.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Order Rejecting ITC Claims:
The petitioner sought relief against the impugned order dated November 30, 2015, which rejected ITC claims for the assessment period from October 1, 2014, to December 31, 2014. The court noted that the respondent no. 2 denied ITC on local sales, export sales, raw materials used in goods sent out of the state on branch transfer, and packaging materials used in goods sent out of the state on branch transfer. The court emphasized that the petitioner could approach the Joint Commissioner (Appeals) for redressal of grievances concerning this issue, indicating the availability of an alternate remedy.

2. Validity of the Impugned Circular:
The petitioner challenged the validity of the Circular dated January 23, 2013, issued by respondent no. 1. The court referenced previous judgments, including the Hindustan Unilever Ltd. (HUL) case, which upheld the validity of the impugned Circular. The court reiterated that the Circular was consistent with the Industrial Policy of Uttarakhand and did not find any merit in the petitioner's challenge.

3. Interpretation of Section 6(3)(d) of the UKVAT Act:
The petitioner contended that Section 6(3)(d) of the UKVAT Act should not restrict or deny ITC claims on packaging materials and containers used in manufacturing goods sent outside the state other than by way of sale. The court referred to the HUL judgment, which upheld the interpretation that Section 6(3)(d) denies ITC for packaging materials used in goods sent out of the state on branch transfer. The court found no basis to deviate from the established interpretation.

4. Vires of Section 6(3)(d) of the UKVAT Act:
The petitioner argued that if Section 6(3)(d) denies ITC on packaging materials for non-sale transactions, it should be struck down as ultra vires Articles 301 and 304 of the Constitution of India. The court referenced the Division Bench's observation that the state's policy on ITC was within its legislative powers and did not violate constitutional provisions. The court upheld the validity of Section 6(3)(d), rejecting the petitioner's contention.

5. Issuance of Form XVI under Rule 26(3) of Uttarakhand VAT Rules:
The petitioner sought a mandamus directing respondent no. 2 to continue issuing Form XVI, necessary for the import of raw materials and finished products. The court noted that respondent no. 2 had stopped issuing Form XVI to coerce the petitioner into paying the ITC amounts demanded in the impugned order. The court found that the issue of Forms was a routine function and that the petitioner's operations were being jeopardized. However, the court did not grant relief, as the matter had been addressed in previous judgments.

Conclusion:
The court dismissed the writ petitions, emphasizing the availability of alternate remedies for the petitioner and upholding the validity of the impugned Circular and Section 6(3)(d) of the UKVAT Act. The court found no merit in revisiting issues already settled by prior judgments, including those affirmed by the Supreme Court.