2016 (7) TMI 287 - HC - VAT and Sales Tax

Input Tax Credit - Manufacturing activity or not - UP VAT - business of sale and purchase of Eucalyptus wood and bamboo - Tribunal observed that, the alleged process of debarking and cutting of wood and bamboo does not result in any new finished commercial item totally different in identity to wood and bamboo, therefore, the process does not involve any manufacture. Consequently the benefit of I.T.C. under Section 13 is not available to the revisionist. Held that - it is evident that every type of operation of the goods or finishing of goods would not amount to manufacture unless it results in emergence of a new commercial commodity, therefore, the contention of the petitioner herein that debarking and cutting of wood, removing of roots involve processing of the original product wood and bamboo resulting in a new item, is unacceptable, as, the new item is nothing but wood and bamboo which do not have an identity totally different from the original product nor does it result in emergence of a new commercial commodity. For the reasons aforesaid the judgment of the Tribunal cannot be faulted and once it is held that no manufacture was involved in the alleged process, the benefit of Section 13(1)(a) read with Explanation 3 could not be extended to the revisionist. - Decided against the assessee.

Summary

Issues Involved:
1. Entitlement to Input Tax Credit (I.T.C.) under Section 13 of the U.P. Value Added Tax Act, 2008.
2. Definition and interpretation of "manufacture" and "processing" under the Act.
3. Applicability of Section 13(1)(a) and Section 13(3)(b) of the Act.
4. Relevance of judicial precedents in interpreting the terms "manufacture" and "processing."

Issue-wise Detailed Analysis:

1. Entitlement to Input Tax Credit (I.T.C.) under Section 13 of the U.P. Value Added Tax Act, 2008:
The revisionist, a businessman dealing in Eucalyptus wood and bamboo, claimed the benefit of I.T.C. under Section 13 of the Act of 2008 for the year 2009-10. The Assessing Authority disallowed this claim, and although the first appeal accepted part of the I.T.C. claim, it disallowed ?33,73,939/-. The Commercial Tax Tribunal upheld the first appellate authority's decision, leading to the present revision before the High Court. The revisionist argued that debarking and cutting wood and bamboo constituted manufacturing, thus entitling them to I.T.C. under Section 13.

2. Definition and interpretation of "manufacture" and "processing" under the Act:
The court examined whether the activities of debarking and cutting wood and bamboo amounted to "manufacture" as defined under Section 2(t) of the Act of 2008. The term "manufacture" involves producing, making, altering, or otherwise processing goods but does not include processes that do not result in a new commercial commodity. The court referred to precedents, including CST v. Lal Kunwa Stone Crusher (P) Ltd. and Dy. Commissioner of Sales Tax v. M/s Pio Food Packers, which clarified that mere processing that does not change the identity of the original product does not constitute manufacturing.

3. Applicability of Section 13(1)(a) and Section 13(3)(b) of the Act:
The revisionist claimed entitlement to I.T.C. under Serial No. 2 of the table in Section 13(1)(a), which allows credit for goods used in manufacturing taxable goods. However, the court found that the process of debarking and cutting wood and bamboo did not result in a new finished commercial item different from the original product. Consequently, the benefit of I.T.C. under Section 13 was not applicable. Furthermore, the court noted that the waste product and firewood resulting from the process were not shown in the closing stock for the relevant year, undermining the revisionist's claim under Section 13(3)(b).

4. Relevance of judicial precedents in interpreting the terms "manufacture" and "processing":
The court relied on several Supreme Court judgments to interpret "manufacture" and "processing." In CST v. Lal Kunwa Stone Crusher (P) Ltd., the Supreme Court held that crushing boulders into smaller stones did not constitute manufacturing. Similarly, in Dy. Commissioner of Sales Tax v. M/s Pio Food Packers, the Supreme Court ruled that slicing pineapples did not result in a new commercial commodity. The court distinguished the present case from Mamta Surgical Cotton Industries v. Assistant Commissioner (Anti Evasion), Bhilwara, where surgical cotton was deemed a new commercial commodity distinct from raw cotton.

Conclusion:
The court concluded that the activities of debarking and cutting wood and bamboo did not amount to manufacturing under the Act of 2008. Therefore, the revisionist was not entitled to the benefit of I.T.C. under Section 13. The Tribunal's judgment was upheld, and the revision was dismissed, as it did not involve any question of law warranting further consideration.