2016 (10) TMI 374 - HC - VAT and Sales Tax

Input tax credit - whether the Hon ble Tribunal was justified in rejecting the claim of the assessee for the Input Tax Credit even though such purchases are not disqualified as per Schedule- E attached to the Haryana VAT Act 2003? - Held that - The kind of goods purchased by the appellant input tax credit on which has been declined is cooper wire Taflon Tape Gasket Union Socket etc. Fire Bricks or Boiler G. I. Pipe M.S. Angle Flat T. Iron M.S. Flange Drill Shaft sleeve Industrial Fan M.S. Channel Angle Fire Bricks Rubber Ring Electric Cable Wire Cold Rolled Strips Tape Cutter etc. . A perusal of the aforesaid goods shows that none of them can be said to be of the category which are used for construction of building rather these are parts of machinery. In fact none of the authorities were very clear on the issue as vague findings were recorded. The goods purchased by the appellant do not fall in the categories described at Sr. Nos. 1 and 2 of SCHEDULE - E. Entry 5 in Schedule- E is general in nature. All goods which are not forming part of the goods mentioned at Sr. Nos. 1 and 2 will form part of this entry. If the goods purchased by the appellant were not in the category of capital goods the same will fall in the goods mentioned at Sr. No. 5. Considering the conditions as provided in column no.3 the appellant is not in the business of telecommunication mining or generation and distribution of electricity hence the goods could not possibly be used for that purpose. The goods have not been exported out of State or disposed of otherwise than by way of sale. Clause (iii) in the circumstances mentioned in Column 5 provides that if the goods have been used in manufacture or packing of exempted goods then the benefit of input tax credit is not available. Conditions laid down in Clauses (iv) and (v) are also not applicable in the case in hand as neither the goods are in stock nor those have been sold to Canteen Store Department. First proviso to Section 8(1) of the Act provides that if the goods so purchased in the State are used or disposed of partly in the circumstance mentioned in Schedule E and partly otherwise the input tax credit in respect of such goods shall be computed on pro-rata basis. The appellant entitled to input tax credit on the goods purchased by him. However while calculating input tax credit conditions in Schedule E and provisos to Section 8(1) of the Act have to be kept in view - appeal disposed off - decided partly in favor of appellant.

Summary

Issues Involved:
1. Rejection of Input Tax Credit (ITC) claim by the assessee.
2. Interpretation of relevant provisions of the Haryana Value Added Tax Act, 2003, particularly Section 8 and Schedule 'E'.

Issue-wise Detailed Analysis:

Issue 1: Rejection of Input Tax Credit (ITC) claim by the assessee

The assessee, a registered dealer under the Haryana Value Added Tax Act, 2003, engaged in the manufacture, sale, and purchase of milk and milk products, appealed against the rejection of ITC on purchases worth ?29,86,837/- for machinery items used in manufacturing. The Assessing Authority categorized these goods as 'infrastructure goods' and denied ITC. The Joint Excise & Taxation Commissioner (Appeals) and the Tribunal upheld this decision. The assessee contended that the goods were part of the machinery used in manufacturing and not for infrastructure development, citing an earlier Tribunal decision in Amir Chand Jagdish Kumar, Gharaunda, Karnal vs State of Haryana, where ITC on machinery used in rice manufacturing was allowed.

Issue 2: Interpretation of relevant provisions of the Haryana Value Added Tax Act, 2003, particularly Section 8 and Schedule 'E'

The legal framework involves Section 8 of the Act, which governs the determination of ITC. Input tax is defined under Section 2(1)(w) as the tax paid on goods sold to a VAT dealer, excluding goods specified in Schedule 'E'. Schedule 'E' lists goods with 'nil' ITC, including petroleum products, natural gas, and certain capital goods. The appellant argued that their goods did not fall under Schedule 'E' exclusions, and thus ITC should be allowed. The State countered that some goods were used for building construction, justifying ITC denial.

Judgment Analysis:

1. Goods Purchased and Their Use:
The Tribunal listed goods like copper wire, Teflon tape, gasket, union, socket, fire bricks, pipes, industrial fan, etc., which were deemed parts of machinery rather than construction materials. The authorities' categorization of these goods as 'infrastructure goods' or used in building construction was found to be vague and unsupported by clear evidence.

2. Definitions and Provisions:
- Capital Goods (Section 2(1)(g)): Defined as plant, machinery, dies, tools, and equipment used in manufacturing or processing goods for sale.
- Input Tax (Section 2(1)(w)): Tax paid on goods sold to a VAT dealer, creditable as per Section 8.
- Tax Invoice (Section 2(1)(zl)): Invoice issued for taxable goods sold to another VAT dealer, enabling ITC claim.
- Section 8(1): Specifies that ITC excludes goods in Schedule 'E' under certain circumstances.

3. Schedule 'E' Analysis:
- The goods in question did not fall under the categories at Serial Nos. 1 and 2.
- Entry 5 is general, covering all other goods not specified in Serial Nos. 1 and 2. The appellant's goods did not meet the conditions for ITC denial under Entry 5, such as use in telecommunications, mining, or exempted goods manufacturing.

4. Pro-rata Calculation:
- The first proviso to Section 8(1) requires pro-rata ITC calculation if goods are partly used in circumstances listed in Schedule 'E'.

Conclusion:

The court concluded that the appellant is entitled to ITC on the purchased goods, provided the conditions in Schedule 'E' and Section 8(1) are met. The substantial question of law was answered in favor of the assessee, and the appeal was disposed of accordingly.