2020 (6) TMI 10 - HC - VAT and Sales Tax

Input Tax Credit - manufacturing loss, but also goods which were traded by the petitioner sold as such - HELD THAT - The issue as to whether the petitioner was liable to pay /revise Input Tax Credit availed on various goods manufactured, is now covered by a decision of this Court in M/S. RAN INDIA STEELS (P) LTD. VERSUS THE PRINCIPAL SECRETARY / COMMISSIONER OF COMMERCIAL TAXES, THE COMMERCIAL TAX OFFICER (FAC) , CHENNAI 2019 (12) TMI 1305 - MADRAS HIGH COURT where it was held that there is no scope for reversal of input tax credit on inputs which get consumed during the course of manufacture as invisible loss . There is no question to denying Input Tax credit availed on goods manufactured and traded by the petitioner unless they were contrary to other provisions of the order. Since the respondent also included the turnover purportedly purchased by the petitioner and sold while confirming the demand, the impugned orders need to be aside. Petition disposed off.

Summary

Issues Involved:
Clarification of earlier order, Input Tax Credit on manufacturing loss and traded goods, applicability of previous court decision, setting aside of demand on manufacturing loss on traded goods, direction for passing appropriate orders.

Analysis:

1. Clarification of Earlier Order:
The judgment begins by stating that there is no need to clarify the earlier order dated 26.02.2020. It then proceeds to dispose of the writ petitions filed by the petitioner in the second round.

2. Input Tax Credit on Manufacturing Loss and Traded Goods:
The petitioner had filed writ petitions, and the court had directed the respondent to pass a fresh order on merits. The impugned orders confirmed a demand on Input Tax Credit on manufacturing loss and goods traded by the petitioner. However, the court refers to a previous decision in M/s.Ran India Steels (P) Ltd. vs. The Principal Secretary, where it was observed that reversal of input tax credit is only warranted when inputs are destroyed at an intermediary stage of manufacture, not when they are consumed during manufacturing as "invisible loss." The court concludes that there is no basis for denying Input Tax credit on goods manufactured and traded by the petitioner.

3. Applicability of Previous Court Decision:
The judgment relies on the decision in M/s.Ran India Steels (P) Ltd. to establish the legal principle that only inputs destroyed at an intermediary stage of manufacture, not those consumed during manufacturing, warrant a reversal of input tax credit. The court directs the disposal of the writ petition in line with this decision.

4. Setting Aside of Demand on Manufacturing Loss on Traded Goods:
The court notes that the impugned orders sought to demand tax on manufacturing loss on traded goods, which the court deems as liable to be set aside. The respondent is directed to pass appropriate orders on merits within three months from the date of receipt of the court's order.

5. Direction for Passing Appropriate Orders:
In conclusion, the court disposes of the writ petitions with the above observations, without any cost. The connected miscellaneous petitions are also closed. The respondent is instructed to pass suitable orders on merits within a specified timeframe.

This comprehensive analysis of the judgment addresses the issues involved and the court's reasoning behind its decision, focusing on Input Tax Credit, applicability of previous decisions, and the direction for passing appropriate orders.