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2021 (10) TMI 931 - HC - VAT and Sales TaxInput tax credit of VAT paid on the Mining Tippers (and its accessories) which were used in the activity of manufacture or production of iron ore - Restoration of reassessment order passed by the prescribed authority - tax periods July, 2009 to March, 2010 - Section 66(1) of the Karnataka Value Added Tax Act, 2003 - HELD THAT - In the case of Suma Oil Agencies 2014 (4) TMI 545 - KARNATAKA HIGH COURT , the assessee had purchased a canter fitted with the tanker for the transportation of edible oil which is taxable goods from one place to another. Even in such context, the input tax credit was extended to the assessee in respect of the purchase of the said canter fitted with tanker. As such, the said judgment would be squarely applicable to the facts of the present case - Moreover, in the light of the judgment of the Hon ble Apex Court 1964 (10) TMI 41 - SUPREME COURT wherein goods purchased by the assessee for using in mining operation more particularly, where the extraction of ore from the mining and the transporting the same to the harbor involving different operations is held to be in the manufacture or processing of goods for sale or in mining, the mining tippers purchased by the assessee as capital goods is entitled for input tax credit, denial of the same is unjustifiable. The questions of law answered in favour of the assessee and against the revenue - Appeal allowed - questions of law are answered in favour of the assessee and against the revenue.
Issues Involved:
1. Entitlement to Input Tax Credit (ITC) on Mining Tippers. 2. Use of Mining Tippers in the activity of manufacture/processing of goods. 3. Jurisdiction and authority in ignoring Supreme Court decisions. 4. Applicability of the decision in Suma Oil Agencies. 5. Applicability of the decision in Canara Overseas Ltd. Issue-wise Detailed Analysis: 1. Entitlement to Input Tax Credit (ITC) on Mining Tippers: The appellant, a dealer under the KVAT Act, engaged in mining and sale of iron ore, purchased Mining Tippers and availed ITC on VAT paid. The department initiated reassessment proceedings denying ITC on these purchases, citing restrictions under Section 11(a)(2) read with the Fifth Schedule of the KVAT Act. The reassessment order demanded ITC along with interest and penalty. The First Appellate Authority allowed the appeal, but the Additional Commissioner of Commercial Taxes set aside this order, restoring the reassessment order. 2. Use of Mining Tippers in the activity of manufacture/processing of goods: The appellant contended that the use of Mining Tippers in the mine area is integrally connected with the manufacture/processing of iron ore, thus the restriction on ITC under Section 11(a)(2) should not apply. The Additional Commissioner, however, disagreed, referencing the decision in Canara Overseas Ltd. which held that the purchase of chassis for trucks was not for manufacturing or processing purposes. 3. Jurisdiction and authority in ignoring Supreme Court decisions: The appellant argued that the respondent ignored the Supreme Court decision in Chowgule and Co. Pvt. Ltd., which held that machinery used for transporting mined ore is integrally connected to the manufacturing process. The court in Chowgule noted that operations from extraction to loading ore into ships are part of the manufacturing process, thus goods used in these operations qualify for ITC. 4. Applicability of the decision in Suma Oil Agencies: The appellant cited the Suma Oil Agencies case, where the court allowed ITC on a goods vehicle used for transporting edible oil, emphasizing that capital goods used in business qualify for ITC. The court in the present case found this precedent applicable, noting that Mining Tippers used in mining activities should similarly qualify for ITC as they are capital goods used in the business. 5. Applicability of the decision in Canara Overseas Ltd.: The respondent relied on Canara Overseas Ltd., where ITC was denied for chassis used in transporting iron ore, arguing this was not for manufacturing purposes. The court distinguished the present case, noting that Mining Tippers are used within the mine area for production-related activities, thus falling within the scope of manufacturing or processing of goods. Conclusion: The court concluded that Mining Tippers qualify as capital goods under Section 2(7) of the KVAT Act, and their use in mining activities entitles the appellant to ITC. The decision of the Additional Commissioner was set aside, and the order of the First Appellate Authority was restored. The questions of law were answered in favor of the appellant, and the appeal was allowed with no order as to costs. Order: 1. The appeal is allowed. 2. The order of the Additional Commissioner of Commercial Taxes dated 26.09.2017 is set aside. 3. The questions of law are answered in favor of the appellant. 4. The order of the First Appellate Authority is restored. 5. No order as to costs.
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