2022 (1) TMI 861 - Tri - VAT and Sales Tax

Input Tax Credit - Intra-state Stock transfer - entitlement to input tax credit on stock transfer made by Unit-II to Unit-I which is stated to be intra-state stock transfer - effect of amendment incorporated in the year 2011 in Section 18 (8) (ix) of the JVAT Act, 2005 - HELD THAT - In order to claim input tax credit petitioner is bound to establish a case that he is covered under any of the sub-sections of section 18 and is not present in the negative list contained u/s 18 (8) of the JVAT Act, 2005. Intra-state Stock transfer does not appear in section 18 (8) (ix) but merely because of the reason that it does not appear in section 18 (8) (ix) does not make it eligible for a claim of input tax credit. Whether Stock transfer of such goods is eligible for input tax credit or not particularity if such goods are subject to intra-state stock transfer is the point for consideration. The whole purpose of the taxation law intends to ensure that the State is not deprived of its taxation rights and the consumer is not overburdened by paying double taxes and therefore VAT law was brought into force. When intra-state transfer of sock is made practically there is no sale and such goods may be used as raw material or consumed as raw material in course of manufacturing of final product but only at the time of sale of the final product the taxes paid on such goods can be claimed as input tax credit. A Composite reading of the proviso to Section 18 (8)(ix) of the JVAT Act, 2005 clearly shows that where stock transfer of goods are made from the State of Jharkhand to any other state then in terms of the proviso the interest of state of Jharkhand is protected and the consumer is not overloaded with excessive tax and therefore, proportionate input tax credit is allowed on inter-sate stock transfer of goods or inter-state sale of goods. This is not applicable when there is intra-sate transfer of stock. In case of intra-state transfer of stock if input tax credit is claimed and if input tax credit is allowed then the other unit of the Petitioner will be at full liberty to subsequently make an inter-state transfer of stock with no requirement to claim input tax credit as he has already availed the same through its unit-11 which would be undoing the mandate of law in terms of Section 18 (8) (ix) of the JVAT Act, 2005. This Tribunal is of the considered view that the dealer with a common TIN number can definitely claim input tax credit even on raw materials used for the purpose of manufacturing of goods at the time of its end product and not on stock transfer of goods claiming to be an intra-state stock transfer. Amendment incorporated u/s 18 (8) (ix) of the JVAT Act, 2005 - HELD THAT - This Tribunal is of the considered view that Section 18 (8) (ix) of the JVAT Act, 2005 does not allow expressly or by implication to include allowance of ITC on intra-state transfer of stocks relating to goods which are likely to be used as raw materials for manufacture and subsequent sale within the state of Jharkhand. This Tribunal is of the considered view that the Revision Application does not have any merit - Revision Application is accordingly dismissed.

Issues Involved:
1. Eligibility of Input Tax Credit (ITC) on intra-state stock transfer.
2. Interpretation and application of Section 18 (8) (ix) of the JVAT Act, 2005.
3. Impact of the 2011 amendment to Section 18 (8) (ix) of the JVAT Act, 2005.
4. Validity of the orders passed by the Assessing Officer and the Appellate Forum.

Detailed Analysis:

1. Eligibility of Input Tax Credit (ITC) on intra-state stock transfer:
The primary issue is whether the petitioner is entitled to ITC on intra-state stock transfer from Unit-II to Unit-I. The petitioner argued that the amendment in Section 18 (8) (ix) of the JVAT Act, 2005, which took effect from 01.04.2006, should allow ITC on intra-state stock transfers. The petitioner emphasized that the amendment aimed to boost business within Jharkhand by allowing ITC on intra-state stock transfers. However, the State contended that intra-state stock transfers are not eligible for ITC as they do not constitute taxable sales, and the legislative intent was to prevent any indirect avoidance of tax obligations.

2. Interpretation and application of Section 18 (8) (ix) of the JVAT Act, 2005:
The petitioner argued that the un-amended provision of Section 18 (8) (ix) did not distinguish between intra-state and inter-state stock transfers and that the amendment clarified the provision by explicitly mentioning inter-state transfers. The petitioner claimed that the amendment should be interpreted to allow ITC on intra-state transfers. The State, however, argued that the amendment was merely clarificatory and did not change the essence of the provision, which intended to restrict ITC on stock transfers to protect the state's tax interests. The Tribunal agreed with the State's interpretation, concluding that the amendment did not grant additional rights but clarified existing provisions.

3. Impact of the 2011 amendment to Section 18 (8) (ix) of the JVAT Act, 2005:
The petitioner asserted that the 2011 amendment, which had retrospective application from 2006, should be considered in their favor, allowing ITC on intra-state stock transfers. The State countered that the amendment clarified the existing law and did not introduce new rights. The Tribunal found that the amendment did not alter the fundamental principle that ITC is not allowed on intra-state stock transfers unless there is a taxable sale within Jharkhand. The Tribunal emphasized that the legislative intent was to ensure that the state is not deprived of its tax revenue and that consumers are not overburdened by double taxation.

4. Validity of the orders passed by the Assessing Officer and the Appellate Forum:
The petitioner challenged the orders of the Assessing Officer and the Appellate Forum, arguing that they failed to consider the amendment and its retrospective application. The State maintained that the orders were consistent with the law and did not warrant any interference. The Tribunal upheld the orders, agreeing with the State's interpretation of Section 18 (8) (ix) and concluding that the petitioner was not entitled to ITC on intra-state stock transfers. The Tribunal also noted that the orders referred to by the petitioner, where ITC was allowed on stock transfers, did not have a binding effect and were not relevant to the present case.

Conclusion:
The Tribunal dismissed the Revision Application, holding that the petitioner was not entitled to ITC on intra-state stock transfers. The Tribunal found that the amendment to Section 18 (8) (ix) of the JVAT Act, 2005, did not grant additional rights but clarified existing provisions, and the orders of the Assessing Officer and the Appellate Forum were consistent with the law. The Tribunal emphasized the legislative intent to protect the state's tax interests and prevent indirect tax avoidance.

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