2022 (4) TMI 827 - HC - VAT and Sales Tax

Exemption from Entry tax - Iron Steel (MS Angle, MS Channel, MS Plate, MS Beam, etc.) used in expansion of Cent Plan - capital goods or not - MS Angle, MS Channel, MS Plate, MS Beam, etc. used by the applicant in expansion of Cement Plant - N/N. 927 dated 18.02.2003 - HELD THAT - Admittedly, the revisionist is manufacturer of cement. For expansion of its unit/cement plant, the revisionist purchased iron steel and used the same for construction of various buildings, sheds, etc. The revisionist claimed the iron steel, purchased and used for construction of various buildings for expansion of its unit, as capital goods so that benefit of input tax credit can be granted to it - Bare perusal of section 2(f) of the VAT Act it has been clearly stated that capital goods means any plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation used for manufacture or processing of any goods for sale by the dealer. Further, perusal of section 13(1)(b) of the VAT Act would reveal that the dealer shall be entitled for claim of ITC only in respect of taxable goods purchased. On close scrutiny of the submissions of the learned counsel for the revisionist and the certificate brought on record to justify its claim, would clearly show that various buildings have been constructed for various other purposes, which have been tried to bring within the definition of capital goods . Further, the said certificate of Charted Accountant nowhere mentions as to how the consumption of iron steel is directly connected with the plant machinery or its accessories or its components - Only by referring or describing the user will not help the assessee for treating the iron steel used for the constructions of buildings as capital goods , more precisely, as plant machinery . In absence of any material having been brought on record, the claim capital goods by the revisionist has rightly been rejected by the authorities below. No case is made out for interference by this Court with the impugned order. Revision dismissed.

Summary

Issues:
- Whether iron & steel used in the expansion of a cement plant can be considered as capital goods for claiming exemption from Entry Tax.
- Whether the iron & steel used in construction can be classified as plant & machinery or its accessories under the VAT Act.

Analysis:
1. The revisions were filed against the Commercial Tax Tribunal's order regarding the exemption of Entry Tax on iron & steel used in expanding a cement plant. The key questions of law revolved around the classification of iron & steel as capital goods and their eligibility for tax exemption.

2. The revisionist argued that the iron & steel purchased for the expansion of the cement plant should be considered capital goods to avail input tax credit. However, the authorities contended that the materials were used for construction purposes and not directly connected to plant & machinery.

3. The court examined the definitions of "capital goods" under sections 2(f) and 13(1)(b) of the VAT Act. It was highlighted that capital goods are those used in the manufacture or processing of goods for sale, and input tax credit is allowed only for taxable goods purchased.

4. The revisionist claimed that the iron & steel were components of plant & machinery based on a certificate from a Chartered Accountant. However, the court found that the certificate did not establish a direct connection between the materials and the plant & machinery, leading to the rejection of the claim.

5. The court referenced judgments from the Supreme Court and Gujarat High Court but concluded that they were not applicable to the present case due to the lack of evidence showing the direct use of iron & steel in plant & machinery.

6. Ultimately, the court dismissed the revisions as the revisionist failed to provide sufficient material demonstrating the iron & steel's direct connection to plant & machinery, thus upholding the rejection of the claim as capital goods for tax exemption purposes.