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2023 (1) TMI 586 - HC - VAT and Sales TaxRejection of claim of set off in respect of raw material used in the manufacturing of M.S. Ingot for the relevant assessment year - year 2005-06 - whether the benefit of set off as envisaged under Section 4-BB of UP Trade Tax Act 1948 could be passed upon the assessee/dealer or not? - HELD THAT - Though the raw material has not been defined under the Act but the Section provides for giving the benefit of set off to a manufacturer using raw material and packaging material. The controversy relating to set off has been engaging the attention of this Court as well as Apex Court in various judgments. The Apex Court has considered on number of occasions the matter relating to the grant of set off for various states and in one of the matter M/s. Vam Organic Chemicals Ltd. Vs. State of U.P. others 2003 (3) TMI 672 - ALLAHABAD HIGH COURT where it was held that for use in manufacture of notified goods which finds place in Section 4-B (2) of the Act of 1948 it would take within its compass diesel oil used by the manufacturer in generators installed in factory premises to produce electricity. The Division Bench had held the diesel oil used in the generator to be one of the raw material and had extended the benefit to the assessee. The explanation to Sub-section 2-A of Section 4-B defines the goods required for use in manufacture as well as the notified goods in Sub-clause (a) and (b) of the explanation to the aforesaid provision. From the reading of Section 4-B and Section 4-BB it is clear that the intention of Legislature was clear to the extent of giving certain relief to the manufacturer while they were using raw material and packaging material in the manufacture of goods. Section 4-BB in particular provides for set off taxes paid on the raw material and packaging material - In the present case the natural gas purchased by a dealer from GAIL whether comes under the purview of word raw material or not. In Shree Bhawani Paper Mills Ltd. 2015 (11) TMI 48 - ALLAHABAD HIGH COURT the Division Bench had held the diesel oil to be raw material used for running the generator for production of electricity - In Rajasthan Taxchem Ltd. 2007 (1) TMI 187 - SUPREME COURT the Apex Court while considering whether the diesel used in running of the generator was also a raw material or not held that the assessee was entitled to the relief as provided under Rajasthan Sales Tax Act for concessional rate of taxes. Iron steel has been notified by the State Government by notification dated 22.05.1998 to be notified goods under Section 4-BB of the Act of 1948. In the process of manufacture of M.S. Ingot the fuel which is used by the manufacturer is the natural gas which is a raw material. The fire which is ignited for making the M.S. Ingot is by the use of natural gas. Thus the process of manufacture of M.S. Ingot requires certain raw materials and natural gas fits into the definition of raw material as provided under Section 4-BB of the Act of 1948. This Court finds that the gas used by the assessee in the manufacture of M.S. Ingot is one of the raw material as mentioned in Section 4-BB of the Act - Revision allowed.
Issues involved:
Interpretation of Section 4-BB of the U.P. Trade Tax Act, 1948 for granting set off on raw material used in manufacturing M.S. Ingot, applicability of judgments in similar cases, and whether natural gas qualifies as raw material. Detailed Analysis: Issue 1: Interpretation of Section 4-BB for Set Off The revision arose from the Commercial Tax Tribunal's order dismissing the Second Appeal No. 109 of 2009 regarding the rejection of set off claimed by the assessee for raw material used in manufacturing M.S. Ingot for the year 2005-06. The dispute centered on whether the assessee was entitled to set off under Section 4-BB of the Act of 1948. Issue 2: Applicability of Judgments The revision was admitted based on questions of law regarding the applicability of judgments, including the Commercial Taxation Officer Vs. Rajasthan Taxchem Limited and Rathi Industries Vs. Commissioner Trade Tax cases. The revisionist argued that natural gas purchased from Gas Authority of India Limited qualified as raw material, citing relevant judgments. Issue 3: Classification of Natural Gas as Raw Material The revisionist contended that natural gas was a raw material used in manufacturing M.S. Ingot, thus eligible for set off under Section 4-BB. The Standing Counsel argued against this, stating that natural gas did not qualify as raw material under the Act of 1948. The court examined previous judgments and legislative intent to determine the classification of natural gas in the context of raw materials. Court's Decision After considering the arguments and precedents, the court held that natural gas used in the manufacturing process of M.S. Ingot qualified as a raw material under Section 4-BB. The court found that the Assessing Authority and Tribunal were unjustified in rejecting the claim without proper findings. Consequently, the court quashed the Tribunal's order and allowed the revision in favor of the assessee. The questions of law framed were answered in favor of the assessee, emphasizing the inclusion of natural gas as a raw material for set off purposes. This detailed analysis highlights the court's interpretation of Section 4-BB, the relevance of previous judgments, and the classification of natural gas as a raw material in the context of granting set off under the Act of 1948.
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