2023 (10) TMI 724 - HC - VAT and Sales Tax

Input Tax Credit - Intrastate stock transfer of goods - denial of credit is contrary to amended provisions of Section 18(8)(ix) of the Jharkhand Value Added Tax Act, 2005 or not - HELD THAT - By bare perusal of the provisions of the JVAT Act, 2005 it would transpire that said provisions are in consonance with the scheme of Value Added Tax Regime introduced in the Country. From the scheme of JVAT, 2005 it would be evident that output tax liability of a dealer was required to be determined after subtracting therein the input tax paid by the dealer. ITC is claimed by a manufacturer on its input which is, admittedly, used for manufacture of goods, which is intended for sale. If the reasoning given by the Tribunal is accepted, then a manufacturer would get ITC on input if the goods are manufactured by it and sold by it itself. Whereas, the manufacturer would not be entitled to ITC if the goods are manufactured but not sold by manufacturer itself and stock transferred to its branch/stockyard/other units etc. up to the stage when the final product is sold - This is clearly not the intent of the Scheme of JVAT Act and the manufacturer is not required to wait for availment of ITC to a stage of ultimate sale of goods but it is entitled for ITC if the goods are merely intended for sale . Almost identical issue came up for consideration before the Hon ble Apex Court by interpreting almost pari materia provisions contained under Section 8(3)(b) of the Central Sales Tax Act, 1956 in the case of ASSESSING AUTHORITY-CUM-EXCISE AND TAXATION OFFICER, GURGAON AND ANOTHER VERSUS EAST INDIA COTTON MFG. CO. LTD. 1981 (7) TMI 205 - SUPREME COURT - In the said Judgment, Hon ble Apex Court in categorical term has held that the words for sale following the word goods in Section 8(3)(b) of the Central Sales Tax Act 1956 clearly indicate that the goods manufactured or processed must be goods for sale ; in other words, they must be intended for sale either by registered dealer himself or by anyone else. Thus, Petitioner is entitled to claim full ITC on Intrastate stock transfer of goods and, consequentially, the impugned orders being the orders dated 05.12.2012, impugned Judgment and order dated 10th August, 2021 passed by Commercial Taxes Tribunal, Jharkhand and impugned Judgment and Order passed by Commercial Taxes Tribunal, Jharkhand are hereby quashed and set aside. Application allowed.

Summary

Issues Involved:
1. Entitlement of the Petitioner-company to claim Input Tax Credit (ITC) on Intrastate stock transfer of goods.
2. Validity of denial of ITC based on amended provisions of Section 18(8)(ix) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act).

Summary:

Issue 1: Entitlement to Claim ITC on Intrastate Stock Transfer of Goods

The primary issue in these writ petitions is whether the Petitioner-company is entitled to claim ITC on Intrastate stock transfer of goods. The Petitioner-company, engaged in manufacturing and selling Auto Parts and Leaf Spring assembly, operates two units in Jamshedpur. The Petitioner claimed ITC for Intrastate stock transfers, which was denied by the Commercial Taxes Department based on the provisions of Section 18(8)(ix) of the JVAT Act, 2005. The Petitioner challenged the Assessment Orders, arguing that the provisions of Section 18(8)(ix) were amended with retrospective effect, removing the earlier embargo on claiming ITC on Intrastate stock transfers.

Issue 2: Validity of Denial of ITC Based on Amended Provisions

The Petitioner contended that the denial of ITC was based on the un-amended provisions of Section 18(8)(ix) and a misplaced reliance on the judgment in Tata Steel Ltd. vs. State of Jharkhand, which was delivered before the amendment. The amendment to Section 18(8)(ix) with retrospective effect from 01.04.2006 allowed full ITC on Intrastate stock transfers. Despite this, the Assessing Officer and the Commercial Taxes Tribunal denied ITC, interpreting that ITC is not available until the final sale of goods, contrary to the scheme of the JVAT Act.

Court's Findings:

The Court found that the Petitioner fulfilled all conditions for availing ITC under Section 18(4)(iii) of the JVAT Act. The amendment to Section 18(8)(ix) removed the bar on ITC for Intrastate stock transfers, allowing full ITC. The Tribunal's interpretation that ITC is only available at the stage of final sale was incorrect. The Court referred to the Supreme Court judgment in Assessing Authority cum Excise and Taxation Officer, Gurugram vs. East Indian Cotton Manufacturing Company Ltd., which held that goods intended for sale, whether by the manufacturer or another entity, are eligible for ITC.

Conclusion:

The Court held that the Petitioner is entitled to claim full ITC on Intrastate stock transfers. The impugned orders denying ITC based on the un-amended provisions and the Tata Steel Ltd. judgment were quashed. The Court directed that any amount realized from the Petitioner due to the denial of ITC be refunded within four months, failing which interest at 6% per annum would be applicable. Consequently, all writ applications were allowed.