2025 (4) TMI 564 - SC - VAT / Sales Tax

Disallowance of the input tax credit for the purchase tax paid on sales turnover made to a manufacturer-exporter - Applicability of exemption provisions under Section 7(c) and the restrictions under Section 13(7) of the Act - HELD THAT - Plainly interpreting and applying section 7(c) provides that no tax under the Act shall be levied and paid on the turnover of sale or purchase of such goods by such class of dealers as may be specified in the notification. The said exemption applies to the goods and also to the class of dealers who satisfy the conditions and fall within the notification issued under section 7(c) of the Act. The controversy is not over the exemption from levy and collection of tax between the dealer and the department since the subject turnover falls admittedly under section 7(c) of the Act read with notifications dated 24.02.2010 and 25.03.2010. The said admitted position takes to the entitlement or eligibility of the dealer for the input tax credit. It is axiomatic particularly in tax jurisprudence that distinct concepts such as taxable persons taxable goods and taxable events are established for levying and collecting the tax. Similarly the scheme of availing input tax credit is determined by section 13 of the Act. Section 13(1) provides for allowing credit of an amount as input tax credit to the extent provided by or under the relevant clause to which the applicable condition is attracted. Section 13(7) outlines the circumstances under which such a benefit cannot be allowed. Section 13(7) also sets out that no facility for input tax credit shall be allowed to a dealer with respect to the purchase of any goods where the sale of such goods by the dealer is exempt from tax under Section 7(c) of the Act. The prohibition from allowing input tax credit is a statutory mandate and the view taken by the orders impugned in the facts and circumstances of this case is available and correct. Conclusion - The appellant is not entitled to input tax credit for the sales turnover made to the manufacturer-exporter as the sales are exempt under Section 7(c) and Section 13(7) prohibits input tax credit in such cases. Appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the appellant, a registered dealer under the Uttar Pradesh Value Added Tax Act, 2008, is entitled to claim an input tax credit for the purchase tax paid on sales turnover made to a manufacturer-exporter, given the exemption provisions under Section 7(c) and the restrictions under Section 13(7) of the Act.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework revolves around Sections 7(c) and 13 of the Uttar Pradesh Value Added Tax Act, 2008. Section 7(c) exempts certain sales and purchases from tax, as specified by notifications issued by the State Government. Section 13 outlines the conditions under which input tax credit can be claimed, with Section 13(7) specifically prohibiting input tax credit for sales exempted under Section 7(c).

Court's Interpretation and Reasoning

The Court interpreted Section 7(c) as providing a clear exemption from tax for certain sales and purchases, as specified in the relevant notifications. The Court further interpreted Section 13(7) as a statutory mandate that prohibits input tax credit for sales exempted under Section 7(c). The Court emphasized that the statutory language is clear and unambiguous, leaving no room for interpretation based on intent or policy considerations.

Key Evidence and Findings

The key evidence includes the turnover of Rs. 1,89,35,100/- recorded by the dealer against Form-E, which falls under the exemption provided by Section 7(c) and the notifications dated 24.02.2010 and 25.03.2010. The dealer claimed an input tax credit of Rs. 6,42,260/-, which was initially allowed but subsequently disallowed by the assessing officer based on Section 13(7).

Application of Law to Facts

The Court applied the provisions of Sections 7(c) and 13(7) to the facts, concluding that the dealer's sales turnover, being exempt under Section 7(c), is not eligible for input tax credit under Section 13(7). The Court noted that the statutory language clearly prohibits input tax credit for sales exempted under Section 7(c), and the dealer was aware of the extent to which input tax credit could be claimed.

Treatment of Competing Arguments

The appellant argued that the denial of input tax credit is contrary to the policy intent of encouraging manufacturer-exporters and that Sections 7(c) and 13(1) should be read together to allow input tax credit. The respondent contended that the statutory language is clear and that input tax credit is not available for sales exempted under Section 7(c). The Court sided with the respondent, emphasizing the clear statutory prohibition in Section 13(7).

Conclusions

The Court concluded that the statutory mandate in Section 13(7) prohibits input tax credit for sales exempted under Section 7(c), and the appellant's claim for input tax credit is not sustainable. The appeal was dismissed, and the orders of the lower authorities were upheld.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

"Bare reading of the provisions of Section 13(7) clearly reveals that the applicant was not entitled for the input tax credit with respect to the sale of goods exempted under Section 7(c) of the Act."

Core Principles Established

The judgment establishes the principle that input tax credit cannot be claimed for sales that are exempt from tax under Section 7(c) of the Uttar Pradesh Value Added Tax Act, 2008, as explicitly prohibited by Section 13(7).

Final Determinations on Each Issue

The Court determined that the appellant is not entitled to input tax credit for the sales turnover made to the manufacturer-exporter, as the sales are exempt under Section 7(c), and Section 13(7) prohibits input tax credit in such cases. The appeal was dismissed, and the orders of the lower authorities were affirmed.