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TMI Blog2015 (3) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under sub-section (5). Sub-section (5) says that if it is consumed or used for/in the manufacture or processing or packaging of goods declared tax-free under section 16. Refinery would be entitled to set-off to the entire tax paid by it on the purchase of raw material. - manufacturer is eligible the benefit of set-off on the entire amount of tax paid on purchase of raw material and principle of apportionment could not be invoked. In the facts and circumstances of the present case, the judgment of the honourable Supreme Court is applicable because the DOC, a by-product is tax-free and another by-product sludge and main product oil are taxable. Hence, the authority cannot apportion the tax liability after deducting the percentage of proportionate manufacture of DOC, which has been done in the present case. - petitioner is eligible to get set-off on entire raw material purchased by it. - Following decision of COMMISSIONER OF SALES TAX, BOMBAY Versus BHARAT PETROLEUM CORPN. LTD. [1992 (2) TMI 250 - SUPREME COURT OF INDIA] - Matter remanded back - Decided in favour of assessee. - W.P. No. 9447 of 2012 - - - Dated:- 29-5-2013 - GANGELE S.K. AND SAXENA G.D. JJ. Pawan Dwivedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax on DOC. 8. Section 14 of the VATAct prescribes rebate on input tax subject to the provisions of sub-section (5). The aforesaid provision is as under: 14 Rebate of input tax.-(1) Subject to the provisions of subsection (5) and such restrictions and conditions as may be prescribed, a rebate of input tax as provided in this section shall be claimed by or be allowed to a registered dealer in the circumstances specified below: (a) Where a registered dealer purchases any goods specified in Schedule II other than those specified in Part III of the said Schedule within the State of Madhya Pradesh from another such dealer after payment to him input tax for,- (1) sale within the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the course of export out of the territory of India; or (2) consumption or use for/in the manufacture or processing or mining of goods specified in Schedule II for sale within the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the course of export out of the territory of India; or (3) use as packing materials in packing of goods specified in Schedule II; or (4) use as plant, machine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Ltd. reported in [1992] 85 STC 220 (SC); [1992] 2 SCC 579 has considered the question of set-off and applicability of principle of apportionment in the event of raw material purchased by dealer be used in manufacture taxable goods and a by-product which is not taxable. The honourable Supreme Court has held that a refinery would be entitled to set-off to the entire tax paid by it on the purchase of raw material. The honourable Supreme Court has held as under (pages 231 and 232 in 85 STC): 17. Turning now to the main question, we are inclined to agree with respondents' counsel that they are entitled to a set-off of the entire tax paid by them on the purchases of sulphuric acid and cotton, respectively. The only condition under the rule is that the goods purchased on payment of tax should have been used in the manufacture of taxable goods for sale. Their concurrent user for the manufacture of another item of goods which may or may not be taxable is immaterial though we may point out that in the Bharat Petroleum case, the kerosene was also taxable for nine months in the year and in the case of Phulgaon Cotton Mills, yarn was also manufactured and it was subject to tax. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertible that the entire sulphuric acid purchased has gone into the manufacture of the sludge. The rules do not require that the purchased goods must have been used only for the manufacture of taxable goods for sale. In this situation, it is not possible to cut down the quantum of relief clearly outlined in the rule on the basis of some general principle claimed to underlie the provision. As Sri Bobde rightly pointed out, the basis for the relief provided is not very clear cut. Various reliefs have been provided in a group of rules which come in for application in various situations. The relief may be based on the principle that the manufactured product is taxed either in the hands of the same assessee or in someone else's hands, or that the manufactured goods are exported which may yield no tax but earn foreign exchange, or even that the purchases are utilised for manufacture of goods in the State thus contributing to the industrial development of the State. It is, therefore, difficult to read into the provision a quantitative correlation of the goods resulting in a taxable turnover and the purchases of raw materials on which tax has been paid. In this background, the straightf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular to the effect that principle of proportionality would be applicable. In such circumstances, the appellate authority could not take different view against the circular issued by the superior authority. 15. The honourable Supreme Court in Filterco v. Commissioner of Sales Tax reported in [1986] 61 STC 318 (SC); [1986] 2 SCC 103, considered the same situation and held as under (pages 322 and 323 in 61 STC): 11. We are of opinion that the High Court should have examined the merits of the case instead of dismissing the writ petition in limine in the manner it has done. The order passed by the Commissioner of Sales Tax was clearly binding on the assessing authority under section 42B(2) and although technically it would have been open to the appellants to urge their contentions before the appellate authority, namely, the Appellate Assistant Commissioner, that would be a mere exercise in futility when a superior officer, namely, the Commissioner, has already passed a well-considered order in the exercise of his statutory jurisdiction under sub-section (1) of section 42B of the Act holding that 21 varieties of the compressed woollen felt manufactured by the appellants are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in [2009] 24 VST 536 (SC); [2009] 8 SCC 209 has also considered the availability of alternative remedy and held as under (paras 35 and 36, page 550 in 24 VST): 30. Mr. Venkatanarayanan also is not correct in contending that in a situation of this nature, the High Court should not have entertained the writ applications directly from the orders of assessment. 31. As the Tribunal had already expressed its view in the matter, it has rightly been contended that appeal to the appellate authority as also the Tribunal would have been an idle formality. 18. From the aforesaid judgments of the honourable Supreme Court, it is clear that if a view has been expressed by the higher authority and the appellate authority is subordinate to the higher authority, then availability of alternative remedy is no bar and it would be a futile exercise if a person is directed to avail of alternative remedy. 19. Consequently, the petition is disposed of with the following directions: (i) That it is held that the petitioner is eligible to get set-off on entire raw material purchased by it. (ii) The impugned order dated March 31, 2012 (annexure P/1) is hereby quashed and the matter i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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