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TMI Blog2016 (2) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... . Only the waste is used as fuel and that too again in the manufacturing process of oil. Therefore, in our opinion, it would not fall under proviso to Section 11(a) of the Act. As far as applicability of Section 11(3)(b)(iii) is concerned, the same would not be applicable since the entire purchase of castor seeds were used in the manufacture of castor oil and only the waste product was used as a fuel, that too, in the manufacture of castor oil. It is not even the case of the appellant-State that the castor oil seeds or a part thereof was purchased for using them as fuel. Deoiled cake is a byproduct and therefore it cannot be said that the same was purchases for using as a fuel. Deoiled cake is an inevitable byproduct which the company can throw it away as waste or use it as a fuel. There is no deliberate attempt on the part of the Company to manufacture Deoiled cake so that the same can be used as fuel. - input tax credit allowed - Decided against the revenue. - TAX APPEAL NO. 1129 of 2013, TAX APPEAL NO. 1130 of 2013, TAX APPEAL NO. 1131 of 2013 - - - Dated:- 11-8-2015 - MR. A.J.DESAI AND MR. A.G.URAIZEE, JJ. For The Appellant : Ms Vacha Desai, Assistant Government Plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the same was used as fuel. The reassessment orders were made for three years and therefore three appeals were filed by the company before the Joint Commissioner of Commercial Tax, Vadodara. The appeals came to be dismissed by the Joint Commissioner of Commercial Tax, Vadodara on the ground that the order of pre-deposit for hearing the appeals was not complied with by the company. The said decision was challenged by the company by filing second appeal before the Gujarat Value Added Tax Tribunal, Ahmedabad. The respective parties appeared before the Tribunal and agreed for the matters to be decided on merits. Hence, the appeals were decided on merits in favour of the respondent company and the order passed by the Assessing Officer came to be quashed and set aside. Hence, these appeals. 5 Ms Vacha Desai, learned Assistant Government Pleader appearing for the appellate revenue has vehemently submitted that the Tribunal has committed a grave error in interpreting the provisions of Section 11 of the Value Added Tax, 2003. She would submit that the company has used deoiled cake, which is part and parcel of castor oil seeds purchased by the petitioner. She would submit that since par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not that the petitioner has not followed the provisions of the Gujarat Value Added Tax Act. It is not in dispute that the entire purchase of the castor oil seeds, for which register and account books have been maintained, are used only for production of castor oil. He would submit that the intention of the purchase of castor oil seeds is only to manufacture castor oil for which the company is already paying the tax and therefore his case would fall under Section 11(3)(a)(vi) and proviso thereof would not be applicable. He would submit that it is also not the case of the Revenue that the oil seeds the purchases are partially used for any other purpose provided under Section 3A of the Act. He would submit that the entire castor oil seeds which have been purchased by the company have been used for manufacturing oil and other oil based items and during the said process the final waste, which is known as deoiled cake, instead of throwing it in public dumping station, has been used as a fuel, again for manufacturing castor oil or other oil based items and therefore, it cannot be said that any part of the purchase was used for any other purpose provided under the said provision. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deoiled cake and has held that the deoiled cake is a byproduct, which was not intended to be manufactured when the seeds were purchased. He, therefore, would submit that all these aspects have been dealt with by the Tribunal in detail which requires no interference by this Court and therefore the appeals may be dismissed. 13 We have heard learned advocates for the respective parties. It is an admitted fact that the respondent company is in business of manufacturing pure castor oil and other castor oil based products. The method of extracting oil from castor seeds purchased by the company is reproduced hereinbelow to understand the case on hand: 14 Chapter II of the Value Added Tax deals with incidence and levy of tax. Section 5 provides for exemptions on the sales and purchases of the goods specified in Schedule I. Section 11 of the Act provides for entitlement to claim tax credit equal to the amount of purchase made by a registered dealer from the purchasing dealer under certain conditions. Since the case on hand relates to the dispute to the tax credit under Section 11, the same is reproduced hereinbelow: 11. Tax credit. (1) (a) A registered dealer who has purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of tax calculated at the rate of four per cent on the [taxable turnover of purchases within the state]- (i) of taxable goods consigned or dispatched for branch transfer or to his agent outside the state, or (ii) of taxable goods which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State. [(iii) of fuels used for the manufacture of goods.] [Provided that where the rate of tax of the taxable goods consigned or dispatched by a dealer for branch transfer or to his agent outside the State is less than four per cent., then the amount of tax credit in respect of such dealer shall be reduced by the amount of tax calculated at the rate of tax set out in the Schedule on such goods on the [taxable turnover of purchases within the state]- (4) The tax credit shall not be claimed by the purchasing dealer until the tax period in which he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice (in original) containing particulars as may be prescribed under sub-section (1) of section 60 evidencing the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97; (n) of the goods which remain as unsold stock at the time of closure of business; (nn) of the goods purchased during the period when the permission granted under clause (a) of sub-section (1) of section 14 has remained valid under clause (b) of that sub-section;] (o) where original invoice does not contain the details of tax charged separately by the selling dealer from whom purchasing dealer has purchased the goods; (p) where original tax invoice [or duplicate thereof duly authenticated in accordance with the rules made in this behalf] is not available with purchasing dealer or there is evidence that the same has not been issued by the selling dealer from whom the goods are purported to have purchased; [(I)] Notwithstanding anything contained in clause (a) or (b) in this sub-section and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit in respect of purchase tax paid by him under subsection (1) or (2) of section 9. [(II)] Notwithstanding anything contained in clause (d) of (dd) in this subsection and subject to such conditions and in such manner as may be prescribed, a registered dealer shall be allowed to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incentive scheme granted by the Government of Gujarat, then the tax shall be deemed to have been paid into the Government treasury for the purpose of this sub-section. (8) (a) If the goods purchased were intended for the purposes specified under sub-section (3) and are subsequently used fully or partly for purposes other than those specified under the said sub-section or are used fully or partly in the circumstances described in sub-section (5), the tax credit, if availed of, shall be reduced on account of such use, from the tax credit being claimed for the tax period during which such use has taken place; and such reduction shall be done in the manner as may be prescribed. [(b) Where the capital goods referred to in subclause (vii) of clause (a) of sub-section (3) are not used continuously for a full period of five years in the State, the amount of tax credit shall be reduced proportionately having regard to the period falling short of the period of five years. (9) The registered dealer may claim the amount of net tax credit, which shall be determined in the manner as may be prescribed. (10) Where any purchaser, being a registered dealer, has been issued with a credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oil remains in the residue, which is known as castor oil cake. The said castor oil cake is again crushed and the remaining portion of the castor oil is extracted therefrom in the second process leaving the waste, which is of no use to the company and therefore the same is used in the furnace as a fuel in the manufacture of castor oil as well as other products. The said residue is known as deoiled cake, which is used in boilers of the company as a fuel. The company, instead of throwing it away, uses it for manufacturing the oil and oil based goods. Therefore, when the waste, which is a byproduct of the oil, is used as a fuel in the manufacture of castor oil, the action on the part of the appellant in disallowing the input tax credit for the use of deoiled cake is not proper. 17 The Honourable Apex Court in the case of Swadeshi Polytex Limited (supra) has specifically held as under in paragraph 20: 20. On an analysis and comparison of aforesaid, it is clear that the clarification in the form of trade notice issued by the Pune Collectorate in respect of R. 56A was as much applicable to that rule as to notification No. 201/ 79. In the premises, it is clear that the Tribunal shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the credit of the duty paid on the inputs could be denied was only where the final products were wholly exempt from the duty of excise or chargeable to nil rate of duty. In the present case, the excisable goods, namely, polyester fibre were not wholly exempt from duty nor chargeable to nil rate of duty. It cannot be read in the notification that the notification would not be available in case non-excisable goods arise during the course of manufacture. In fact, the Tribunal seems to have erred in not bearing in mind that exemption notification was pressed in service in respect of polyester fibre which is excisable goods and not in respect of methanol which arises as a by-product as a part and parcel of chemical reaction. It appears further on a comparison of the R. 56A and the notification No. 201/79 that these deal with the identical situation. 18 In case of Sterling Gelatin (supra) the Division Bench of this Court has held as under: 6. The undisputed facts of the case are that for the purpose of manufacture of Gelatin, cleared bone chips are charged to acidulation vats with the help of conveyors. Each vat is filled with pre-determined quantity of bone chips and then soak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantity of inputs meant for use in the manufacture of exempted goods and take Cenvat Credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. Sub-rule (3) of rule 6 makes provision for the conditions which a manufacturer of goods opting not to maintain separate accounts is required to follow. 8. Thus, on a plain reading sub-rule (1) of rule 6, it is apparent that CENVAT credit is admissible in respect of the inputs used in the manufacture of dutiable goods and is inadmissible on such quantity of inputs which is used in the manufacture of exempted goods. Sub-rule (2) imposes an obligation on the manufacturer who manufactures final products and exempted goods from the common input to maintain separate accounts for receipt, consumption and inventory of inputs. Examining the applicability of the aforesaid rules to the facts of the present case, as noted hereinabove, it is not as if more quantity of Hydrochloric Acid is used than that required for manufacturing Gelatin or that by using a smaller amount of Hydrochloric Acid, the production of Mother Liquor could be averted. In the manufacturing process adopted by the assessee, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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