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TMI Blog2016 (6) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the final product, the same would stand covered. - Decision in the case of MARUTI SUZUKI LIMITED [2009 (8) TMI 14 - SUPREME COURT] It is also true that in the decision of the Apex Court, the matter was pertaining to consumable item, namely, ‘naphtha’ and ‘diesel’ for generation of electricity. But, in our view, once the goods are purchased in furtherance to or for aiding the manufacturing process, the same will have a direct nexus to the manufacturing activity and there is no reason why the same could be treated as an independent capital goods disentitling the benefit. As such, the matter cannot be segregated just on a mere ground that it would be capital goods. If the various items mentioned at Sl. No.3 in the description of goods are considered, it does include air conditioner, air cooler, fax machines which can be broadly considered as capital goods. Further, the language for all electrical or electronic goods is inclusive and not exhaustive. Therefore, when the other goods specified can also be considered as capital goods, but to be used in the manufacturing activity, there would not be any justifiable ground if the speeder system is purchased and used to back up the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirmed and the appeals were dismissed. These matters were further carried before the Karnataka Appellate Tribunal, Bangalore [hereinafter referred to as Tribunal , for short] in STA Nos.2473-2484/2011. The Tribunal, ultimately vide Order dated 5.7.2013, partly allowed the appeals. Under the circumstances, the present revision petitions before this Court. 5. We may now extract the discussion point wise. On the first question pertaining to the claiming of input tax credit which was not computable on the basis of the books of accounts, the Tribunal at paragraph 12[a] has observed thus: (a) We have perused the assessment as well as appeal records. It was recorded that the assessee company having manufacturing, processing, packing and trading activities which involve purchase of taxable and exempted goods, exports, dispatching of goods to out side the state on stock transfer basis, imports and stock receipts of raw materials and finished goods from other states. In view of this situation the input tax credit has to be calculated as per Section 11,14,04 and 17 of KVAT Act read with Rule 131(3) of the KVAT Rules. In the light of the above explanation, the assessee co., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the non- deductible input tax calculated by the appellant is not in accordance with the provisions of Section 11,14 and 17 of the KVAT Act, read with Rule 131 of KVAT Rules 2005. Accordingly, the same was worked out as per the formula appended to Rule 131(3) of KVAT Rules. We refer the Rule-131(3) which reads thus; Rule-131(3) Any input tax relating to both sale of taxable goods and exempt goods, including inputs used for non- taxable transactions, the non-deductible input tax, may be calculated on the basis of the following formulas: (sales of exempt goods+ non taxable transactions)* total input tax Non-deductible input tax= . Total sales (including non- taxable transactions). (4) For the purpose of Clause(3)-(a) Sale of taxable goods would be the aggregate of the amounts specified in clauses(b),(c),(d),(e) and (f) of sub-rule (1) of Rule 3 relating to sale of goods other than those exempt under Section 5 which are not sold in the course of export out of the territory of India [and those sold in the course of import into the territory of India]; and In this regard, we also refer the Commissioner s Circular cited supra in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. This does not require any permission from the Commissioner. Further, in such cases, the partial rebating formula provided in Rule 1131 should not be applied without any justifiable reason. It may also be noted that the apportionment formula prescribed in Rule 131(3) is a general formula and may not fit all cases. Therefore, cases in which its application does not give the correct amount of input tax rebate available to the dealer, the Commissioner would have to be moved by the dealer or the departmental officer concerned to specify a special formula. However, if even in such cases the procedure laid down in this Circular is applicable, then specification of a special formula would not be necessary. 8. Learned Counsel for the petitioner further contended that the aforesaid circular shows that in a given case, if the Assessee does not give correct amount of input tax rebate, the Commissioner will have to be moved by the dealer or the Department Officer concerned to specify a special formula and thereafter the matter could be considered. As per the learned Counsel, in the event the dealer has failed to move the Commissioner for a specified formula, the Departmental Officer als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d input tax. According to Sec.2(19) of the KVAT Act input means any goods including capital goods purchased by a dealer in the course of its business for re- sale or for use in the manufacture or processing or packing or storing of other goods or any other use in business. According to the KVAT business includes any trade, commerce, manufacture or any adventure are concerned in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure are concerned is carried or in furtherance carried on in furtherance of gain or profit and whether or not any gain or profit approves there from, any transaction in connection with, or incidental or ancillary to , such trade, commerce, manufacture, adventure are concerned. The research activities of the appellant do not fit in to the definition of business as provided under the KVAT Act. In this regard we refer the judgment of Hon ble High Court of Madras in the case of South India Textile research association Vs. DCCT, Coimbatore reported in 41 STC page 97. The Judgment of this Tribunal in STA No.1819 to 1821/2004 in respect of Entry Tax is not applicable in this case as the same was for the levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the Tribunal is correct and may not be interfered by this Court. 16. In order to appreciate the contentions, the definition of the word business will be required to be considered. Section 2[6] of the KVAT Act reads as under: 2(6) Business includes:- (a) any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on in furtherance of gain or profit and whether or not any gain or profit accrues therefrom; and (b) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. 17. The aforesaid shows that the business does include any transaction in connection with or incidental and ancillary to such trade or commerce or manufacture or adventure or concern. Such a definition as such is inclusive definition and is not exhaustive. Therefore, any activity or any function which has direct nexus to the manufacturing activity of the assessee would fall within the definition of the word business apart from the principal activity of manufacturing. The word business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business as defined under the definition clause. Such are not the fact situation in the present case. Hence, we are of the view that the said decision on the aforesaid observations as made by us in respect of another decision of the Madras High Court in the case of SOUTH INDIA TEXTILE RESEARCH ASSOCIATION [supra], cannot be made applicable to the facts of the present case. 21. In the decision of this Court in the case of UNILEVER INDUSTRIES PVT. LTD., Vs. THE STATE OF KARNATAKA rendered in CRP No.683/2006 and others decided on 6.7.2007, the matter came up before this Court against the Order passed by the Tribunal in STA Nos.1819-1821/2004 decided by the Tribunal vide Order dated 1.9.2005. If facts of both decisions are considered, it appears that in the said case, in respect of very assessee, it was contended that the appellant therein was engaged in the research activity, but the relevant aspect is that in Paragraph-13 in the decision of the Tribunal, it was also recorded that the appellant- company is also a registered dealer and therefore since both the activities were by the same assessee, namely, research and as a registered dealer, the view was taken. 22. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of input tax credit, even on all electrical goods, there was no reason on the part of the Tribunal to disallow the claim. He submitted that the goods of Express Speeder System were purchased by the Assessee in order to ensure that there is no disruption of the power resulting into seriously hampering the manufacturing process. He submitted that the Express Speeder System is a separate dedicated speeder from the power grid to the manufacturing plant to ensure continuous supply of power. In his submission, it was in furtherance to the manufacturing activity and therefore directly covered by the provisions of Section 11[a][2] of the KVAT Act read with item No.3 of Fifth Schedule and therefore the view taken by the Tribunal deserves to be interfered with. 27. On the contrary, learned Additional Government Advocate appearing for the Respondent-Revenue supported the view taken by the Tribunal by contending, inter alia, that the said Express Speeder System was by way of capital goods and cannot be said to be a consumable item used in the manufacturing process and hence in his submission, the Tribunal has rightly confirmed the view taken by the lower Authority. 28. We may have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production for manufacture of final products or for any other purpose. 32. It is true that it was a case before the Apex Court pertaining to CENVAT credit, but in our view, the principles would remain the same and can reasonably be applied even in the case of input tax credit. Therefore any input used for generation of electricity or steam, provided such electricity or steam is used within the factory for the manufacturing activity of the final product, the same would stand covered. 33. It is also true that in the decision of the Apex Court, the matter was pertaining to consumable item, namely, naphtha and diesel for generation of electricity. But, in our view, once the goods are purchased in furtherance to or for aiding the manufacturing process, the same will have a direct nexus to the manufacturing activity and there is no reason why the same could be treated as an independent capital goods disentitling the benefit. As such, the matter cannot be segregated just on a mere ground that it would be capital goods. If the various items mentioned at Sl. No.3 in the description of goods are considered, it does include air conditioner, air cooler, fax machines which can be br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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