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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 ..... only to Rule 131 (3) of the Rules?. (b) Whether, on the facts and in the circumstances of the petitioner's case, was the Appellate Tribunal justified in law in holding that the petitioner was not entitled to claim the rebate of input tax in respect of the purchases effected by its research division when the said division was ancillary to the business of the petitioner? (c) Whether, on the facts and in the circumstances of the petitioner's case, was the Appellate Tribunal justified in law in holding that the petitioner was not entitled to claim input tax credit in respect of the purchase of un-interrupted power supply system which is an integral part of the manufacturing process?." 3. In order to appreciate the facts and contentions in our present decision, we shall be dealing with the facts related to question wise instead of common discussion. 4. We may broadly state the facts that the re- assessment proceedings were undertaken before the Assistant Commissioner of Commercial Taxes and ultimately he passed the Order on 15.10.2010. The matter was carried in appeal before the First Appellate Authority, namely, Joint Commissioner of Commercial Taxes [Appeals] and vide Order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has taken credit of input tax in respect of goods taxable at 4% and taxable at 12.5% including furnace oil instead of disallowing the entire input tax pertaining to the exempted sale turnovers. Further the assessee has contended that they have not claimed any input tax credit in the units where exempt goods sales are effected. All inputs are taken has common input and eligible input tax is claimed based on common formula. This contention of the assessee is not acceptable. For illustration, the assessee company is having a bakery division namely M/s. Modern Bakerys Bangalore wherein the manufacture of bread, bun, cakes and other bakery item are undertaken. For manufacture of these goods it has effected purchases of taxable goods as well and claimed input tax on the said purchases. Therefore, the contention of the assessee is not acceptable. The FAA has also recorded that the scrutiny of the re-assessment records or the accounts maintained by the appellant, do not revealed that the appellant company has maintained day to day accounts, stock accounts on a day to day basis in respect of exempted goods and taxable goods for the manufacturing activities. Hence both the authorities b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the formula adopted by it for approval by the Commissioner or any other Departmental Authorities, the view taken by the lower authorities including the First Appellate Authority that the benefit of input tax credit would not be available has not been interfered with. 7. The contention of the learned Counsel for the petitioner was that the Circular dated 26.06.2006, copy whereof is produced at Annexure-D, was already issued by the Commissioner of Commercial Taxes for the purpose of procedure for partially rebating under the Karnataka Value Added Tax Act, 2003 [hereinafter referred to as 'KVAT Act', for short] and such circular was binding to the Assessing Officer and the Department. As per the said Circular vide paragraph-9, it has been provided as under: "(9) It may be noted that in many cases the deductible input tax is identifiable even if the dealers transactions are many and attract partial rebating. It would be because of the fact that the dealers concerned have maintained classified and detailed accounts indicating the purchase, use and disposal of every input purchased by them. In such cases, the dealers may claim partial input tax rebate based on their books of account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has without there being any prior approval, applied the formula on its own and has prepared books of accounts in a manner that the input tax is not identifiable in respect of product used as raw material, the Assessee runs the risk. The Assessee cannot pass over the burden to the Departmental Officer as sought to be canvassed. It is hardly required to be stated that if one is claiming input tax credit, the burden would be upon the Assessee to satisfy the Authority that he is entitled to input tax credit of a particular goods, used as raw material. If the books of accounts are prepared wherein the product for input tax credit is not identifiable and resultantly, the Assessing Officer has disallowed the credit, it cannot be said that there is any error of law as sought to be canvassed. Under the circumstances, we answer question No.[a] against the Assessee and in favour of the Revenue. 12. As regards question No.[b], the relevant discussion in the impugned order of the Tribunal is at clause[b] which reads thus: "(b) The assessee Company has mainly purchased furniture, chemicals, engineering goods scientific goods to its research centre i.e., HLRC and claimed input tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n furtherance to the trade or commerce or manufacture are included. As per the petitioner, the research is made exclusively for the products which are being manufactured by the petitioner and therefore there was no reason on the part of the Tribunal to concur with the view taken by the lower authority. It was also submitted that the decision of Madras High Court upon which reliance has been made by the Tribunal is easily distinguishable and therefore the said question may be answered in favour of the Assessee. 15. On the contrary, Learned Additional Government Advocate appearing on behalf of the Respondent-Revenue contended that this Court in the case of 'BALANOOR PLANTATIONS AND INDUSTRIES LTD., Vs. STATE OF KARNATAKA AND OTHERS' rendered in Writ Appeal Nos.6586-6633/2012 decided on 28.02.2014, has held that the fertilizers used for agricultural plantations and other expenses incurred for the agricultural operations in the separate product of tea and coffee are not admissible for the purpose of input tax credit. It was also submitted that the Tribunal has rightly relied upon the decision of the Madras High Court which has been referred to and the view taken by the Tribunal is cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esultant product, it cannot be said to be falling within the definition of the term 'business'. 19. The facts of the present case are substantially distinguishable, in as much as, the Assessee is not running an Independent Research Institute, but is also dealing in the manufacturing or sale of the products. In the present case, the principal activity of the Assessee is manufacturing of the product and research is limited to the variety of products which may be manufactured by the Assessee. Under the circumstances, the decision in the case of SOUTH INDIA TEXTILE RESEARCH ASSOCIATION [supra] cannot be applied to the facts of the present case. 20. In another decision of the Madras High Court in the case of 'STATE OF TAMIL NADU Vs. CEMENT RESEARCH INSTITUTE OF INDIA' reported in [[1992] 86 STC 124], the same situation arose, in as much as, it was an Institution initiated by Cement Industries and supported by Council of Scientific and Industrial Research of the Government of India. It was an independent Research Organization. Under the circumstances, the observations were made that the activity could not fall within the word 'business' as defined under the definition clause. Such are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KVAT Act 2003. These electrical goods have not been sold nor used in the manufacturing of processing of any other goods for the sale. The disallowance of input tax credit is in order and we agree with the orders passed by the authorities below in this regard." 25. The aforesaid shows that the Tribunal itself allowed the input tax credit mainly on the ground that the electrical goods have not been sold nor used in the manufacturing or processing of any goods or sale. Under the circumstances, the Tribunal had agreed with the view taken by the lower Authority and did not interfere with the Orders passed by the lower Authority in this regard. 26. The learned Counsel for the petitioner relied upon Section 11[a][2] of the KVAT Act read with Fifth Schedule of KVAT Act and contended that if the tax is paid on any goods specified in Fifth Schedule and the said goods are purchased and put to use, input tax credit would be available if the goods are for the purpose of resale or manufacture or any process of other goods for the sale. It was submitted that when there was express provision made for admissibility of input tax credit, even on all electrical goods, there was no reason on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of input tax credit unless the goods are for resale or for manufacturing of any other goods for sale. To put it in other words, if the goods specified in Fifth Schedule are purchased and put to use for the purpose of resale or for manufacture or for the process of other goods for sale, the input tax credit would be available. So far as Fifth Schedule is concerned, the electrical or electronic goods so narrated and referred to hereinabove should have the nexus to the manufacturing process if they are purchased and put to use for the purpose of or in furtherance to the manufacturing process. 31. We may usefully refer to the decision of the Apex Court in the case of 'MARUTI SUZUKI LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE, DELHI-III' reported in [(2009) 9 SCC 193] and more particularly, the observations made at paragraph-45 which reads as under: "45. To sum up, we hold that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose." 32. It is true that it was a case before the Apex Court p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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