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TMI Blog2011 (12) TMI 654X X X X Extracts X X X X X X X X Extracts X X X X ..... ida" and "Suji", which are taxable wheat products and for manufacture of which the wheat (raw material) was purchased by the respondent-assessee upon payment of Sales Tax/VAT and full input tax credit in respect of which was claimed under Section 18 of the Act against the tax payable by the assessee on the sale of "Aata", "Maida" and "Suji" during the period in question. 2. The Assessing Authority vide the assessment order dated 30.08.2007 disallowed the input tax credit to the extent of sale of exempted goods, namely, wheat bran (Chaff/Chokar) by the assessee, which was assessed by him @ 25% of total input tax credit, which was not in the list of exempted goods in Schedule-I to the VAT Act, 2003 during the relevant period and imposed reverse tax, as provided in the said Act holding that since only the finished goods "Aata", "Maida" and "Suji" were taxable whereas wheat bran (Chaff/Chokar) was not taxable or was exempted from payment of tax, therefore, the Input Tax Credit was not allowable to the assessee to the extent of 25% of its claim assuming that production of wheat bran (Chaff/Chokar) was to the extent of 25% of the total production, out of such wheat used as raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wheat bran (Chaff/Chokar) on the other hand, therefore, no distinction can be made between two and even if manufacture of wheat bran is taken to be a byproduct, the sale thereof, admittedly made by respondent-assessee as VAT exempted goods, as the same was specifically included in Schedule-I, to the Act and Entry No.3 of the said Schedule, therefore, the proportionate input tax credit was rightly disallowed by the learned Assessing Authority and Tax Board has erred in holding otherwise. 6. Explaining these two judgments, cited above and relied upon by the assessee before the appellate forums below, Mr. G.R. Punia, Sr. Advocate, submitted that in the cases before the Hon'ble Supreme Court and Punjab & Haryana High Court, the statutory provisions were not available in this regard for giving only proportionate set-off or input tax credit and, therefore, the Hon'ble Courts noticing this fact, namely, absence of specific statutory provisions, allowed full benefit of set-off to the assessee and, therefore, not only these two judgments are distinguishable from the fact situated in the present on the basis of statutory position available before this r urt in the present matter, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the State from a registered dealer to the extent and in such manner as may be prescribed, for the purpose of (a) sale within the State of Rajasthan; or (b) sale in the course of Inter-state trade of commerce; or (c) sale in the course of export outside the territory of India; or (d) being used as packing material of goods, other than exempted goods for sale; or (e) being used as raw material except those as may be notified by the State Government in the manufacture of goods other than exempted goods, for sale within the State of in the course of Inter-state trade or commerce; or (f) being used as packing material of goods or as raw material in manufacture of goods for sale in the course of export outside the territory of India; or (g) being used in the State as capital goods in manufacture of goods other than exempted goods; however, if the goods purchased are used partly for the purpose specified in this sub-section and partly as otherwise, input tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section." 10. Entry No. 3 of Schedule-I, containing list of exempted goods under the VAT Act, 2003, befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (SC). We do not think these cases are of assistance. The first two cases dealt with the question as to when profits and gains can be said to accrue or arise in a manufacturing business and the third held that when a receipt is a composite one of capital and revenue nature, it is open to the Revenue to apportion the same and bring the latter to tax. These are situations in which the taxable element Is severable. Under the rules presently under consideration also, situations are conceivable where such severance is implicit. For instance, suppose the cotton purchased is utilised partly for manufacture of cloth that is taxable and partly for manufacture of cloth that is not taxable or partly for the manufacture of yard which is taxable and is sold and partly for manufacture of cloth which is not taxable. In these instances, it is clear that only some of the cotton is utilised for the first purpose and some for the second purpose and so only the purchase tax paid in respect of the quantity utilised for the first purpose will be eligible for set-off. But the type of user with which we are concerned is a composite one in which it is not possible to correlate any part of the purchased go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product) and such set-off benefit could not be curtailed even if the 'acid sludge' obtained as byproduct in the process of manufacture of kerosene came out and was sold as a tax-free product, the Hon'ble Apex Court noted that contention of the State raised by Mr. Dholkia, Senior Advocate for implicit principle of apportionment on the basis of turnovers of various items of goods manufactured and restriction of quantum of set-off to a proportionate basis of turnover of taxable goods to the total turnover, should be applied was liable to be negatived. More particularly, In view of the fact that "the rules do not require that purchased goods must have been used only for manufacture of taxable goods." These words, as a matter of crux, renders the present assessee before this Court without any help from the aforesaid decision of the Apex Court in the present matter because Section 18 in the present case specifically and unequivocally lays down that if the goods purchased are used partly for the purposes specified in this sub-section. The purpose specified in Section 18 (1) (e) of the Act is that goods purchased are being used as raw material in the manufacture of goods other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected its claim for full rebate on the ground that wheat bran was a tax-free item. The Joint Excise and Taxation Commissioner (Appeals) and the Tribunal upheld the order of the Assessing Authority. However, while deciding the review petition and reference application filed by the assessee by a common order (annexure P5), the Tribunal changed its earlier view and remanded the case to the Assessing Authority by relying upon the decision of the Supreme Court in the case of Bharat Petroleum Corporation Ltd., (1992) 85 STC 220. The relevant extract of that order are reproduced below : "The honourable Supreme Court has held that if a relevant and material provision of law was not brought to the notice of the court, the court would be justified to review its order. The counsel for the petitioner, for the question under the State Act, has relied upon the judgment of the honourable Supreme Court reported in (1992) 85 STC 220, Commissioner of Sales Tax, Bombay v. Bharat Petroleum Corporation Ltd. at page 231 which reads as under: "Turning now to the main question, we are inclined to agree with respondents' counsel that they are entitled to a set-off the entire tax paid by them on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment was delivered by the apex Court. Besides, the counsel could not establish similarity between the provisions interpreted by the honourable apex Court and those contained in Haryana General Sales Tax Rules (rule 24-A and 24-B) as stressed by the departmental representative and are absolutely clear. These will lead to conclude that if tax paid goods go into manufacture of taxable goods, relief into toto will be admissible. Such relief will not be admissible, if tax-free goods are also produced as a result of the process of manufacture. And in the event of the process resulting into production of taxable and taxfree goods, grant of proportionate relief shall be the most logical conclusion. (This observation of Division Bench of Punjab & Haryana High Court clearly helps the Revenue before this Court in present matter.) That being the legal position under the Haryana provisions, the orders of the authorities below applying pro rata basis are fully in accordance with the provisions of law. The counsels, for dealers have also assailed the use of department instructions by the authorities. According to them such instructions can be made use of prospectively, nor retrospectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffirmed and the appeals are dismissed but without any order as to costs." 18. That a byproduct or a waste product can also be a marketable commodity and such regularly marketed product can also attract excise duty, was held by Supreme in CT Cotton Yarn Ltd. v. Commissioner of Central Excise, Indore, reported in (2006) 7 SCC 794. However, the Apex Court remanded the case back to Tribunal in the following terms : "8. It is clear that the product involved herein is not a leftover after the end product is manufactured. Here the cotton waste is generated during the process of manufacture of yarn. In other words, when cotton purchased in the domestic market is used for manufacture of yarn, by initiating the process of manufacture, at an intermediate stage, the so-called cotton waste is produced, which is a marketable commodity and which is regularly marketed. Therefore, one of the twin tests, namely, that the commodity which is produced is marketable and is regularly marketed as a product, is satisfied. It is by now established that merely because a commodity is included in the Schedule, it will not be exigible to duty unless a process of manufacture is involved when that product emer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gument that it was only impure cotton which has got separated from the cotton purchased from the open market so as to enable the appellant to manufacture the yarn intended for export and this product produced at the intermediate stage still remains cotton and it is not a manufactured product, have both to be considered in the light of the decided cases. In this situation, we think it appropriate to set aside the order of the Tribunal and remand the appeals filed by the appellant to the Tribunal for a fresh decision. We think that this aspect needs to be reconsidered by the Tribunal afresh and a fresh decision taken. We, therefore, set aside the order of the Tribunal on this aspect and direct the Tribunal to decide the appeals afresh based on the finding to be rendered on this question. All contentions including whether the Department could invoke the extended period of limitation are left open." 19. Thus, it is clear that view of Division Bench of Punjab & Haryana High Court supports the Revenue's case before this Court and Hon'ble Division Bench of Punjab & Haryana High Court remanded the case to Tribunal setting aside the contradictory later view of the Tribunal and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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