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TMI Blog2019 (5) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby that it is not a vested right but it is a concession which is given on the fulfillment of certain conditions as enumerated under the given clause. In the present case Section 13(1)(f) was inserted on 20.8.2010 and the reason and object of the Amending Act was to protect the revenue of the State, which was being misused by the dealers and the said provision was provided as a safeguard. In the present case, it is rice bran which is purchased, and rice bran oil and physical refined rice bran oil is manufactured from the raw material. Further, only 13.77 % of taxable goods, i.e., rice bran oil is produced and rest of 83.60 % bye product i.e. DORB is produced, which is exempted from tax under Schedule-I of the VAT Act. Thus, the case of the dealer is covered under this provision as sale price is lower than the cost price. While the benefit granted by the Tribunal would amount to loss to the revenue if the argument of the counsel for the assessee is accepted that cumulative sale price of the taxable product and exempted bye product have to be considered. Present case specifically falls under Section 13(1)(f) of the Act. Supreme Court in the case of Jayam Co. have held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessment Year 2013-14. The respondent-assessee is a registered dealer under the U.P. Value Added Tax Act (hereinafter referred to as the VAT Act ). The respondent-assessee by processing the rice bran in his solvent extraction plant recovered 13.77% taxable goods, i.e., rice bran oil and 83.60% bye product, i.e., de-oiled rice bran (hereinafter called as DORB ). Further, by refining of rice bran oil, physical refined rice bran oil is produced. 6. For the Assessment Year 2013-14, respondent-assessee purchased 8,21,935.71 Quintals rice bran for ₹ 93,69,53,404/- and paid a tax of ₹ 4,68,47,670/-. 7. On the basis of provision of Section 13(3)(b) read with Explanation(iii) of Section 13 treating that all such purchased rice bran has been used in production of only taxable goods, i.e., rice bran oil and claimed credit of full amount of input tax credit of ₹ 4,68,47,670/- by processing the rice bran so purchased and 1,13,180.54 Quintals rice bran oil was produced and 6,87,138.25 Quintals DORB was recovered. Out of 1,13,180.54 Quintals rice bran oil, 93,241.15 Quintals was further refined to produce 76,068.37 Quintals physical refined r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of such goods; [Provided that tax paid or payable in respect of transfer of right to use any goods shall not form part of the input tax;] Section 2(u) defines manufacturer as under: (u) manufacturer in relation to any goods mentioned or described in column 2 of Schedule IV, means a dealer who, by application of any process of manufacture, after manufacture of a new commercial commodity inside the State, makes first sale of such new commercial commodity within the State, whether directly or otherwise; and includes a selling agent who makes sale of such new commodity on behalf of the person who has manufactured it; Section 2(v) deals with non-vat goods as under: (v) non-vat goods means any of the goods mentioned or described in column 2 of Schedule-IV; Section 2(ai) defines taxable goods as under: (ai) taxable goods means any goods except goods mentioned or described in column 2 of Schedule I of this Act; 10. Section 13 of the Act deals with input tax credit, which reads as under: 13. Input tax credit. - (1) Subject to provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Partial amount of input tax, which is in excess of rate prescribed under sub section(1) of section-8 of the Central Sales Tax Act, 1956 of the purchase price on which the dealer as paid tax either to the registered selling dealer or to the State Government (b) Input tax credit of full amount of input tax shall be allowed to every dealer, liable to pay tax, in respect of capital goods purchased on or after the date on which dealer becomes liable for payment of tax under this Act, if such goods are to be used in,- (i) manufacture of any taxable goods except non-vat goods and where such manufactured goods is, - A. sold within the State, in the course of inter-state trade or commerce or in the course of the export of the goods out of the territory of India; or B. transferred or consigned outside the State otherwise than as a result or a sale; or (ii) manufacture of any exempt goods except non-vat goods and where such manufactured goods are sold in the course of export of the goods out of the territory of India; (iii) generation of electrical energy, where such energy is used for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, in respect of all taxable goods, except non-vat goods, capital goods and captive power plant, where such taxable goods have been purchased on or after January 1, 2008 but within a period of six months ending on the day preceding the date on which such dealer has become liable to pay tax and - (i) are held in opening stock, on the date on which the dealer has become liable to pay tax, in the same form and condition in which they were purchased; (ii) have been used in manufacture of semi-finished goods (in the process of manufacture of taxable goods except non-vat goods) or finished taxable goods, except non-vat goods and such semi-finished or finished goods as are held in opening stock on the date on which the dealer has become liable to pay tax; or (iii) have been purchased from a registered dealer after obtaining sale invoice bearing name and address of purchasing dealer, be allowed credit of partial or full, as provided in column 3 against relevant entry of the said table, amount of input tax as input tax credit and for this purpose amount of input tax shall be computed in the prescribed manner. [For p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification issued by the state government. Explanation - For the purposes of this sub-section the word codeveloper or developer and expressions Special Economic Zone or authorized operations shall have the meanings assigned to them in the Special Economic Zones Act, 2005. [(3) (a) Where purchased goods are to be used or disposed of partially for the purposes specified in clause (a) of sub-section (1), the input tax credit shall be claimed and allowed proportionate to the extent they are used or disposed of for the purposes specified in such clause. (b) Subject to the provisions of this section where during process of manufacture of vat goods, exempt and non-vat goods except as by product or waste product are produced, the amount of input tax credit may be claimed and be allowed in proportion to the extent they are used or consumed in manufacture or taxable goods other than non vat goods and exempt goods. Explanation: For the purpose of this sub-section the exempt goods shall include taxable goods other than non vat goods, which are disposed of otherwise than by way of sale within the State or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner for which facility of input tax credit is not admissible or such facility is admissible for partial amount of input tax: Provided that where the dealer discontinues his business, full amount of input tax, which was claimed under sub-section (4), in respect of9 (i) goods held by the dealer in the same form and condition in which those were purchased; or (ii) goods which have been used in manufacture of any goods held by the dealer, (whether in semi-manufactured or manufactured state); (iii) goods which have been used or consumed in packing of any goods held by the dealer, in closing stock on the day on which he has discontinued business, shall, before end of the tax period prescribed for submission of the tax return for the tax period in which business is discontinued, shall be debited by the dealer into the account of input tax credit maintained by him. (7) Except where- (a) purchased goods; or (b) manufactured goods which are manufactured by using purchased goods; or (c) packed goods which are packed by using or consuming purchased goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any tax return submitted under section 24 or in any assessment proceedings under any section of this Act, proceedings shall be completed in accordance with provisions of relevant sections. Explanation (1) For the purposes of this section, (i) goods for use in manufacture of any goods includes goods required for use, consumption or utilization in manufacture or processing of such goods or goods required for use in packing of such manufactured or processed goods; (ii) manufacture of any goods includes processing of such goods and packing of such manufactured or processed goods; and (iii) where during the process of manufacture of any taxable goods any exempt goods are produced as by-product or waste-product, it shall be deemed that purchased goods have been used in the manufacture of taxable goods. Conversely, where during the process of manufacture of any exempt goods any taxable goods are produced as by-product or waste-product; it shall be deemed that purchased goods have been used in the manufacture of exempt goods. [(iv) where during the process of manufacture of any vat goods and non-vat goods are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the extent of tax payable on the sale value of the manufactured goods. 13. Sri Goyal submitted that the Tribunal had wrongly allowed full amount of input tax credit by recording a finding that provisions of Section 13(1)(f) of the VAT Act are not applicable and the case is covered under Section 13(3)(b) read with Explanation-III of Section 13 of the Act. 14. He further submitted that in the transaction of manufacture of rice bran oil (taxable goods) have been sold at a price which is lower than its cost price (value of rice bran) as such provisions of Section 13(1)(f) of the Act are applicable and hence the amount of input tax credit was to be allowed only to the extent of tax payable on the sale value of manufactured goods (rice bran oil). 15. He further relied upon Rule 23(6) of the VAT Rules, which deals with reversal of input tax credit. He further argued that Section 13(1)(f) of the VAT Act begins with non-obstante clause as such it has an overriding affect over the other provisions of Section 13(1)of the Act and Tribunal had wrongly noted only one part of the Section that is the goods manufactured or processed by using or uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahul Agarwal appearing for the dealer-opposite party submitted that the respondent-assessee is entitled to full input tax credit when the sale price of taxable product is less than the cost price of manufacture, but the cumulative sale price of the taxable product and the exempted by product (produced in the process of manufacture) is more than the cost price of manufacture. He submitted that the Tribunal had relied upon the definition of goods as envisaged in Section 2(m) of the Act, as also in the scheme of Section 13 and particularly Section 13(3)(b) and Explanation (iii) of the Act to hold that while considering the applicability of Section 13(1)(f), the cumulative sale price of the taxable product and the exempted by product have to be considered, since in the case in hand the cumulative sale price of taxable rice bran oil and the exempted DORB was more than the cost price of manufacture, thus provisions of Section 13(1)(f) was not applicable and the Tribunal rightly granted the full benefit of ITC. 20. Sri Agarwal further submits that Section 13(1)(f) was inserted in the year 2010, and the same beginning with non-obstante clause, is limited to Sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d goods and nonvat goods may be produced in two ways i.e. firstly by deliberately in the process of manufacture and secondly inadvertently/incidentally as a bye product or waste product. 24. Section 13(3)(b) restricts the eligibility to proportionate ITC only where exempted goods and non- vat goods are deliberately produced in the process of manufacture, the aforesaid section carves out an exception where exempted good and non-VAT goods are produced inadvertently/incidentally as a byproduct or waste product in the process of manufacture. Further it is made more clear by Explanation (iii) to Section 13 which provides that during process of manufacture of taxable goods, any exempted goods are produced as a waste product/byproduct, it shall be deemed that the purchased goods had been used in the process of manufacture of taxable goods. Similarly, during manufacture of exempted goods, any taxable product are being produced as a waste product/byproduct, it is deemed that purchased goods have been used in the manufacture of exempted goods. Explanation (iii) to Section 13 forbids the assessing authority as well as the assessee from raising any dispute as to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f bye-product are manufactured worth ₹ 400/-, then according to Section 13(1)(f) introduced in the year 2010 he will get ITC of ₹ 70/-, but the dealers are claiming the entire amount of ₹ 100/- as ITC on the basis of cumulative sale price, i.e., manufactured goods ₹ 700/- plus exempted goods worth ₹ 400/-. Thus, the amendment took care of those cases where the sale price of the manufactured goods was less the cost price, then ITC was allowable only to the extent of taxable turnover manufactured by the manufacturer. 30. The question regarding allowability of excess input tax credit came up for consideration before the Supreme Court in the case of Jayam Co. (supra) in which the provisions of Tamilnadu VAT Act was under consideration, their Lordship held as under: It is a trite law that whenever concession is given by statute or notification, etc., the conditions thereof are to be strictly complied with in order to avail of such concession. Thus, it is not the right of the dealers to get the benefit of ITC but its a concession granted by virtue of section 19. As a fortiorari, conditions specified in section 10 must be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the manufacture of the goods. The High Court has been swayed by the fact that while extracting oil from sunflower, cake emerges only as a by-product. Relevant event is not the manufacture of an item from which the said by-product is emerging. On the contrary, it is the sale of goods which triggers the provisions of Section 17 of the KVAT Act. Whether it is by-product or manufactured product is immaterial and irrelevant. Fact remains that de-oiled cake is a saleable commodity which is actually sold by the respondent assessee. Therefore, de-oiled cake fits into the definition of goods and this commodity is exempt from payment of any VAT under Section 5 of the KVAT Act. Thus, provisions of Section 17 clearly get attracted when sale of these goods takes place. 30) Secondly, as rightly pointed out by the learned counsel for the appellant, the High Court has not considered the import and effect of sub-rule (3) of Rule 131 of the KVAT Rules. We have already reproduced Rule 131, including sub-rule (3) thereof. After perusing Rule 131 in its entirety, it becomes clear that sub-rule (1) pertains to input tax directly relatable to sales of exempt go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases his raw material both within the State of Maharashtra and outside the State. Insofar as the purchases made outside the State of Maharashtra are concerned, the tax thereon is paid to other States. The State of Maharashtra gets the tax only in respect of purchases made by the appellant within the State. So far as the sales tax leviable on the sale of the goods manufactured by the appellant is concerned, the State of Maharashtra can levy and collect such tax only in respect of sales effected within the State of Maharashtra. It cannot levy or collect tax in respect of goods which are dispatched by the appellant to his branches and agents outside the State of Maharashtra and sold there. In law (apart from Rules 41 and 41-A) the appellant has no legal right to claim set-off of the purchase tax paid by him on his purchases within the State from out of the sales tax payable by him on the sale of the goods manufactured by him. It is only by virtue of the said Rules - which, as stated above, are conceived mainly in the interest of public - that he is entitled to such set-off. It is really a concession and an indulgence. More particularly, where the manufactured goods are not sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where the goods were resold outside Delhi, because in that event the first sale would escape tax by reason of the deduction granted under section 5 (2) (a) (ii) and the re-sale would also be free from tax since, it is outside Delhi and- hence covered by the exempting provision contained in section 27. The Legislature could never have intended to bring about such a result where the Union Territory of Delhi would be deprived altogether of tax. The intention of the Legislature was to recover tax at only one point whilst the goods were in the stream of trade and the Legislature, therefore, granted deduction in respect of the first sale on the basis that it would be levying tax when the goods were resold and that postulated the requirement that the resale should be inside Delhi. Secondly it was urged that the Legislature had no legislative competence to tax sale outside Delhi and moreover, by reason of section 27 sale outside Delhi was taken out of the purview of the Act and re-sale within the meaning of section 5 (2) (a) (ii) and the Second Proviso could not, therefore, possibly include resale outside Delhi. The last argument was that the words 'by him foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Parliament. But here we venture to think that the result is unintelligible. Lord Reid also with great clarity and precision which always characterise his judgments enunciated the rule as follows in Federal Steam Navigation Co. Ltd. v. Department of Trade and Industry : Cases where it has properly been held that a word can be struck out of a deed or statute and another substituted can as far as I am aware be grouped under three heads : where without such substitution the provision is unintelligible or absurd or totally unreasonable where it is unworkable and where it is totally irreconcilable with the plain intention shown by the rest of the deed or statute. This rule in regard to reading words into a statute was also affirmed by this Court in several decisions of which we may refer only to one, namely, Naraynaswami v. Pannerselvam where the Court pointed out that: '.... addition to or modification of words used in statutory provision is generally not permissible.......', but 'courts 'may depart from this rule to avoid a patent absurdity.' Here, the word used in section 5 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is proper to conclude that, if the legislature used that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all. We may repeat what Pollock C. B. said in Attorney- General v. Sillem that: If this had been the object of our legislature, it might have been accomplished by the simplest possible piece of legislation; it might have been expressed in language so clear that no human being could entertain a doubt about it. We think that in a taxing statue like the present which is intended to tax the dealings of ordinary traders, if the intention of the legislature were that in order to qualify a sale of goods for deduction, 're-sale' of it must necessarily be inside Delhi, the Legislature would have expressed itself clearly and not left its intention to be gathered by doubtful implication from other provisions of the Act. The absence of specific words limiting 're-sale' inside the territory of Delhi is not without significance and it cannot be made good by aprocess of judicial construction, for to do 'so would be to attribute to the legislature an intention which it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 8 (3) (b) indicating clearly that the resale contemplated by that provision is resale by the registered dealer purchasing the goods and by no one else, but while enacting the second sub- clause of section 8 (3) (b) the legislature did not qualify the words for sale by adding the words by him . This deliberate omission of the words by him after the words for sale clearly indicates that the legislature did not intend that the sale of the manufactured goods should be restricted to the registered dealer manufacturing the goods. If the legislature intended that the sale of the manufactured goods should be by the registered dealer manufacturing the goods and by no one else, there is no reason why the words by him should have been omitted after the words for sale when the legislature considered it necessary to introduce those words after the words for resale in the first sub-clause of section 8 (3) (b). The omission of the words by him is clearly deliberate and intentional and it cannot be explained away on any reasonable hypothesis except that the legislature did not intend that the sale should be limited to that by the registered dealer manufacturing the goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e., the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. 36. Sri Agarwal, further to support his contention has relied upon the judgment of the Apex Court in the case of Kalyan Roller Flour Mills Pvt. Ltd (supra) which is as under: 10. The revisional authority as well as the High Court accept that the language of the notification is clear, but resort to interpreting the notification in light of the intention behind its issuance and proceed on the presumption that the State Government was made to issue the aforesaid notification in order to give an advantage ot the dealers in the State of Andhra Pradeh who deal in sale or purchase of wheat and wheat products. According to the revisional authority as well as the High Court a roller flour mill would be entitled for exemption only if firstly, it manufactures a product fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible, at their meaning, without, in the first place, reference to cases for theories of construction. 16. In CST vs. Modi Sugar Mills Ltd. , this Court has observed as follows: 11......In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency. 37. As the issue before the Court is not in regard to any ambiguity in the provision of Section 13 of the Act, it is only whether the provisions of Section 13(1)(f) inserted in the year 2010 is applicable or the benefit granted by the Tribunal under Section 13(3)(b) read with Explanation(iii) of Section13 of the Act was applicable. 38. As the Apex Court in the case of Jayam Co. (supra) as well as M.K.Agro Tech (supra) has categorically held that the claim of ITC is not the right of a dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Section 13 has to be read in harmony and the benefit or denial cannot be restricted only to Section 13(1)(f), cannot be accepted as Section 13 in the beginning itself provides that ITC will be allowed to the extent provided by or under the relevant clause. 43. Present case specifically falls under Section 13(1)(f) of the Act. Supreme Court in the case of Jayam Co. (supra) as well as in the case of M.K.Agro Tech (supra) have held that it is not a right of a dealer to get the benefit of ITC but it is a concession by virtue of the provisions of the Act. Further, it is a trite law that whenever concession is given by statute or notification etc., the condition thereof are to be strictly complied with in order to avail such concession. Further, the observation of the Apex Court that how much tax credit is to be given and under what circumstances, is the domain of the Legislature and the Courts are not to tinker with the same. 44. Thus, in the present case by Amending Act of 2010, the Legislature had made specific provision in regard to those cases where the sale price of the manufactured goods was lower than the cost price. Argument of Sri Rahul Agar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Section 13 of the Act does not provide for contingency as in the case of respondent dealer, where the sale price of the manufactured or taxable goods is lower than the cost price and the only provision in the entire scheme of Section 13 is provided under Section 13(1)(f) of the Act. Thus, the case of respondent dealer will not fall under the said provision as specific provision has been made in Section 13 of the Act. 47. As Section 13, which is in form of concession given to registered dealer, specifically in its opening line provides for these concession on fulfillment of certain conditions, these conditions and restrictions have been provided under the relevant clause, as such the dealers who are covered under the relevant clause can claim benefit /concession only as far as it has been provided, under the said clause and cannot take the benefit and advantage as provided under other clauses because all these concessions/benefits are subject to certain restrictions and conditions and only on fulfillment of those conditions that concession is given to the dealer. 48. Reliance placed by counsel for the respondents on the judgments of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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