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TMI Blog2023 (1) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... rnace oil is an input for power generation and is used by HT industrial users as fuel in gensets, to ensure and maintain continuous production. 3. The period in and around 2012 and 2013 saw the State of Tamil Nadu face power shortages and hence the demand for furnace oil at the instance of the HT industrial consumers rose. They approached the State for assistance in this regard and, at their instance, three Notifications came to be issued granting exemption from tax on the sales of furnace oil under Section 30 of the Act. 4. The first is G.O.Ms.No.103 dated 01.08.2012 issued in exercise of powers conferred by Section 30 (1) and (2) of the Act granting exemption in respect of the tax on sale of furnace oil to HT consumers, who are registered under the provisions of the Act for use in Gensets, subject to production of a certificate. The Notification covered the period 01.02.2012 to 30.09.2012. 5. The second is G.O.Ms.No.155 dated 08.12.2012 that continued the exemption granted under the first G.O. and covered the period 01.10.2012 to 31.05.2013, in the same circumstances as earlier, that is, in regard to sale of furnace oil to HT consumers registered under the Act for use in Gense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right of ITC has already accrued and thus cannot be retrospectively taken away by the State. Writ Petitions filed by other OMCs on the same issue as in the present matter were cited, where a prima facie case was made out by those assessees, and an interim stay granted by this Court. 14. A personal hearing was held on 21.10.2016, which culminated in an order dated 31.10.2016, adverse to the interests of the petitioner, confirming the reversal of ITC. Inter alia, the entirety of the submission of the petitioner has been extracted and by way of a non-speaking order, the officer confirms the reversal of ITC under Section 19(5)(a). The matter is now stated to be pending in second appeal before the Sales tax Appellate Tribunal in A.P.No.172 of 2016. 15. On 20.04.2018, the respondent issued a notice pursuant to the orders passed by this Court in W.P.No.33787 of 2017 dated 22.12.2017. That writ petition and several others, had been filed by purchasing dealers praying for the refund of taxes as per the Notifications issued in this regard and this Court had directed the authorities to consider the issue of refund of taxes. The petitioner was called upon to file supporting evidences to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Writ Petitions, proportionate ITC must be restored to the petitioners in this regard. 24. The quantification in this regard is as below and no dispute has been raised by the respondents in regard to the same. S.No. Assessment Year Ref. Date of Assessment Order Total ITC Reversed by the respondent ITC attributable on sales to Tamilnadu Petroproducts Ltd. 1 2011-12 24.06.2019 Rs.98,76,536/- Rs.48,59,224/- 2 2012-13 31.10.2016 Rs.1,08,308/- (ITC attributable to sales to TVS Motor Co. Ltd.) 3 2012-13 24.06.2019 Rs.2,98,42,712/- Net tax demand of Rs.1,89,58,404/ - after adjusting ITC already reversed for 2011-12 of Rs.1,08,308/- by order dt.31.12.2016 (adjustment done, vide page 2 of impugned order dt.24.06.2019 - page 96 of the typeset) Rs.1,50,15,978/- Out of gross demand of Rs.1,89,58,404/- 25. The Assessing Authority is directed to do so within a period of six (6) weeks from date of receipt of a copy of this order. 26. On the reversal of ITC, the first submission of Mr.N.Prasad, learned counsel for the petitioner is that Section 19(5)(a) has no applicability to the matter on hand, since it refers only to exemption granted qua specified 'goods'. A dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile the Court had indeed noticed and approved the difference between 'exempted goods' and an 'exempted transaction', that observation must be seen in the context of the facts of that case. The dealer therein was a manufacturer of asbestos. 34. The transaction in question constituted the first link in a chain of sales. There were several subsequent transactions of sale pursuant to the sale between the manufacturer and the first purchaser that continued to be taxable, since what was taxed was the transaction involving specified goods and specified assessee and not specified goods alone. Denial of ITC at the first stage would thus add a burden upon the subsequent sellers. 35. In the present case, the transaction ends with the purchasing OMCs/HT consumers, as the furnace oil purchased by them is consumed in their manufacturing process. The facts in the two cases are thus distinct and distinguishable. 36. To answer this issue, I first extract the provisions of Section 30 that reads as follows: 30. Power of Government to notify exemption or reduction of tax .- (1) The Government may, by notification, whether prospectively or retrospectively make an exemption, or reduction in rate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to one that would render otiose or sterile. The challenge to Section 7-A that had been accepted by the High Court stood reversed by the Hon'ble Supreme Court. 42. The relevant paragraphs in that judgement are extracted below: 17. ............... With due respect, it seems to us that in arriving at this erroneous interpretation, the learned Judges mixed up concept of goods liable to tax with the transactions liable to tax under the Act. The scheme of the Act involves three interrelated but distinct concepts which may conveniently be described as 'taxable person', 'taxable goods' and 'taxable event'. All the three must be satisfied before a person can be saddled with liability under that' Act.. Nevertheless, the distinction between them, is overlooked. may lead to serious error in the construction and application of the Act. 'Goods' Is defined in Section 2(j) as: "all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes all materials. commodities, and articles (including those to be used in the fitting out, improvement or repair of movable property); and all growing crops, grass or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estos Cement Sheets (A.C. sheets), and had availed ITC on the purchase of raw material used in such manufacture. 45. A proposal was made for disallowance of ITC, that despite objections raised by the petitioner, came to be confirmed. In the course of appeal proceedings, the assessee made a distinction between the exemption granted on the products itself and exemption granted to the manufacturers of the products. 46. Section 18 of the Rajasthan Sales Tax Act contains a pre-requisite that no ITC should be granted on exempted goods. Since the exemption in that case had been qua the manufacturers and not the goods, that assessee argued that the reversal of ITC was bad in law. 47. The judgment in the case of ACTO V. Abishek Granites Ltd. (23 Tax- World 285) was cited to state that an exemption to a unit was different and distinct from an exemption granted to a transaction of sale of a commodity. Though the statutory authorities rejected this argument, the learned single Judge found merit in the same and allowed the Writ Petitions. 48. The Commercial Tax Officer carried the matter in appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court appreciated the distinction that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le consideration. This would place an exempted manufacturer-dealer at a disadvantageous position and make his products uncompetitive inspite of the exemption notifications under section 8(3) of the Act. 56. The petitioner has supplied the following illustration to bring home the position that the inequity that the Hon'ble Supreme Court notices in the case of A infrastructure applies a fortiori in the present matter as well and I find merit in this submission. 1. Price of Furnace Oil per KL, at the hands of the Refinery - Rs.30,000/KL 2. Tax at 5% on Rs.37,110/- = Rs. 1,500/- 3. Total purchase cost of Furnace Oil for the Petitioner = Rs. 31,500/- 4. Cost of Furnace Oil to the Petitioner if ITC is allowed = Rs. 30,000/- 5. Resale price of Furnace Oil per KL, at the hands of the Petitioner, if ITC is allowed = Rs. 40,000/- 6. Resale price of Furnace Oil per KL, at the Hands of the Petitioner, if ITC is not allowed = Rs. 41,500/- 7. Differential cost to HT consumer per KL if ITC is not allowed to the Petitioner (Additional Input Cost) = Rs. 1,500/- 57. As can be seen from the illustration above, upon grant of the exemption, the petitioner has effected s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt considered the construction of Section 1(2) in relation to Section 28 of the Calcutta Thika Tenancy Act. The case of the petitioner therein was for relief under Section 28 when that was in force and whether his application under the Thika Tenancy Act that remained undisposed on the date when the amendment Act came into force would have to be disposed in light of unamended Section 28 or Section 28 post amendment. 60. The Court reiterated the settled principles of interpretation of statutory provisions, the first of those being that statutory provisions that create substantive rights or take away substantive rights, ordinarily are prospective and retrospectivity of such provisions would have to be expressly provided for. The second of the interpretational rule was that the intention of legislature has to be gathered from the plain, normal, grammatical and apparent meaning that the words convey. 61. The third was that if in any legislation, the general object was to benefit a particular class of persons, a provision which was ambiguous should would be interpreted such that it would preserve the benefit rather than the alternate interpretation which would take away the benefit. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Contemporary exposition helps to show what people thought the Act meant in the period immediately after it was passed. Official statements on its meaning are particularly important here, since every Act is supervised, and most were originally promoted, by a government department which may be assumed to know what the legislative intention was." 18. In R. v. Wandsworth London Borough Council, ex p. Beckwith the House of Lords has held that a departmental circular is entitled to respect. It can only be ignored when it is patently wrong. The said principle has also been followed in Indian Metals and Ferro Alloys Ltd. v. CCE (AIR at p. 1034: SCC p. 135), KeshavjiRavji and Co. v. CIT (AIR at p. 1817: SCC p. 250), Raymond Synthetics Ltd. v. Union of India (AIR at p. 859), P Kasilingam v. P.S.G. College of Technology (Scale at p. 397: SCC pp. 356 a 57) and CCE v. Dhiren Chemical Industries". 19. The Central Government, admittedly, never exercised its purported power of transfer and posting in its capacity as an employer or otherwise. From the impugned order, furthermore, it would appear that even therein the source of power had not been traced from the provisions of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the part reversal of ITC was, according to it, in error. The High Court accepted this argument. 71. In appeal, the Hon'ble Supreme Court considered the distinction between de-oiled cake and oiled cake, noting their judgment in Ravi Prakash Refineries (P) Ltd. V. State of Karnataka ((2016) 12 SCC 193) to the effect that the two comprised different and distinct commercial commodities. 72. They also noted their judgment in the case of State of Gujarat V. Raipur Mfg. Co. Ltd. ((1967) 19 STC 1) holding that where both the main and subsidiary product were being sold regularly in the course of business by a manufacturer concerned, clearly both commodities would be taken to be the result of the manufacturing process, as the intention of the manufacturer to sell both the main and by-product is very categoric and clear. 73. Per contra, the case of the State was that no ITC should be granted in regard to the exempted turnover. The appeal by the revenue was allowed by the Hon'ble Supreme Court on a plain interpretation of Section 17, which allowed partial rebate on the 'sale of taxable goods and goods exempt under Section 5'. 74. Thus, neither of the limbs of Section 17 related to, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This proposition is authoritatively determined by this Court in series of judgments. We may refer to the judgment in Godrej & Boyce Mfg. Co. (P) Lid. v. CST and the relevant extract which is relevant for our purposes is as follows: (SCC pp. 631-32, para 9) "9. Sri Bobde appearing for the appellants reiterated the contentions urged before the High Court. He submitted that the deduction of one per cent, in effect, amounts to taxing the raw material purchased outside the State or to taxing the sale of finished goods effected outside the State of Maharashtra. We cannot agree. Indeed, the whole issue can be put in simpler terms. The appellant (manufacturing dealer) 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 Mah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nactment and corresponding Rules. The question that came up for consideration in that case is also at variance with the specific issue that has been raised in this matter and thus, the ratio of the judgement of three judge in A Infrastructure has also not been taken into account. There is no equivalent of Rule 131 of the KVAT Rules that prescribes a pro rata formula for the grant of ITC qua exempt and taxable sales. 79. Having applied anxious consideration to the rival submissions on this score, I find merit in the arguments advanced by the petitioner and allow this ground. 80. One of the points that the Hon'ble Supreme Court has noted in the case of A Infrastructure is that none of the Notifications referred to therein, expressly referto the reversal of ITC in the hands of the selling dealers. So too in the present case. The scope and ambit of the Notifications can be gleaned from the manner in which the notification and annexures have been constructed, and the language used. To illustrate, I refer to the third Notification, specifically the forms annexed thereto. 81. The third notification provides an exemption in respect of the sale of furnace oil to oil companies/HT consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce on the 1st October 2012 and shall remain in force upto and inclusive of the 31st May 2013. 'CERTIFICATE-IV (To be filled up by the concerned dealer and submitted to the concerned assessing officer) I / We certify that I / We have received the VAT paid amounting to Rupees .......... In respect of tax paid on the purchases of furnace oil for the period from 1.10.2012 to the date of issue of this Notification from our suppliers in credit note no. ................... dated ................ and I / We also declare that we have not adjusted any input tax credit on the VAT amount refunded to us and we declare that if any discrepancies are found in future regarding the claim made by us in the certificates prescribed, we will repay the entire amount refunded to us with interest as provided under the Tamil Nadu Value Added Tax Act, 2006 from the date of credit received on the purchase of furnace oil for the said period. (Signature) Name and address of the dealer with TIN. Place: Date: SUNIL PALIWAL SECRETARY TO GOVERNMENT. (Relevant portion marked in bold by the Court) 86. Apart from there being no stipulation whatsoever in regard to the claim of ITC by the selling dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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