Strict construction of input tax credit exclusions preserves credit for fuels not specifically covered under the VAT rules.

A strict reading of rule 20(2)(b) confines the fuel exclusion from input tax credit to fuels used for automobiles, captive power generation, or power plants; Low Sulphur Heavy Stock and Liquefied Petroleum Gas did not fall within that limited disqualification. Schedule VI likewise lists petroleum products through specific entries, showing that it does not treat all petroleum products as a single class; these goods were not covered by any listed entry. On that basis, input tax credit under section 13(1) could not be denied and the consequential refusal of refund was unsustainable.

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Issues: (i) Whether Low Sulphur Heavy Stock and Liquefied Petroleum Gas were fuels falling within the exclusion in rule 20(2)(b) of the Andhra Pradesh Value Added Tax Rules, 2005 so as to deny input tax credit under section 13(1) of the Andhra Pradesh Value Added Tax Act, 2005; (ii) Whether Low Sulphur Heavy Stock and Liquefied Petroleum Gas were covered by Schedule VI of the Andhra Pradesh Value Added Tax Act, 2005 so as to disentitle the assessee from input tax credit.

Issue (i): Whether Low Sulphur Heavy Stock and Liquefied Petroleum Gas were fuels falling within the exclusion in rule 20(2)(b) of the Andhra Pradesh Value Added Tax Rules, 2005 so as to deny input tax credit under section 13(1) of the Andhra Pradesh Value Added Tax Act, 2005

Analysis: Rule 20(2)(b) excludes only fuels used for automobiles, captive power generation, or power plants. The exclusion is not a general reference to every article that may loosely be described as fuel. The language of the rule confines the disqualification to fuel put to the specified uses, and the remaining sub-rules do not bring the goods in question within any other exclusion.

Conclusion: Low Sulphur Heavy Stock and Liquefied Petroleum Gas were not hit by rule 20(2)(b), and denial of input tax credit on that basis was unsustainable in favour of the assessee.

Issue (ii): Whether Low Sulphur Heavy Stock and Liquefied Petroleum Gas were covered by Schedule VI of the Andhra Pradesh Value Added Tax Act, 2005 so as to disentitle the assessee from input tax credit

Analysis: Schedule VI specifically enumerates petroleum products by distinct entries such as petrol, aviation motor spirit, aviation turbine fuel, and diesel oil. The separate enumeration of different products shows that the Schedule was not intended to cover all petroleum products as a single class. Low Sulphur Heavy Stock and Liquefied Petroleum Gas did not answer any of the listed entries.

Conclusion: Low Sulphur Heavy Stock and Liquefied Petroleum Gas were not covered by Schedule VI, and the assessee remained entitled to the benefit of section 13(1) in favour of the assessee.

Final Conclusion: The denial of input tax credit and the consequential refusal of refund could not be sustained, and the writ petitions were allowed.

Ratio Decidendi: A statutory exclusion from input tax credit must be applied strictly according to its wording, and goods not specifically brought within the enumerated exclusion or schedule entry cannot be denied credit by broad classification.

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