2010 (8) TMI 847 - HC - VAT and Sales Tax

High Court denies input tax credit on diesel for electricity generation under Punjab VAT Act

The High Court ruled against the appellant, denying input-tax credit on diesel purchase for captive electricity generation under section 13(5) of the ... Whether the order passed by the Excise and Taxation Commissioner is sustainable in law? Whether the respondent is entitled to input-tax credit on the purchase of diesel used in the generation of electrical energy for captive consumption especially when the word diesel has been specifically/specially mentioned in clause (b) of section 13(5) and excluded from section 13(4) of the Act? Whether the learned Tribunal has misinterpreted the provisions of sections 13(4), 13(5), and 13(5)(i) of the Act? Whether the order dated May 24, 2006 passed by the learned Tribunal is sustainable in law under the facts and circumstances of the case? Whether the respondent is entitled to input-tax credit on the purchase of diesel at the rate prescribed in section 13(4) of the VAT Act especially when the word 'diesel' is not mentioned in it? Held that:- Diesel is an item on which input-tax credit is not available unless as provided under clause (b). In view of such express provision, resort could not be had to clause (i). It is settled principle of law that an express and special provision excludes a general provision. The questions are, thus, answered in favour of the Revenue and against the assessee. Issues:1. Interpretation of section 13(5) of the Punjab Value Added Tax Act, 2005 regarding input-tax credit on purchase of diesel for captive consumption.2. Sustainability of the Excise and Taxation Commissioner's order.3. Entitlement to input-tax credit on diesel purchase for electricity generation.4. Misinterpretation of provisions of sections 13(4), 13(5), and 13(5)(i) of the Act.5. Sustainability of the Tribunal's order.Analysis:The petition under section 68(1) of the Punjab Value Added Tax Act, 2005 challenged the order of the VAT Tribunal proposing substantial questions of law. The key issues revolved around whether input-tax credit on diesel used for captive consumption in electricity generation was allowable under section 13(5)(i) of the Act. The Excise and Taxation Commissioner initially denied the credit, citing clause (b) of section 13(5) which excludes diesel unless sold as a business. However, the Tribunal disagreed, allowing the credit under clause (i) of section 13(5) for captive consumption.The Tribunal's decision was based on interpreting the provisions of section 13(5) and determining that the appellant's use of diesel for electricity generation for captive consumption qualified for tax credit under clause (i). The Tribunal held that the specific provision in clause (i) prevailed over the general exclusion in clause (b) of section 13(5). The Tribunal set aside the Commissioner's decision and ruled in favor of the appellant, granting full tax credit for diesel purchase.The High Court analyzed the statutory provisions of section 13(5) and applied the principle that specific provisions override general ones. Citing legal precedents, the Court emphasized that when a specific provision like clause (i) exists, it takes precedence over a general provision like clause (b). Therefore, the Court disagreed with the Tribunal's interpretation and ruled in favor of the Revenue, denying the input-tax credit on diesel purchase for captive consumption in electricity generation.In conclusion, the High Court disposed of the petition, upholding the Revenue's position and rejecting the appellant's claim for input-tax credit on diesel purchase for captive electricity generation. The judgment clarified the application of specific and general provisions in statutory interpretation, emphasizing the precedence of specific provisions in determining tax credit eligibility under the Punjab Value Added Tax Act, 2005.