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of <h1>Court rules on Input Tax Credit for stock transfers under Uttarakhand VAT Act</h1> <h3>Hindustan Unilever Ltd. Versus State of Uttarakhand and others</h3> Hindustan Unilever Ltd. Versus State of Uttarakhand and others - [2016] 88 VST 114 (Utk) Issues:Interpretation of Uttarakhand VAT Act regarding Input Tax Credit (ITC) on packing material for stock transfers to other states. Validity of Circulars issued by Commissioner, Commercial Tax, Uttarakhand. Constitutionality of proviso to Section 6(3) of the Act in light of Articles 301 and 304 of the Constitution of India.Interpretation of Uttarakhand VAT Act Regarding ITC on Packing Material for Stock Transfers:The petitions involved identical issues of whether a company is entitled to Input Tax Credit (ITC) on packing material for stock transfers to other states under the Uttarakhand VAT Act. The petitioner argued that Circular No. 46 dated 28.06.2008 mandated ITC on packing material for stock transfers, emphasizing the importance of packing for goods like soaps and detergents. However, the Assessing Authority denied ITC on packing material for stock transfers, citing subsequent Circular No. 4411 dated 23.01.2013. The court analyzed Section 6 of the Act, noting that stock transfers to other states were not considered inter-State sales, thus ITC on such transfers was not automatic.Validity of Circulars Issued by Commissioner, Commercial Tax, Uttarakhand:The petitioner contended that Circular No. 46 dated 28.06.2008 should prevail over Circular No. 4411 dated 23.01.2013, which seemingly superseded the former. The court examined the statutory force of Circulars and their alignment with the Act. It concluded that the subsequent Circular was in line with the correct interpretation of Section 6, rendering the earlier Circular ineffective. The court emphasized that the literal rule of interpretation must be followed, and stock transfers without sale did not entitle automatic ITC, as clarified by the subsequent Circular.Constitutionality of Proviso to Section 6(3) of the Act in Light of Articles 301 and 304:The petitioner argued that the proviso to Section 6(3) of the Act violated Articles 301 and 304 of the Constitution of India by allegedly discriminating against goods imported from outside the state. The court referred to a Supreme Court judgment highlighting that states cannot discriminate between locally produced and imported goods. However, in this case, the State of Uttarakhand did not impose tax on imported goods but provided additional ITC on raw materials for stock transfers, which the court deemed not violative of constitutional provisions. Consequently, the petitions were dismissed, upholding the constitutionality of the proviso and the State's VAT regulations.This detailed analysis of the judgment provides insights into the interpretation of the Uttarakhand VAT Act, the significance of Circulars issued by the tax authorities, and the constitutional validity of the provisions in question.
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