2017 (4) TMI 1280 - HC - VAT and Sales Tax

Input tax credit allowed for silo construction materials as 'capital goods' under tax law

The Commissioner, Commercial Tax, U.P. Lucknow Versus M/s. Ambuja Cement Ltd., Saharanpur

The Tribunal upheld the allowance of input tax credit for goods used in silo construction as 'capital goods' under the U. P. Value Added Tax Act. The ... Input Tax Credit - capital goods - M. S. Sheets utilized for construction of silo - UP VAT - case of Revenue is that since the nature of silo is immoveable, and is embedded to Earth, it cannot be included within the definition of ‘capital goods’ - Held that: - storage tank embedded in the earth also forms part of capital goods, if it is otherwise being utilized for manufacture of goods - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, BANGALORE-II Versus SLR STEELS LTD. [2012 (9) TMI 169 - KARNATAKA HIGH COURT] - the distinction of movable or immovable nature of goods is not contained in the Act, and is otherwise not a relevant consideration, there survives no other ground of challenge to the order of the Tribunal. - credit allowed - decided against Revenue. Issues:Challenge to disallowance of input tax credit for goods used in the construction of a silo based on the definition of 'capital goods' under the U. P. Value Added Tax Act, 2008.Analysis:The revision by the revenue questions the disallowance of input tax credit by the Tribunal concerning goods used for silo construction. The crux of the challenge lies in the interpretation of the term 'capital goods' as per Section 2(f) of the U. P. VAT Act. The revenue argues that since silos are embedded structures, they do not fall under the definition of 'capital goods'. Conversely, the assessee contends that the definition of 'capital goods' should be the focus, emphasizing that plant structures, like a cement plant, should not be restricted to movable property only.Upon reviewing the definitions under Sections 2(f) and 2(m) of the Act, it is evident that 'capital goods' encompass various items used for manufacturing or processing goods for sale by the dealer. The movable nature of machinery or equipment does not limit the classification of plant structures as 'capital goods'. The Tribunal's decision draws support from a Supreme Court case regarding MODVAT credit under the Central Excise Act, emphasizing the liberal interpretation of 'capital goods' and the importance of usage in determining qualification.Additionally, a Division Bench of the Karnataka High Court upheld the inclusion of storage tanks embedded in the earth as capital goods if used in manufacturing processes. The absence of a distinction between movable and immovable goods in the Act renders such considerations irrelevant. Consequently, the Tribunal's allowance of input tax credit for M. S. Sheets used in silo construction as 'capital goods' is upheld, leading to the rejection of the revenue's revision.In conclusion, the Tribunal's decision to grant input tax credit for goods utilized in silo construction as 'capital goods' aligns with the Act's provisions and established legal precedents. The absence of a movable or immovable distinction in the Act solidifies the justification for the Tribunal's ruling, ultimately resulting in the rejection of the revenue's challenge.