Input tax set-off cannot be apportioned for tax-free by-products where the statute grants full manufacturing rebate.

Input tax set-off under the VAT scheme was held available on the full purchase of raw material used in a composite manufacturing process, even though part of the output was a tax-free by-product, because the statute did not require quantitative apportionment of the rebate. The revenue's attempt to reduce the credit on an output-mix basis was unsustainable. The court also noted that the existence of an alternate statutory remedy did not bar writ relief where the departmental position was already settled and further resort to the remedy would have been a futile formality. The assessment was set aside and reassessment ordered in line with these findings.

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Issues: (i) Whether the dealer was entitled to set-off of input tax on the entire purchase of raw material used in the manufacture of taxable products as well as a tax-free by-product. (ii) Whether availability of an alternative statutory remedy barred writ interference in the facts of the case.

Issue (i): Whether the dealer was entitled to set-off of input tax on the entire purchase of raw material used in the manufacture of taxable products as well as a tax-free by-product.

Analysis: The rebate scheme under the Value Added Tax Act allowed input tax set-off where purchased goods were used in manufacture of goods for sale, and the statutory restriction relied on by the revenue did not justify reducing the rebate merely because one by-product was tax-free. The reasoning was supported by the principle that, where the purchased raw material is used in a composite manufacturing process and the statute does not require quantitative apportionment, the full input tax rebate cannot be curtailed by splitting the raw material on the basis of the output mix. The court also relied on the binding effect of the Supreme Court authorities applying the literal statutory entitlement to set-off and rejecting apportionment in comparable circumstances.

Conclusion: The dealer was entitled to set-off on the entire raw material purchase, and the revenue's apportionment-based reduction was unsustainable.

Issue (ii): Whether availability of an alternative statutory remedy barred writ interference in the facts of the case.

Analysis: The existence of an appellate remedy did not bar writ jurisdiction where the higher departmental authority had already taken a binding view and insistence on the alternate remedy would have been an idle formality. In such circumstances, writ intervention was justified to avoid a futile and repetitive process.

Conclusion: The availability of an alternative remedy did not prevent the court from granting relief.

Final Conclusion: The assessment order was set aside, the dealer's entitlement to full input tax set-off was affirmed, and the matter was sent back for reassessment in conformity with those findings.

Ratio Decidendi: Where the statute grants input tax rebate for raw material used in manufacture and does not mandate apportionment because one output is tax-free, the full rebate cannot be reduced on a proportional basis; an alternate remedy will not bar writ relief when it would be a mere formality.

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