2015 (11) TMI 1321 - SC - VAT and Sales Tax

Manufacturer wins tax credit case on raw materials purchase under Rajasthan VAT Act

Commercial Taxes Officer Versus A. Infrastructure Ltd.

Commercial Taxes Officer Versus A. Infrastructure Ltd. - [2016] 87 VST 190 (SC), (2015) 15 SCC 98 Issues Involved:1. Disallowance of Input Tax Credit (ITC) on purchase of raw materials.2. Interpretation of exemption notifications under the Rajasthan Value Added Tax Act, 2003.3. Distinction between exempted goods and exempted transactions.4. Applicability of ITC to manufacturers of asbestos cement sheets.Detailed Analysis:1. Disallowance of Input Tax Credit (ITC) on Purchase of Raw Materials:The assessee-company, engaged in manufacturing Asbestos Cement Pressure Pipe and Asbestos Cement Sheets, availed ITC on the purchase of raw materials. The assessing authority issued notices disallowing ITC and charging interest under Sections 18, 22, and 55(4) of the Rajasthan Value Added Tax Act, 2003. The orders were upheld by the Deputy Commissioner (Appeals) and the Rajasthan Tax Board, leading to revision petitions filed by the assessee before the High Court.2. Interpretation of Exemption Notifications under the Rajasthan Value Added Tax Act, 2003:The High Court analyzed various notifications, including those issued on 01.06.2006, 05.07.2006, and 09.03.2007, to determine the nature of exemptions applicable to A.C. Sheets and Bricks. The Court distinguished between exemptions granted to goods and those granted to manufacturers or transactions. It was noted that the notifications under Section 8(3A) and 8(3) of the Act exempted manufacturers of A.C. Sheets and Bricks, not the goods themselves.3. Distinction between Exempted Goods and Exempted Transactions:The High Court emphasized the distinction between exempted goods (goods on which no VAT is payable) and exempted transactions (specific transactions or persons exempted from tax). The Court referred to the definition of 'exempted goods' under Section 2(13) and 'goods' under Section 2(15) of the Act. The Court concluded that the intention of the legislature was to exempt manufacturers of A.C. Sheets and Bricks, not the goods themselves, thus allowing ITC for the assessee.4. Applicability of ITC to Manufacturers of Asbestos Cement Sheets:The High Court held that the assessee, as a manufacturer of A.C. Sheets, was entitled to avail ITC. The Court reasoned that the notifications and the provisions of the Act indicated that the exemption was granted to the manufacturers and not to the goods. Consequently, the orders denying ITC to the assessee were set aside.Conclusion:The Supreme Court upheld the High Court's judgment, emphasizing the distinction between exempted goods and exempted transactions. The Court concluded that the assessee, being a manufacturer of A.C. Sheets, was entitled to ITC, and the orders denying ITC were unjustified. The appeals were dismissed, affirming the High Court's interpretation of the exemption notifications and the provisions of the Rajasthan Value Added Tax Act, 2003.