Input tax credit on LPG purchases turns on separate identification of stock and taxable sales, with Rule 131(3) needing proper factual scrutiny.

Entitlement to full input tax credit on LPG industrial and non-domestic purchases depended on whether the local dealer purchases were separately identifiable and directly linked to taxable sales, or whether stock intermixing and transfers justified proportionate disallowance under Rule 131(3). The record lacked a clear factual finding on the assessee's claim that no non-domestic LPG stock transfer occurred from the Devanagunthi bottling plant and that the invoices and classified accounts supported local taxable sales. As the documents were not properly examined, the disallowance issue was remitted for fresh consideration by the first appellate authority and was not finally decided on merits.

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Issues: Whether the assessee was entitled to full input tax credit on LPG industrial and non-domestic purchases from the local registered dealer in the light of the maintained classified accounts and the asserted absence of stock transfers from the Devanagunthi bottling plant, and whether the formula under Rule 131(3) was applicable.

Analysis: The controversy turned on whether the purchases from the local dealer were separately identifiable and directly relatable to taxable sales, or whether there was intermixing with other stocks and stock transfers so as to attract proportionate disallowance under the formula provision. The authorities below had proceeded without a clear factual finding on the assessee's specific case that no stock transfer of non-domestic LPG took place from the Devanagunthi unit and that the invoices and accounts supported local taxable sales. In the absence of a proper examination of the documents and the precise factual position, the issue could not be finally resolved on the existing record.

Conclusion: The matter required fresh consideration by the first appellate authority, and the disallowance issue was not finally decided on merits in these proceedings.

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