Plain meaning of disjunctive tax conditions allows input tax credit, with penalty and interest falling away.

A taxing provision that uses the disjunctive "or" must be applied according to its plain meaning, so input tax credit on capital goods under Section 12(2) of the Karnataka Value Added Tax Act can be claimed on satisfaction of any one of the stipulated conditions, including commencement of commercial production, taxable sales, or export sales. The provision does not require each expansion unit to begin production independently before credit is available. Once the credit claim is lawful, the basis for penalty and interest falls away, and money paid under protest towards the disputed levy is refundable.

---

---

Issues: (i) Whether input tax credit on capital goods under Section 12(2) of the Karnataka Value Added Tax Act, 2003 could be availed on fulfillment of any one of the stipulated conditions, and not only after commencement of commercial production of the particular expansion unit; (ii) Whether the levy of penalty and interest was sustainable, and whether the amount paid under protest was refundable.

Issue (i): Whether input tax credit on capital goods under Section 12(2) of the Karnataka Value Added Tax Act, 2003 could be availed on fulfillment of any one of the stipulated conditions, and not only after commencement of commercial production of the particular expansion unit.

Analysis: In a taxing statute, clear words must be given effect according to their plain meaning. The expression "or" in Section 12(2) is disjunctive and cannot be read as "and" when the provision is unambiguous. Section 12(2), read with Rule 133 of the Karnataka Value Added Tax Rules, 2005, permits deduction of input tax after commencement of commercial production, or sale of taxable goods, or sale of goods in the course of export. The provision does not require that each expansion unit must independently commence production before the credit can be claimed. Since the assessee was already effecting taxable sales and export sales, the statutory condition stood satisfied.

Conclusion: The assessee was entitled to avail input tax credit under Section 12(2), and the contrary view of the authorities was unsustainable.

Issue (ii): Whether the levy of penalty and interest was sustainable, and whether the amount paid under protest was refundable.

Analysis: Once the input tax credit claim was held to be lawful, the foundation for penalty and interest ceased to survive. Penalty cannot be imposed merely because it is permissible to do so, and in the absence of mens rea or an intention to evade tax, the levy was not justified. The amount deposited under protest, having been paid towards the disputed levy, was liable to be returned to the assessee.

Conclusion: The levy of penalty and interest was not sustainable, and the assessee was entitled to refund of the amount paid under protest.

Final Conclusion: The revisional challenge succeeded, the adverse orders were quashed, and the assessee obtained the reliefs flowing from acceptance of the input tax credit claim.

Ratio Decidendi: Where a taxing provision grants benefit on satisfaction of any one of several conditions expressed disjunctively, the court must give effect to the plain language and cannot add a further restriction not found in the statute; consequential penalty and interest cannot survive when the underlying demand fails.

---