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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether section 18(8)(ix) of the Jharkhand Value Added Tax Act, 2005 applied to a dealer who carried on no manufacturing activity in the State of Jharkhand; (ii) whether the disallowance of input tax credit on the footing that scrap batteries were consumed for manufacture could be sustained.
Issue (i): Whether section 18(8)(ix) of the Jharkhand Value Added Tax Act, 2005 applied to a dealer who carried on no manufacturing activity in the State of Jharkhand.
Analysis: The provision was read according to its plain language, which disallows input tax credit only in respect of goods consumed for manufacture of goods for inter-State transfer of stock or for sale outside the State. The dealer's registration and the record showed only trading activity in Jharkhand, with no manufacturing unit or manufacturing activity in the State. The revenue did not establish the foundational fact required for attracting the provision.
Conclusion: The provision was held inapplicable, and the assessee succeeded on this issue.
Issue (ii): Whether the disallowance of input tax credit on the footing that scrap batteries were consumed for manufacture could be sustained.
Analysis: The interpretation adopted by the authorities was rejected as adding words to a taxing provision. In fiscal legislation, nothing can be read in by intendment, and ambiguity must operate in favour of the taxpayer. The assumption that scrap batteries could only be used for manufacture was found unsustainable, particularly when trading and re-sale were also possible and no manufacturing activity in Jharkhand was shown. A remand was declined as futile because the first essential condition itself was absent.
Conclusion: The disallowance of input tax credit was held unsustainable, and the assessee succeeded on this issue as well.
Final Conclusion: The writ petition was allowed, the impugned assessment, appellate and revisional orders were quashed, and the assessee obtained full relief.
Ratio Decidendi: A taxing provision disallowing input tax credit must be applied strictly according to its express terms, and where the statutory condition of manufacturing activity is not established, the provision cannot be invoked by implication or extended by presumed legislative intent.
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