Input tax credit on captive fuel use allowed where fuel forms an integral manufacturing input, despite alternate remedy objections.

Writ petitions challenging denial of input tax credit were held maintainable despite an alternate statutory appeal because the dispute raised a pure question of statutory interpretation on undisputed facts. On the merits, fuel such as furnace oil used to generate electricity or heat for captive consumption in manufacturing was treated as an integral industrial input under the Tamil Nadu Value Added Tax Act, 2006. Credit could not be denied merely because the fuel did not form part of the final product; the denial provision applied only where the statutory conditions were actually met, including turnover involving exempt goods. The reversal orders were set aside to that extent.

---

---

Issues: (i) Whether the writ petitions were maintainable despite the availability of statutory appeal. (ii) Whether input tax credit could be denied on furnace oil and other fuel used to generate electricity or heat for captive consumption in the manufacturing process.

Issue (i): Whether the writ petitions were maintainable despite the availability of statutory appeal.

Analysis: The challenge raised a pure question of statutory interpretation on undisputed facts, namely, the entitlement to input tax credit under the Tamil Nadu Value Added Tax Act, 2006. The authorities had adopted a uniform view that the petitioners were not entitled to the credit, and the dispute turned on the legal scope of the credit provisions rather than on contested factual enquiry. In those circumstances, the existence of an alternate statutory remedy did not bar recourse to writ jurisdiction.

Conclusion: The writ petitions were held to be maintainable.

Issue (ii): Whether input tax credit could be denied on furnace oil and other fuel used to generate electricity or heat for captive consumption in the manufacturing process.

Analysis: Section 19(2)(ii) of the Tamil Nadu Value Added Tax Act, 2006 permits input tax credit for goods used as input in the manufacture or processing of goods in the State. The denial provision in Section 19(5)(a) is attracted only where the relevant turnover is that of exempt goods, and the record showed that the end products manufactured by the petitioners were taxable, with only a small and identifiable exception in one case where the electricity sold had already suffered tax. The Court treated fuel used to generate electricity or heat that was captively consumed in the manufacturing process as an integral industrial input. The legal principle applied was that fuel need not form part of the final product to qualify as input, so long as it is directly and integrally used in the process of manufacture or processing. The authorities' view that mere generation or captive use of electricity, or use of furnace oil as fuel, by itself defeated credit was rejected.

Conclusion: Input tax credit on the fuel used for captive power generation and allied manufacturing use was allowed, and the reversal orders were set aside to that extent.

Final Conclusion: The petitioners succeeded on the substantive ITC issue, while the writ forum was also held to be available for adjudication of the challenge.

Ratio Decidendi: Fuel and electricity used as integral inputs in captive power generation for manufacturing or processing of taxable goods do not lose eligibility for input tax credit merely because they are not sold as independent products; the credit can be denied only where the statutory conditions for denial are actually attracted.

---