dyeing job work of cloth

[Satbir singh wahi]

Under rule 15 (4) of punjab Vat act, the dyeing unit is claiming labour , pet coke and other etp consumables and profit as deductible from Sale value , the balance is treated as taxable sale, and vat paid @6.05%. The ETO is saying that ITC on Pet coke and etp consumable will not be allowed as deducted above for calculation taxable sale. Whether this view of ETO correct. PLs guide.

[YAGAY and SUN]

Punjab-Haryana High Court

M/S Khanna Paper Mills Ltd vs State Of Punjab And Another 2016 (8) TMI 249 - PUNJAB AND HARYANA HIGH COURT

[Satbir singh wahi]

Sir

Thks for reply. But Eto is saying that once consumables have been deducted for calculating taxable turnover you cannot claim ITC.pl guide.

[YAGAY and SUN]

We could not understood the contention of the ETO as consumable and Turnover both are different from each other and both form the part of P&L Account at opposite sides. Please check the facts and revert to enable us to reply to your query.

[Ganeshan Kalyani]

VAT is payable on sale value. If value itself is reduced by components as mentioned in your query the VAT paid is on lesser sale value. Thus the dept is not allowing to claim set off. It seems logical.

[Satbir singh wahi]

AS PER RULE 15(4) OF PUNJAB VAT ACT

SALE VALUE 100

LESS LABOUR 15

CONSUMABLES 5

PET COKE FUEL 5

PROFIT 5

TAXABLE TURNOVER 100-15-5-5-5=70

VAT PAYABLE 70*5.50%=3.85

BUT ITC ON CONSUMABLE AND PET COKE FUEL TAKEN.

ETO SAYS ONCE YOU HAVE DEDUCTED CONSUMABLE AND PETCOKE FUEL ,ITC ON THESE ITEMS NOT ALLOWED.

KHANNA MILLS CASE GIVEN DURING HEARING.SECTION 13 OF ITC , NO WHERE GIVES THIS RESTRICTION.PLS GUIDE .

[YAGAY and SUN]

Well, it is P & L Account which is required for conducting the VAT/CST Assessment to get the gross Profit/Net Profit. This does not restrict the availment of ITC and we assume that you must had booked consumable net of ITC.

[Satbir singh wahi]

Sir

The pet coke used as fuel in dyeing unit to produce steam for dyeing process. Pls guide whether ITC is available.Khanna paper mills case they are not accepting .

AI Summary

Input tax credit may be disputed where consumables and fuel are deducted from sale value under valuation rules.
Whether input tax credit on consumables and fuel used in dyeing job work can be claimed where those same costs are deducted from sale value is contested: the department treats deduction of consumables and fuel from sale value as precluding ITC on those items, while others assert that accounting deductions for valuation do not by themselves eliminate statutory entitlement to input tax credit.