2016 (2) TMI 767
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.... 2 The brief facts as arising from the record are that the respondent is a company registered under the provisions of the Companies Act, 1956 and it is engaged in the business of crushing of castor seeds and thereafter manufacturing castor oil and other waste products. The undisputed fact is with regard to process of getting castor oil from the castor seeds purchased by the company as raw-material. The castor seeds purchased by the company is crushed and would manufacture castor oil as well as castor oil cake. Since the castor oil cake contains some oil, the same is again crushed and the resultant product would be castor oil and the remaining is called, deoiled cake. 3 Since the respondent-company was using the entire purchase of castor oil seeds for production of castor oil, it claims input tax credit under the provisions of Section 11 of the Gujarat Value Added Tax Act, 2003 ('VAT Act', for short). 4 The Assessing Authority initially processed and adjusted the tax paid by the respondent company against the purchases of castor oil seeds. However, the reassessment was done on the ground that waste - de-oil cake, was used by the respondent-company as a fuel for the process....
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....s as provided under that Section and therefore the Tribunal has erred in holding that the company has not used the purchased goods for the manufacture of castor oil. 6 She would further submit that the goods of the company would also fall under the provisions of Section 11(3)(iii) of the VAT since part of the purchase was used as a fuel for the manufacture of the goods. She would submit that deoiled cake, though remains of castor seeds, it does remain part of the seeds and the same is made taxable, the Tribunal has erred in holding that deoiled cake cannot be treated as fuel as defined under the provisions of Section 11(3)(b)(iii) of the Act. 7 She would further submit that under the statute, if any benefit is expressly provided, the assessee would be entitled for the same and therefore, there is no scope of interpreting or widening the provisions of the taxing statute. By taking us through the decision of the Tribunal and more particularly the observations and conclusions narrated in the judgment from page 16 onwards (paragraph 79 onwards) she would submit that the Tribunal has widened the scope of the provisions of Section 11 of the Act, which is not permissible as far as applic....
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.... fuel for manufacture of the goods. It is not the case of the State that the castor seeds themselves have ever been used by the respondent-company as a fuel in the manufacture of the goods. 10 Mr Joshi, in support of his submissions, has relied upon the following decisions: (1) Swadesh Polytex Limited v. Collector of C. Ex., 1989 (44) ELT 794 (SC), (2) Commissioner of Central Excise v. NOCIL, 2008 (232) ELT 193 (SC) (3) Commissioner of C.Ex. & Cust. V. Sterling Gelatin, 2011 (270) ELT (Guj.) (4) Ratan Industries (Pvt.) Limited v. Additional commissioner, Trade Tax and Another, [2006] 148 STC 111 (All) (5) Ruchi Soya Industries Ltd. v. State of M.P. and Others, [2014] 70 VST 40 (MP). 11 He would submit that in Swadeshi Polytex Limited (supra) it has been held by the Apex Court that any unintended byproduct during the course of manufacturing of a particular goods could not be said to be an intended one and would be subjected to any payment of excise, etc. By relying upon the observations made in paragraph 8 of the judgment in the case of Sterling Gelatin (supra) he would submit that when the entire quantity of input was used in the manufacture and if the byproduct emerges....
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....e register and the books of accounts in such manner as may be prescribed. (3)(a) Subject to the provisions of this section, tax credit to be claimed under subsection (1) shall be allowed to a purchasing dealer on his purchase of taxable goods which are intended for the purpose of - (i) sale or re-sale by him in the State; (ii) sale in the course of inter-State trade and commerce, other than the sales in the course of export out of the territory in India; (iii) branch transfer or consignment of taxable goods to other States (subject to the provision of subclause (b) below); (iv) sales in the course of export out of the territory of India; (v) sales to export oriented units or the units in Special Economic Zones for sale in the course of export out of the territory of India; (vi) Use as raw material in the manufacture of taxable goods intended for (i) to (v) above or in the packing of the goods so manufactured; (vii) use as capital goods meant for use in manufacturer of taxable goods intended for (i) to (vi) above subject to the condition that such capital goods are purchased after the appointed day; Provided that if purchases are used partially for the purp....
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.... under sub-section (2) of section 5; (h) of the goods which are used in manufacture of goods specified in Schedule I, [or the goods exempt from the whole of the tax by a notification under sub-section (2) of section 5] or in the packing of goods so manufactured; (i) of capital goods used in the manufacture of goods specified in Schedule I or the goods exempt form the whole of the tax by a notification under sub-section (2) of section 5 or in generation of electrical energy including captive power; (j) of vehicles of any type and its equipment, accessories or spare parts (expect when purchasing dealer is engaged in the business of sales of such goods) (k) [of the property] or goods not connected with the business of the dealer; (l) of the goods which are used as fuel in generation of electrical energy meant for captive use or otherwise; [(ll) of petrol, high speed diesel, crude oil and lignite unless such purchase is intended for resale;] (m) of the goods which are used as fuel in motor vehicles; (mm)of capital goods used in transfer of property in goods (whether as goods or in some other form) involved in execution of works contract; (mmm) of the goods for which rig....
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....ealers that shall not be entitled to whole or partial tax credit. (7) Where a registered dealer without entering into a transaction of sale, issues to another registered dealer tax invoice, retail invoice, bill or cash memorandum with the intention to defraud the Government revenue or with the intention that the Government may be defrauded of its revenue, the Commissioner may, after making such inquiry as he thinks fit and giving a reasonable opportunity of being heard, deny the benefit of tax credit, in respect of such transaction, to such registered dealers issuing or accepting such tax invoice, retail invoice, bill cash memorandum either prospectively or retrospectively from such date as the Commissioner may, having regard to the circumstances of the case, fix. (7A) Notwithstanding anything contained in this section, in no case the amount of tax credit on any purchase of goods shall exceed the amount of tax in respect of the same goods, actually paid, if any, under this Act or any earlier law, into Government treasury: Provided that, where purchase tax is shown as payable in the return by the claimant dealer on the purchase of the said goods effected by him, it shall be de....
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....ect to the exceptions as may be prescribed by the rules, any dealer including the Commission agent shall not be permitted to transfer his tax credit to any other dealer or as the case may be, the principal. Explanation.- For the purpose of this section the amount of tax credit on any purchase of goods shall not exceed the amount of tax actually paid or payable under this Act in respect of the same goods." (emphasis supplied) 15 The respondent company is purchasing castor seeds at the price including the tax charged by the registered dealer and it is maintaining the register and books of accounts under section 11(2) of the Act. It is not in dispute that the entire purchase of castor seeds is intended to be used for the purpose of extracting castor oil. Since the seeds are rawmaterial for the oil, which is taxable goods, the same would fall under Section 11 (3)(a)(vi) of the Act. 16 As far as submissions made by Ms Desai, learned Assistant Government Pleader that the case is covered under the proviso to Section 11(3)(a) is concerned, neither it is the case of the authority that any part of the seeds - raw-material has been used for other purpose than that was provided under sect....
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....g under Tariff Item 68 (i.e. inputs) had been used from so much of the duty of excise leviable thereon as was equivalent to the duty of excise already paid on the inputs. It is clear, however, that ethylene glycol was used in the manufacture of polyester fibre. It appears that methanol arises as a part and parcel of the chemical reaction during the process of manufacture when ethylene glycol interacts with DMT to produce polyester fibre. It is not possible to use a lesser quantum of the ethylene glycol to prevent methanol from arising for producing a certain quantity of polyester fibre. Thus, the quantity of ethylene glycol required to produce a certain quantum of polyester fibre is determined by he chemical reaction. It may be mentioned herein that it is not as if the appellants have used excess ethylene glycol wantedly to produce the methanol. It is clear that the appellants are not engaged in the production of methanol but in the production of polyester fibre. That position is undisputed. Therefore, it appears that the Tribunal erred when it held that the appellants were not entitled to a part of the credit of duty since ethylene glycol when it enteracts with DMT also gives rise....
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....s not as if a particular quantity of Hydrochloric acid is used for the manufacture of Gelatin and a particular quantity is used for the production of Mother Liquor (whether ascertainable or unascertainable), the entire quantity of Hydrochloric acid in respect of which cenvat credit is availed of is used by the respondent for the manufacture of Gelatin. Considering the process of manufacture adopted by the respondent, it is not possible to manufacture Gelatin without corresponding production of Mother Liquor. This Mother Liquor which otherwise is in the nature of a waste product, is used by the respondent assessee for the manufacture of Di- Calcium Phosphate. 7. At this juncture, reference may be made to certain statutory provisions. Rule 6 of the Cenvat Credit Rules, 2002 makes provision for "Obligation of manufacturer of dutiable and exempted goods". Sub-rule (1) thereof provides that CENVAT Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2). Sub-rule (2) provides that where a manufacturer avails of Cenvat Credit in respect of any inputs and manufactures such final produ....