TaxTMI 
TaxTMI 
2016 (2) TMI 767
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....ce of the input tax credit and the penalty u/s.34(12)? 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,....
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....anufacturing of oil, but part thereof is used for other purposes 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....
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....or seeds nor any part thereof was ever purchased to use the same as a 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 ....
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....and the tax credit shall be calculated in such manner as may be prescribed. (2) The registered dealer who intend to claim the tax credit shall maintain the 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 i....
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....nd commerce; (f) [of the goods (not being taxable goods dispatched outside the State in the course of branch transfer or consignment)] which are disposed of otherwise than in sale, resale or manufacture; (g) of the goods specified in the Schedule I or the goods exempt from whole of tax by a notification 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 other....
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....akhs, or (b) is cancelled on request by such dealer, and becomes liable to pay tax under section 7, shall be allowed to claim tax credit for the taxable goods held in stock which are purchased after 1st April, 2008 and during the period of one year ending on the date of liability to pay txax under section 7.]. (6) The State Government may, by 2, 2A, 2B and 2C notification in the Official Gazette, specify any goods or the class of dealers 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 ....
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....rned, subject to such conditions as may be prescribed. (11) A registered dealer shall apply fair and reasonable method to determine, for the purpose of this section, the extent to which the goods are sold, used, consumed or supplied, or intended to be sold, used, consumed or supplied. The Commissioner may, after giving the dealer am opportunity of being heard and for the reasons to be recorded in writing, reject the method adopted by the dealer and calculate the amount of tax credit as he deems fit. (12) Subject 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 dispu....
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.... does not mean that the full effect to the exemption notification should not be given by any circuitous process of interpretation. After all, exemption notifications are meant to be implemented and trade notices in these matters clarify the stand of the Government for the trade. It is clear, therefore, that the Tribunal failed to interpret the words of the exemption notification No. 201/ 79 properly and fully. The said notification exempted all excisable goods on which the duty of excise was leviable and in the manufacture of which any goods falling 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 pr....
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....nufacture of Gelatin is concerned, after removal of Mother Liquor the demineralised bones are hydraulically transported to the washing section and thereafter processed further to manufacture Gelatin. The above manufacturing process shows that while soaking the bone chips in Hydrochloric Acid a waste product, viz., Mother Liquor ipso facto comes into existence. It is not as if there is a deliberate attempt on the part of the manufacturer to manufacture the Mother Liquor which emerges as a by-product during the course of manufacture of Gelatin. Moreover, it is 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 manufact....
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....eparate accounts in respect of the same. When the entire quantity of input is used in the manufacture of Gelatin, the question of maintaining separate accounts or of paying a percentage of the total price of the exempted goods would not arise. In the peculiar facts of the present case, sub-rule (1) of rule 6, itself would not come into play inasmuch the manufacturer does not deliberately use any quantity of the inputs, viz. Hydrochloric Acid for manufacturing Mother Liquor, the entire Hydrochloric Acid is used in the manufacture of Gelatin. Thus, when no input is specifically used for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt, consumption and inventory of input." 19 Considering the above observations, compared with the facts of the present case, it is clear that the entire purchase made by the company is intended to manufacture castor oil and oil based products. In the first phase, when crushing of the seeds takes place, only some portion of the seeds turn into oil. After the first process of crushing the seeds, most of the oil is extracted. The said castor oil cake is again crushed and the remainin....