TaxTMI 
TaxTMI 
2016 (8) TMI 88
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....), exempt from payment of tax. The proportion of firewood is about 1% of the raw material. 3. In this background, the question of assessee taking full tax credit on the purchase of timber came up for consideration on an application filed by the assessee to the Commissioner of Commercial Tax under section 80 of the VAT Act. The Joint Commissioner (Ahmedabad) by order dated 31.12.2013 opined that by virtue of proviso to sub section 11(3)(a) and section 11(8)(a) the VAT Act to the extent the purchased timber was used for manufacturing the firewood, the assessee would not be entitled to tax credit. Aggrieved by the said order of the Joint Commissioner, the assessee preferred appeal before the Tribunal. The Tribunal by the impugned judgement dated 12.12.2014 dismissed the appeal and confirmed the view of the Joint Commissioner. The Tribunal was of the opinion that : "Further, the scheme of the Act, to our mind is such that all the taxable goods carry tax until it reaches the last customer for consumption. Thus, the last customer who would consume the goods has to bear the ultimate burden of the tax. From production/manufacture to market to agency, to subagency, stockiest, the whole se....
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.... (MP). (4) In case of Swadeshi Polytex Ltd. v. Collector of C. Ex. reported in 1989(44) ELT 794(SC). (5) On decision of Karnataka High Court in case of M.K. Agro Tech (Private) Limited v. State of Karnataka( order dated 17.7.2014 passed in Sales Tax Revision Petition Nos.774 to 794 of 2013) 6. On the other hand, learned AGP Shri Pranav Trivedi opposed the appeal contending that the Tribunal has correctly applied the statutory provisions. To the extent firewood was generated, the assessee was not entitled to tax credit on purchase of timber since such firewood was exempted from payment of tax. Proviso to section 11(3)(a) would therefore, apply. 7. Facts are seriously not in dispute. The appellant purchased timber which is taxable for the purposes of manufacturing sawn timber or logs which is also taxable. The process creates a waste of about 1% of sawn dust which is sold as firewood and which is exempt from payment of tax. 8. In this context, we may notice statutory provisions applicable. Section 11 of the VAT Act pertains to tax credit. In terms of subsection (1) thereof, a registered dealer would be entitled to tax credit equal to the amount of tax collected from the purchasi....
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....ds which are intended for the purposes mentioned in clauses (i) to (vii). Clause (vi) thereof refers to use as raw material in the manufacture of taxable goods intended for clauses (i) to (v) or in the packing of the goods so manufactured. Thus in terms of clause(vi) of subsection( 3)(a) of section 11 with respect to raw material for the manufacture of taxable goods intended for the purposes mentioned in clauses (i) to (v), tax credit would be allowed. Proviso to subsection( 3) however, limits the scope for such tax credit by providing that if purchases are used partially for the purposes specified in the said section, the tax credit shall be allowed proportionately to the extent they are used for the purpose they are so specified. 12. In terms of proviso, thus if the purchases mentioned in clause (vi) namely, the raw material is used only partially for specified purposes, the tax credit would be restricted proportionate to the extent they are so used for such purpose. In other words, to the extent the raw material is used partially for the purposes other than those specified in the subsection, there shall be proportionate disallowance of available tax credit. However, for applica....
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....eeds were used for production of deoiled cake, would not be available in view of the proviso to section 11(3). The High Court negatived the contention making the following observations : "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 remaining portion of the castor oil is extracted therefrom in the second process leaving the waste, which is of no use to the company and therefore the same is used in the furnace as a fuel in the manufacture of castor oil as well as other products. Only the waste is used as fuel and that too again in the manufacturing process of oil. Therefore, in our opinion, it would not fall under proviso to Section 11(a) of the Act." 16. Similar view was expressed by the Division Bench of Madhya Pradesh High Court in case of Ruchi Soya Industries Ltd.(supra), making the following....