TaxTMI 
TaxTMI 
2017 (6) TMI 90
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....pital assets viz. Dry Dock and Fit Out Berth which are considered as "plant", the Revenue has preferred the Tax Appeal No.563/2016 to consider the following questions of law. "1. Whether the Hon'ble Tribunal has erred in holding that Input Tax Credit u/s.11(3)(a)(vii) of the Gujarat Value Added Tax Act, 2003 is available for purchase of cement, sand, steel, greet, concrete etc. that are used for manufacture of capital goods? 2. Whether the Hon'ble Tribunal is justified in holding that even immovable structure shall be categorized as capital goods under the Gujarat Value Added Tax Act, 2003?" [3.0] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 13.06.2014 passed by the learned Tribunal in First Appeal No.29/2010 by which the learned Tribunal has allowed the said Appeal preferred by the respondent - Dealer and has held that on the purchases of cement, steel, greet etc. which are used for the purpose of construction of Jetty etc. used as capital goods, the Dealer is entitled to Input Tax Credit and by which the learned Tribunal has set aside the Determination Order passed by the Joint Charity Commissioner in treating the LPG and Acet....
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....ieved and dissatisfied with the assessment order the Dealer preferred the First Appeal before the learned Joint Commissioner. That the learned Joint Commissioner dismissed the said appeal and confirmed the order passed by the learned Assessing Officer. [5.3] Feeling aggrieved and dissatisfied with the assessment order passed by the learned Assessing Officer as well as the order passed by the learned Appellate Authority in denying the Input Tax Credit on the Dry Dock and Fit Out Berth more particularly on purchase of cement, sand, steel, greet, concrete etc., the Dealer preferred Second Appeal No.269/2013 before the learned Tribunal. On considering the decisions on the point and the use of Dry Dock and relying upon the decision of the House of Lords in case of Inland Revenue Commissioners vs. Barclay, Curle & Co. Ltd. (1970) 76 ITR 62 (HL), the learned Tribunal has held the Dry Dock as "plant" and consequently as capital goods and has held that on purchase of cement, sand, steel, greet, concrete etc. used in construction of Dry Dock - capital goods, the Dealer is entitled to the Input Tax Credit. The learned Tribunal has also considered / noted its earlier decision in the case of....
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....titled to the Input Tax Credit or not. [7.4] It is vehemently submitted by Shri Vora, learned Assistant Government Pleader that as per subsection (3) of section 11 of the VAT Act, the Tax Credit to be claimed under subsection (1) shall be allowed to a person / Dealer on his purchase of taxable goods which are intended for the purpose of use as capital goods meant for use in manufacture of taxable goods intended for (1) sale or resale by him in the State; (2) sale in the course of interState trade and commerce other than sale in the course of the expiry out of the territory in India; (3) branch transfer or consignment of taxable goods to other States and (4) sales in the export out of the territory of India. It is submitted that therefore on purchase of those taxable goods which are entitled for the purpose of use as capital goods, the Input Tax Credit is allowable. It is submitted that therefore cement, sand, steel, greet, concrete etc. which are admittedly not intended for the purpose of use as capital goods meant for use in manufacturing of taxable goods, Input Tax Credit is not allowable. [7.5] It is further submitted by Shri Vora, learned Assistant Government Pleader appe....
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....AT Act. Shri Vora, learned Assistant Government Pleader has relied upon the aforesaid definitions in support of his above submissions and more particularly in support of his submission that Dry Dock and Fit Out Berth cannot be said to be goods within the definition of section 2(13) of the VAT Act. Relying upon the definition of "capital goods" contained in section 2(5) of the VAT Act, it is vehemently submitted that as per section 2(5) of the VAT Act, "capital goods" means "plant and machinery" meant for use in manufacture of taxable goods and accounted as capital assets in the books of accounts. It is submitted that therefore cement, sand, steel, greet, concrete etc. cannot be said to be "capital goods" and therefore, on such purchase the Input Tax Credit is not allowable. [7.9] Relying upon the definition of "goods" contained in section 2(13) of the VAT Act, it is submitted that Dry Dock and Fit Out Berth / Jetty cannot be said to be "goods" as the same are not a movable property. Making above submissions and relying upon above decision it is requested to allow the present Tax Appeals and answer the question in favour of the Revenue and against the Dealer. [8.0] Present Tax....
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....) 2 SCC 186 3. Commissioner of Central Excise, Coimbatore and Ors. vs. Jawahar Mills Ltd. and Ors. (2001) 6 SCC 274 [8.5] Now, so far as the reliance placed upon the decision of the Division Bench of this Court in the case of Sales India Corporation (Supra) by the learned Assistant Government Pleader, it is submitted by Shri Joshi, learned Senior Advocate appearing on behalf of the Dealer that the said decision shall not be applicable to the facts of the case on hand. It is submitted that in the case before the Division Bench, the Division Bench was considering the definition of "plant and machinery" and was considering whether the goods 'Out Board Marine Engine' commonly known as "Oil Engines" shall fall under Entry No.58A of the VAT Act which pertains to plant and machinery. It is submitted that considering the fact that Entry No.58A referred to "plant and machinery" and not "plant or machinery", the Division Bench has held that the Out Board Marine Engine shall not fall under Entry 58A. It is submitted that as such the said decision more particularly the observations made in para 15 shall assist the Dealer in support of his submission that "Dry Dock" are capital good....
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....e case of State of Gujarat Through Commissioner vs. SAL Steel Limited (Tax Appeal No.251/2013 and other allied appeals). It is submitted that in the aforesaid decisions the Division Bench of this Court has held that petroleum coke used in the process of manufacturing cement cannot be said to be used as fuel. It is submitted that therefore the learned Tribunal has not committed error in holding that LPG and Acetylene gas are not fuel as per section 11(3)(b)(iii) of the VAT Act and consequently has not committed any error in holding that on the same the Input Tax Credit is allowable. Making above submissions, it is requested to dismiss the Tax Appeal No.99/2015 and to answer the questions in favour of the Dealer and against the assessee. [10.0] Heard learned Counsel appearing on behalf of the respective parties at length. A short question which is posed for consideration of this Court is whether on purchase of cement, sand, steel, greet, concrete etc. which are used for manufacture of capital goods, the Dealer is entitled to Input Tax Credit under Section 11(3)(b) (a)(vii) of the VAT Act and another question which is posed for consideration of this Court is whether the immovabl....
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....ce" as "plant" visavis the book, in paras 11 to 14 the Hon'ble Supreme Court has observed and held as under: "11. Counsel for the assessee urged that the expression 'plant' should be given a very wide meaning and reference was made to a number of decisions for the purpose of showing how quite a variety of articles, objects or things have been held to be 'plant'. But it is unnecessary to deal with all those cases and a reference to three or four decisions, in our view, would suffice. The classic definition of 'plant' was given by Lindley, L.J. in Yarmouth v. France a case in which it was decided that a carthorse was plant within the meaning of section 1(1) of Employers' Liability Act, 1880. The relevant passage occurring at page 658 of the Report runs thus : There is no definition of plant in the Act: but, in its ordinary sense, it includes whatever apparatus is used by a business man for carrying on his business, not his stockintrade which he buys or makes for sale; but all goods and chattels, fixed or movable, live or dead, which he keeps for permanent employment in his business . In other words, plant would include any articl....
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.... that these documents as constituting a book would fall within the definition of 'plant'. It cannot be disputed that these documents regarded collectively will have to be treated as a 'book', for, the dictionary meaning of that word is nothing but a a number of sheets of paper, parchment, etc. with writing or printing on them, fastened together along one edge, usually between protective covers; literary or scientific work, anthology, etc., distinguished by length and form from a magazine, tract, etc. (vide Webster's New World Dictionary). But apart from its physical form the question is whether these documents satisfy the functional test indicated above. Obviously the purpose of rendering such documentation service by supplying these documents to the assessee was to enable it to undertake its trading activity of manufacturing the theodolites and microscopes and there can be no doubt that these documents had a vital function to perform in the manufacture of these instruments; in fact it is with the aid of these complete and upto date sets of documents that the assessee was able to commence its manufacturing activity and these documents really formed the basis of ....
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....nclusions on material facts which would enable us to hold that drawings and patterns in question were in a book form and possessed the physical characteristics of a book. In the absence of such material, the question referred to us cannot be answered, one way or the other, by confining one's attention only to the inclusive definition of the word "plant". If the case had to be decided solely by reference to the said inclusive definition, we would have been required to call for a supplementary statement of case or to decline to answer the question raised by the Tribunal and to leave the Tribunal to take appropriate steps to adjust its decision under section 260(1) of the Act in the light of the observations made in this judgment. We find, however, that the Tribunal has alternatively found that drawings and patterns are "plant" even within the ordinary meaning of the said word, apart from the enlarged meaning given to it by the definition clause. This finding of the Tribunal turns upon the interpretation of the word "plant" occurring in section 32 and if we concur in the view of the Tribunal on that point, the question referred to us can be answered in favour of the assessee witho....
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....s & Co. Ltd. v. AttorneyGeneral; (vii) human body, Norman v. Golder; (viii) wallpaper pattern books, Rose & Co. (Wallpaper & Paints) Ltd. v. Campbell; (ix) designs for wallpaper and furnishing fabrics, McVeigh v. Arthur Sanderson & Sons Ltd.; and (x) water storage tank used for storing water by the supplier thereof for irrigation purposes, Jayasingrao Piraji Rao Ghatge v. Commissioner of Incometax. 27. Two material facts emerge on a conspectus of these authorities : first, that in each case the word "plant" was construed having regard to its context and circumstances of the case, and, secondly, that in none of the cases the court was concerned with the interpretation of the word "plant" occurring in a statute in which it was defined. The first feature noted above is illustrated by the fact that one and the same thing, namely, a horse, has been held to be plant in one case (Yarmouth's case) in the context of the Employers' Liability Act, 1880, whereas in another case (Creasey's case) in the context of the Bills of Sale Act (1878) Amendment Act, 1882, it has been held not to be plant. These cases, therefore, would be of little utility in seeking to interpret the ....
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....lant" within the meaning of section 103(5) of the War Damage Act, 1943. In that section, the word "plant" was used throughout as part of the phrases "plant or machinery" and "machinery and plant". Uthwatt J., who decided the case, held in the first place that circumstances did not have "the effect of confining the meaning of the word to such plant as is used for mechanical operations of processes". In the next place, he accepted the definition of Lindley L.J., but to some extent qualified it. Said he (at page 286) : "..... 'plant' includes whatever apparatus or instruments are used by a businessman in carrying on his business." 31. Then he proceeded to state and we think that the underlined portion contains the qualification which he engrafted : "The term does not include stockintrade, now does it include the place in which the business is carried on." 32. This decision brings into bold relief two points : first, that the collocation of the words "plant or machinery" does not necessarily mean that an apparatus used by a businessman, in order to qualify as a plant, must be such as is used for mechanical operations or processes and, secondl....
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....o add anything thereto. Lord Keith of Avonholm held that the articles in question could "quite properly be described as among the plant to be provided for a similar business set up for the first time, and their replacements must, I think, continue to be plant". Lord Denning in his speech stated (at page 422) : "These machines are undoubtedly plant. They are plant used by the manufacturers in the factory. Each of the machines each mechanical cobbler is part of the plant. The knives and lasts too are part of the plant." 35. Lord Jenkins referred to the definition of the word "plant" in Yarmouth's case and proceeded to state (at page 424) : "The reference to 'permanent employment' in the business demands some degree of durability. This, I think, is satisfied in the present case by the life of three years attributed to making and finishing lasts, sometimes extended to four or five years in the case of the latter, and to sole knives. The upper knives are given a life of only 12 months, but the intention, no doubt, is to keep and use them for so long as they are serviceable, and I cannot regard the circumstance that they wear out in that relatively ....
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....that Lord Reid in Hinton's case must be taken as having approved of the definition of the word "plant" as given by Lindley L.J., with the qualification superimposed thereon by Uthwatt J. Dealing with the principal contention of the revenue, he observed (at page 693) : "The dividing line between what is "plant" and what is not is a narrow one, and the facts of this particular case come near to that dividing line. But, in my judgment, in the circumstances of this case and I think each case does depend largely on its own circumstances the partitions should be regarded as something more than a mere setting for the carrying out of the trade; in other words as coming within the definition of "plant" as contained in section 279." [10.4] In another decision in the case of Saurashtra Bottling (P.) Ltd. (Supra), while considering the bottles and wooden shells (crates) purchased by the assessee for bottling and distribution of its products as "plant", it is observed and held that a "plant" would mean an equipment or article necessary for the purpose of that business. Considering the aforesaid decision of the House of Lords in the case of Barclay, Curle & Co. Ltd. (Supra) an....
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.... of such raw materials which are not used in the manufacturing of the taxable goods, but are used in manufacture of capital goods, the Dealer shall not be entitled to Input Tax Credit. It is the case on behalf of the Revenue that only those materials which are used in manufacture of taxable goods, the Dealer shall be entitled to the Input Tax Credit. Therefore, it is the case on behalf of the Revenue that "raw materials" shall be applicable with respect to clause (i) to clause (vi) of subsection (3) of section 11 of the VAT Act and the same shall not be applicable to clause (vii) of subsection (3) of section 11 of the VAT Act. However on the other hand it is the case on behalf of the Dealer that by applying the "User Theory" as applied by the Hon'ble Supreme Court and many High Courts, on all the materials used in manufacture of capital goods, the Dealer shall be entitled to Input Tax Credit. [11.2] While considering the said issue, two decisions of the Hon'ble Supreme Court in the case of Jawahar Mills Ltd. and Ors. (Supra) and Rajasthan Spinning and Weaving Mills Limited (Supra) are required to be referred to. There are other decisions of various High Courts on the issue which....
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.... illustrate his point, Mr. Rohtagi submitted that part of a cable may go into the machine used by the manufacturer and, thus, may qualify the requirement of clause 1(a) and, at the same time, another part of the cable which is used only for lights and fans would not so qualify. We have no difficulty in accepting the contention of the learned Additional Solicitor General that, under these circumstances, user will determine whether an item qualifies or not the requirement of clause 1(a). However, in the present cases this aspect has no relevance. It was not the case of the revenue at any stage before the authorities that an item does not satisfy the requirement of `Capital goods' within the meaning of the Rule on the ground of its user as it now sought to be urged by the learned counsel. The case of the revenue has all through been that the items in question per se are not `Capital goods' within the meaning of the expression as defined in Explanation 1(a). In respect of the cables of which Mr. Rohtagi gave example, the stand of the revenue before the Tribunal was that the cables per se cannot be treated as `Capital goods'. The stand of the revenue was not as has been proj....
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....41 (Mad.) 3. Commissioner of C. Ex. & Service Tax vs. India Cements Ltd. 2014 (310) E.L.T. 636 (Mad.) 4. Orissa Power Generation vs. Commissioner, Commercial Taxes 105 (2008) CLT 442 (Decided on 14.02.2008 by Orissa High Court) 5. Commissioner of Incometax vs. Kiran Crimpers (1997) 94 Taxman 502 (Guj) 6. Commissioner of Incometax vs. Saurashtra Bottling (P.) Ltd. (1998) 232 ITR 270 (Guj) [11.5] Following the law laid down by the Hon'ble Supreme Court in the case of Jawahar Mills Ltd. (Supra) and Rajasthan Spinning and Weaving Mills Ltd. (Supra) to the facts of the case on hand and as cement, sand, steel, greet, concrete etc. are required to be used in manufacturing of "Capital Goods" viz. Dry Dock and Fit Out Berth, which is an integral part of the final product of the Dealer are without the Dry Dock and Fit Out Berth, it is not possible for the Dealer to carry on his business which is of ship building / manufacture and repairs of ship and that the Dry Dock and Fit Out Berth are specialized in nature which are required to be constructed specially and specifically for the purpose of business of the Dealer i.e. ship building / manufacture and re....
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....ose goods which are used in manufacture of "Capital Goods" as capital goods meant for use in manufacture of taxable goods, the Dealer shall be entitled to the Input Tax Credit, otherwise the Dealer shall not be allowed / granted the Input Tax Credit either on the Dry Dock and Fit Out Berth. That would defeat the grant of Input Tax Credit under section 11(3)(vii) of the VAT Act. Therefore, on purposive interpretation of the said provision also, the submission on behalf of the State that only on purchase of taxable goods which are intended for the purpose of use as capital goods meant for use in the manufacture of taxable goods alone, the Dealer shall be entitled to the Input Tax Credit, cannot be accepted. [12.0] In view of the above and for the reasons stated above, even question No.1 in both the Tax Appeals i.e. whether the learned Tribunal has erred in holding that Input Tax Credit u/s.11(3)(a)(vii) of the Gujarat Value Added Tax Act, 2003 is available for purchase of cement, sand, steel, greet, concrete etc. that are used for manufacture of capital goods or not, is held to be in favour of the assessee - Dealer and against the Revenue. [13.0] Now, so far as the additional q....