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2017 (9) TMI 1307
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....hemicals. These goods are manufactured by the respondent in its factory situated in the State of Gujarat (hereinafter referred to as the 'appellant State'). After the manufacture of these goods, same are transferred by the assessee to its various branches located in different parts of the country from where those goods are sold. Obviously, in respect of goods transferred to places outside the appellant State, the Value Added Tax (VAT) is paid at the time of sale of those goods in those States, as per the local laws of the said States. The goods are sold in the appellant State as well and in respect of these goods VAT is paid as per the Gujarat Value Added Tax Act, 2003 (for short, the 'VAT Act'). For the purpose of manufacturing the aforesaid goods, namely, polymers and chemicals, the assessee purchases furnace oil, natural gas and light diesel oil (hereinafter referred to as the 'raw material or inputs') from its registered dealers. These fuels are used for the aforesaid manufacturing activities. On purchase of the raw material, VAT is paid at varying rates. On furnace oil, 4% VAT is payable as per the VAT Act, whereas on natural gas and light diesel oil rate of VAT prescribed and....
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....e purchased after the appointed day; Provided that if purchases are used partially for the purposes specified in this sub-section, the tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section. (b) Notwithstanding anything contained in this section, the amount of tax credit in respect of a dealer shall be reduced by the amount of tax calculated at the rate of four per cent on the taxable turnover of purchases within the State (i) of taxable goods consigned or dispatched for batch transfer or to his agent outside the State, or (ii) of taxable goods which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State. (iii) of fuels used for the manufacture of goods Provided that where the rate of tax of the taxable goods consigned or dispatched by dealer for branch transfer or to his agent outside the State is less than four per cent, then the amount of tax credit in respect of such dealer shall be reduced by the amount of tax calculated at the rate of....
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.... 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 right to use is transferred for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable considerations; (mmmm) made from a dealer after the name of such dealer has been published under sub-section (11) of section 27 or section 97; (n) of the goods which remain as unsold stock at the time of closure of business; (nn) of the goods purchased during the period when the permission granted under clause (a) of sub-section (1) of section 14 has remained valid under clause (b) of that sub-section; (o) Where original invoice does not contain the details of tax charged separately by the selling dealer from whom purchasing dealer has purchased the goods; (p)Where original tax invoice or duplicate thereof duly authenticated in accordance with the rules made in this behalf is not available with purchasing dealer or there is evidence that the same has not been issued by the sel....
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.... subsequently used fully or partly for purposes other than those specified under the said sub-section or are used fully or partly in the circumstances described in sub-section (5), the tax credit, if availed of, shall be reduced on account of such use, from the tax credit being claimed for the tax period during which such use has taken place; and such reduction shall be done in the manner as may be prescribed. (b) Where the Capital goods referred to in sub-clause (vii) of clause (a) of sub-section (3) are not used continuously for a full period of five years in the State, the amount of tax credit shall be reduced proportionately having regard to the period falling short of the period of five years. (9) The registered dealer may claim the amount of net tax credit, which shall be determined in the manner as may be prescribed. (10) Where any purchaser, being a registered dealer, has been issued with a credit note or debit note in terms of section 61 or if he returns or rejects goods purchased, as a consequence of which the tax credit availed by him in any period in respect of which the purchase of goods relates, becomes either short or excess, he shall compe....
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....ds, it gets covered by sub-clause (iii) as well. The issue that needs to be decided is as to whether the tax credit is to be reduced at the rate of 4% under sub-clause (ii) and again at the same rate under sub-clause (iii) as well or deduction permissible is only once. 4) The Assessing Officer had held that in respect of such goods tax credit is required to be reduced at the rate of 4% under sub-clause (ii) and again at the rate of 4% under sub-clause (iii). This order was upheld by the Joint Commissioner of Commercial Taxes in appeal that was preferred by the assessee. However, in further appeal before the Gujarat Value Added Tax Tribunal, the aforesaid view was upset as the Tribunal held that the deduction can be at 4% only and there cannot be double reduction in tax credit admissible to the assessee. The High Court has put its stamp of approval to the aforesaid view of the VAT Tribunal. That is the reason for the appellant State to approach this Court as it is obviously not satisfied with the decision of the High Court. 5) Reasons given by the High Court in taking the aforesaid view can be captured from the following discussion contained in the impugned judgment: ....
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....Mr. Datar. 8) It was argued by Mr. Venugopal and Mr. Bagaria that the approach of the High Court was clearly erroneous as liberal interpretation of Section 11(3)(b), when read in the context of the entire scheme of tax credit and other provisions, would clearly show that it was intended to reduce the amount of tax credit by 4% in an eventuality when case was covered under sub-clause (ii) and again at the rate of 4% when the matter was covered by sub-clause (iii). It was argued that in tax matters, where the language of the statute is plain and clear, effect thereto has to be given and equity does not play any role in these cases. It was further argued that as per the provisions of the VAT Act, VAT was payable on the purchase of furnace oil, natural gas and light diesel oil as well. However, the Legislature intended to give tax credit in respect of these items when such items are used as raw material/inputs for the purpose of manufacturing other products. At the same time, it is the prerogative of the law makers to decide how and under what circumstances such tax credit would be admissible and to what extent. But for such a provision, the assessee did not have any right to cla....
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....herwise (sub-clause (l)), no tax credit is allowed. According to him, if one keeps in mind this scheme of giving tax credit, the intention is clear, namely, the reduction rate cannot be more than the tax credit allowed. Pointing out that in respect of furnace oil VAT is payable at 4% and if the contention of the appellant State is accepted, deduction there on will be at the rate of 8% (4% under sub-clause (ii) and 4% under sub-clause (iii)) and it would result in an anomalous position as tax credit earned on the said furnace oil, when used as raw material in the production of polymers or chemicals, would be earned at the rate of 4% under clause (a), the State intended to reduce the same by 8% under clause (b). 10) We have examined the respective contentions minutely and carefully and are of the opinion that the view taken by the High Court in the impugned judgment may not be entirely correct. 11) Let us take up the provision for interpretation in the first instance. 12) Section 11 entails the provision pertaining to the scheme of tax credit, which is the caption of the said Section as well. Sub-section (1) thereof mentions the contingencies when a registered dealer woul....
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.... ""raw materials" means goods used as ingredient in the manufacture of other goods and includes processing materials, consumable stores and materials used in the packing of the goods so manufactured but does not include fuels for the purpose of generation of electricity;" 14) It is clear that the material used even in the packing of goods is treated as raw material and, therefore, this definition is to be treated as term of art. This definition also clarifies that fuels used in the manufacture of goods would be treated as raw material with the only exception of those fuels which are used for the purpose of generation of electricity. 15) Keeping in mind the aforesaid aspects, we advert to Section 11(3) (b). It is a non-obstante clause as it starts with the word 'notwithstanding'. Another aspect which is to be necessarily kept in mind is that it is the 'amount of tax credit' which a dealer would be entitled to claim under clause (a) that is to be reduced at the rate of 4% and this reduction is to be effected in three eventualities provided under sub-clauses (i), (ii) and (iii). Insofar as sub-clause (i) is concerned, it pertains to trading activity and there is no question of....
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.... VIIth Schedule has to be construed in its widest sense so as to give power to the State Legislature to legislate on all matters relating to administration of justice. After the words 'administration of justice' in Entry 3 there is a semicolon and this punctuation cannot be discarded as being inappropriate. The punctuation has been put with a definite object of making this topic as distinct and not having relation only to the topic that follows thereafter. Under Entry 78 of List I, the topic of jurisdiction and powers of the High Courts is not dealt with. Under Entry 3 of List II the State Legislature can confer jurisdiction and powers or restrict or withdraw the jurisdiction and powers already conferred on any of the courts except the Supreme Court, in respect of any statute. Therefore, the State Legislature has the power to make a law with respect to the jurisdiction and powers of the High Court." 69. In Aswini Kumar Ghosh v. Arabinda Bose [AIR 1952 SC 369], Mukherjea, J. in AIR para 57 has observed that: (SCR p. 41) "Punctuation is after all a minor element in the construction of a statute, and very little attention is paid to it by English co....
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....e may refer to the judgment in Godrej & Boyce Mfg. Co. Pvt. Ltd. & Ors. v. Commissioner of Sales Tax and Others (1992) 3 SCC 624 and the relevant extract which is relevant for our purposes is as follows: "9. Sri Bobde appearing for the appellants reiterated the contentions urged before the High Court. He submitted that the deduction of one per cent, in effect, amounts to taxing the raw material purchased outside the State or to taxing the sale of finished goods effected outside the State of Maharashtra. We cannot agree. Indeed, the whole issue can be put in simpler terms. The appellant (manufacturing dealer) purchases his raw material both within the State of Maharashtra and outside the State. Insofar as the purchases made outside the State of Maharashtra are concerned, the tax thereon is paid to other States. The State of Maharashtra gets the tax only in respect of purchases made by the appellant within the State. So far as the sales tax leviable on the sale of the goods manufactured by the appellant is concerned, the State of Maharashtra can levy and collect such tax only in respect of sales effected within the State of Maharashtra. It cannot levy or collect tax in....