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TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1038
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....rom Gujarat State Fertilizers and Chemicals Ltd. This is used for manufacturing of yarn which in turn is sold within as well as outside the State. On purchase of such raw material, the assessee pays Value Added Tax ("VAT" for short) at the prescribed rate. Upon manufacture and sale of goods, the assessee claims tax credit of the tax so paid for the purchase of caprolactum under section 11 of the Gujarat Value Added Tax Act, 2003 ("the VAT Act" for short). The State however, opposes the assessee's claim of tax credit on the ground that such raw material is sent by the assessee to its factory situated at District Hoshiarpur, Punjab, for converting into nylon filament yarn before it is returned to the assessee in Gujarat, from where it is sold to its different customers within and outside the State. The assessee contends that the tax credit is available in terms of section 11 of the VAT Act. The case of the assessee would fall under subclause( vi) of clause(a) of subsection (3) of section 11 and it would not be limited as envisaged under clause(b) of subsection (3) of section 11. The issue ultimately reached the Gujarat Value Added Tax Tribunal ("the Tribunal" for short). Th....
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....l has compelled the State to file the appeal. 4. Tax Appeal No.730/2017 is filed by the State Government in case of the same assessee M/s. Mohit Industries Ltd.. The main issue is of the assessee's availment of tax credit unhindered by clause(b) of subsection( 3) of section 11 in identical facts. Additional issue is whether the Tribunal could have entertained the appeal of the assessee on merits when the order in challenge before the Tribunal passed by the appellate authority was of dismissing the assessee's appeal for not fulfilling the predeposit requirement. 5. Appearing for the appellant M/s. JCT Limited, learned counsel Shri Soparkar contended that the assessee is allowed to avail the tax credit on duty paid goods purchased by the assessee and used as raw material. In particular, he drew our attention to subsection( 3) of section 11 and contended that case of the assessee falls squarely within clause (vi) thereof. He argued that clause (b) of subsection( 3) of section 11 is not applicable in case of the assessee. The endeavor on part of the State to reduce the tax credit by 4% is therefore, erroneous. He argued that for applicability of the said clause(b), the ca....
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....GP Ms. Shruti Pathak in both sets of appeals canvased the point of view of the department. Her interpretation of the section was that since the goods in question had travelled outside the State by way of branch transfer, reduction provided in clause(b) of subsection( 3) of section 11 would automatically apply. Merely because goods later on were returned after carrying out some manufacturing process would not make the said provision inapplicable. Learned AGP contended that subclause( iii) of clause (a) of subsection( 3) is made specifically subject to the provision of subclause( b). Subclause( b) itself starts with a nonobstante clause. She placed heavy reliance on a recent judgment of Supreme Court in case of State of Gujarat v. Reliance Industries (Civil Appeal No.13047/2017 and connected matter, judgment dated 22.9.2017). 8. Section 3 of the VAT Act, which is a charging section, pertains to incidence of tax. Section 7 pertains to levy of tax on turnover of sales and rates of tax. Section 11 pertains to tax credit and reads as under : "Tax credit (1)(a) A registered dealer who has purchased the taxable goods (hereinafter referred to as the "purchasing dealer")....
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.... rate of four per cent. on the taxable turnover of purchases within the State (i) of taxable goods consigned or dispatched for branch 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 a 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 tax set out in the Schedule on such goods on the taxable turnover of purchases within the State. (4) The tax credit shall not be claimed by the purchasing dealer until the tax period in which he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice (in original) containing particulars as may be prescribed under subsection (1) of section 60 evidencing the amount of t....
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.... the name of such dealer has been published under subsection (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 subsection (1) of section 14 has remained valid under clause (b) of that subsection; (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 selling dealer from whom the goods are purported to have purchased; (I) Notwithstanding anything contained in clause (a) or (b) in this subsection and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit in respect of purchase tax paid by him under subsection (1) or (2) of section 9. (II) Notwithstanding anything contained in clause (d) or (dd) in this subsecti....
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....t, where the tax levied or leviable under this Act or any earlier law is remitted or to be remitted or, deferred or is deferrable under any tax, incentive scheme granted by the Government of Gujarat then the tax shall be deemed to have been paid into the Government treasury for the purpose of this subsection (8)(a) If the goods purchased were intended for the purposes specified under subsection (3) and are subsequently used fully or partly for purposes other than those specified under the said subsection or are used fully or partly in the circumstances described in subsection (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 subclause (vii) of clause (a) of subsection (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 cr....
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....oods intended for (i) to (v) or in the packing of the goods so manufactured. Clearly the assessee's case was covered by this clause since he purchased raw material intending it to be used in manufacturing of taxable goods which in turn were intended for sale within the State or interState trade. As noted earlier, for the restrictions of clause(b) to apply, case of the assessee must fall in any one of the three subclauses contained therein. Since subclause( iii) pertains to fuels used for the manufacture of goods, is clearly inapplicable. We may therefore, focus our attention to remaining two subclauses. Subclause( i) takes within its fold taxable goods consigned or dispatched for branch transfer or to the assessee's agent outside the State. Subclause( ii) covers a situation where 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 the agent of assessee outside the State. Neither the term 'branch transfer' nor 'consignment to an agent' is defined under the Act. However, concepts of branch transfer or consignment to an agent are ....
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....thstanding anything contained in the said section, the amount of tax credit would be reduced in the manner provided therein. However, this would not change our opinion on the correct interpretation of the said provision. Firstly, it is only subclause( iii) which is made specifically subject to the provision of subclause( b). Subclause( iii) refers to branch transfer or consignment of taxable goods outside the State. Subclauses (i) and (ii) of clause (b) have direct relation to these instances. For example, subclause( i) pertains to taxable goods consigned or dispatched for branch transfer or to an agent outside the State where as subclause( ii) refers to taxable goods which are used as raw materials which in turn are dispatched outside the State in the course of branch transfer or on consignment basis. We are conscious that subclauses (i), (ii) and (iii) of clause(b) has no such direct corelation with subclause( iii) of clause(a). However, we may notice that in the original form clause(b) of subsection( 3) of section 11 only contained two subclauses. Subclause( iii) was inserted by the Gujarat Value Added Tax (Amendment) Act, 6 of 2006. 13. Judgment of the Supreme Court in case ....