TaxTMI 
TaxTMI 
2019 (9) TMI 521
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.... Taxes, Ramgarh Circle, Ramgarh to the extent claim of the petitioner for Input Tax Credit has been rejected. 2. In the instant writ application, two questions of law have been raised which is enumerated hereunder:- (i) Whether the petitioner is entitled to claim Input Tax Credit ( ITC in short) on tax paid by it on purchase of coal which is used by it for generation of electricity in its captive power plant and in turn, electricity so generated is used by the petitioner for manufacturing and processing of its finished goods for sale ?; and (ii) Whether in absence of production of statutory declaration form JVAT 404, the claim of ITC can be denied to the petitioner inspite of the fact that the petitioner produced substantial evidence to demonstrate it has purchased goods i.e. inputs after payment of Input Tax ? 3. The petitioner is a Company registered under the Companies Act, 1956 and is primarily engaged in the business of manufacture of Sponge Iron and M.S. Billet and is having an integrated manufacturing unit situated in the district of Ramgarh. The integrated manufacturing unit of the petitioner comprises of the following, namely, (i) Direct Reduced Iron Unit (DRI Unit....
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.... 2011-12 denied benefit of ITC on coal purchased by the petitioner, and utilized by it for generation of electricity, which in turn, was utilized for carrying out the manufacturing activity. The said Assessment Order to the extent of denial of benefit of ITC on purchase of coal utilized for generation of electricity was assailed by the petitioner by filing statutory appeal under Section- 79 of the JVAT Act, 2005 before the Appellate Authority, i.e., the Joint Commissioner of Commercial Taxes, Hazaribagh Division, Hazaribagh, vide Appeal Case No. RG/JVAT/A- 03/15-16. However, the appeal of the petitioner was dismissed vide order dated 22.12.2015 and while dismissing the appeal, reliance was placed upon the definition of "Goods" as contained under Section- 2(xxii) of the JVAT Act, 2005 and it was held inter-alia that since "Electricity" is not "goods" as per the aforesaid definition, the petitioner is not entitled for benefit of ITC on the purchase of coal which is used for generation of electricity. The petitioner further assailed the appellate order by filing Revision Application in terms of Section- 80(2)(b) of the JVAT Act, 2005 before the Commercial Taxes Tribunal, Jharkhand, ....
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....ax liability, then ITC shall not be admissible. It is the submission of the learned counsel for the petitioner that said reasoning adopted by the Commercial Taxes Tribunal is wholly erroneous and is contrary to the very concept of Value Added Tax regime in the Country of India including promulgation of JVAT Act, 2005 by the State of Jharkhand. 9. The petitioner in order to buttress its contention that it is entitled for ITC on purchase of coal utilized by it for generation of electricity which in turn, is utilized for carrying out the manufacturing activity of Sponge Iron and M.S. Billet, has relied upon the following decisions before this Hon'ble Court, namely; (i) Collector of Central Excise, Jaipur Vs. Rajasthan State Chemical Works, Deedwana, Rajasthan, reported in (1991) 4 SCC 473 (Relevant paragraph- 1,3,7, 5,17,20,21 and 26) (ii) Collector of Central Excise New Delhi Vs. M/s Ballarpur Industries Ltd, reported in (1989) 4 SCC 566 (Relevant paragraph- 13,17,18 and 19) (iii) M/s J.K.Cotton Spinning & Weaving Mills Co. Ltd Vs. Sales Tax Officer, Kanpur, reported in AIR 1965 SC 1310: (1965) 1 SCR 900 (Relevant paragraph-9) (iv) Commercial Taxation Officer, Udaipur Vs. R....
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.... does not provide for furnishing of JVAT 404 forms for the purpose of claiming benefit of ITC and it only contemplates production of tax invoices in original and even in appropriate case, the Assessing Officer can even dispense with requirement of production of tax invoices in original for good and sufficient reason to be recorded in writing . In support of the said contention, learned counsel has relied upon the following decisions, namely; (i) State of Orissa Vs. M.A. Tulloch & Co. Ltd, reported in AIR 1966 SC 365: (1964) 7 SCR 816 (Relevant paragraph-2,3 and 4) (ii) Food Corporation of India , Patna Vs. The Commissioner of Commercial Taxes, Bihar, Patna, reported in (1993) 2 PLJR 625 (Relevant paragraph- 2,5,6,22, 27 and 28) 11. Per Contra, the counsel appearing for the respondent-State of Jharkhand has supported the decision of the Assessing Officer as upheld upto the Commercial Taxes Tribunal, Jharkhand on both the issues. 12. With respect to the issue no.(i), the counsel for the respondents submitted that ITC is in the nature of "Concession" extended by the State of Jharkhand and the conditions enumerated for availing benefit of ITC is necessarily required to be complie....
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....ioner and only ITC in respect of coal utilized for manufacturing of electricity has been denied, which is in accordance with law and the scheme of the JVAT Act, 2005. 16. The counsel for the respondent-State of Jharkhand further by relying upon the definition of "Goods" as contained under Section- 2(xxii) of the JVAT Act, 2005 has submitted that Electricity is not falling under the definition of "goods" under the JVAT Act, 2005 and hence, on that ground also the petitioner-Company is not entitled to the benefit of ITC on coal which is utilized by it for generation of electricity , especially when the electricity itself is not "Goods" under the JVAT Act, 2005. 17. The counsel for the State of Jharkhand by further relying upon the provisions of Section- 18(1) of the JVAT Act, 2005 has contended that since there is no generation of output tax liability in the process of manufacture of electricity from inputs i.e. coal and since electricity is consumed for further manufacturing of Sponge Iron and Billet, under the scheme of the JVAT Act, 2005, in absence of any output tax liability payable on generation of electricity by utilizing coal, benefit of ITC on the tax paid on such coal can....
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....of movable property (other than newspapers, actionable claims, electricity, stocks and shares and securities) and includes livestock, all materials, computer software sold in any form, Sim cards used in Mobile Telephony or for any other similar activation purposes, commodities and articles and every kind of property (whether as goods or in some other form) involved in the execution of a works contract, and all growing crops, grass, trees and things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale; (II) Section-2 (xxviii) "Input" means, goods purchased in course of business - (a) for resale in the same form; or (b) for use in manufacturing or processing of taxable goods for sale; or (c) for directly use in mining or use as containers or packing materials for taxable goods; or (d) for the execution of works contract, but excluding purchases of Petrol, Diesel, Furnace Oil and steam and Natural Gas and for use as Capital Goods as specified in Appendix-I of this Act. (III) Section-2 (xxix) "Input Tax" means the tax paid or payable under this Act, by a registered dealer to another registered dealer on the purchase of go....
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....t of tax paid by the registered dealer to another registered dealer, on his turnover of purchases made during any tax period, intended to be used for the purposes and subject to the conditions as specified in sub Section (3), sub- Section (4), sub-Section (5) and sub-Section(6) and calculated in such manner as may be prescribed. (3) Subject to such conditions and restrictions as may be prescribed, partial or proportionate input tax credit may be allowed in such cases as may be used (xxx) for their respective uses. (4) Input Tax credit shall be allowed on purchase of goods made within the State of Jharkhand from a registered dealer holding a valid certificate of registration and which are intended for the purpose of- (i) ................. (ii) ................ (iii) use as raw material and for direct use in manufacturing or processing of goods for sale, or for directly use in mining, or for use as capital goods, other than those goods exempt from tax under this Act and the goods specified in Part E of schedule II, intended for sale in the State of Jharkhand or in the course of interstate trade and commerce; (VII) Section-18(6) - Input Tax credit shall not be claimed by t....
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....mely, (i) Purchase of goods should be made within the State of Jharkhand. (ii) Purchase should be made from registered dealer holding valid certificate of registration; (iii) Goods purchased should be intended for the purpose of use as raw material for direct use in manufacturing or processing of goods for sale. 24. So far as condition no.(i) and (ii) aforesaid is concerned, there is no dispute that goods were purchased within the State of Jharkhand from Registered dealer holding valid certificate of registration. The only dispute for adjudication is "Whether Coal which was purchased on payment of input tax and was utilized for generation of electricity, which was in turn, utilized for manufacturing of finished products namely Sponge Iron and M.S. Billet, would meet the conditions prescribed aforesaid to be entitled to be claimed as Input Tax Credit"? 25. It is an admitted fact, that the petitioner is having an integrated manufacturing unit, wherein, it undertakes manufacturing of Sponge Iron and M.S. Billet and is having its captive power plant from which electricity is generated, which is, exclusively consumed by the petitioner for carrying out the manufacturing ac....
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....sses would be regarded as integrated processes and included "in the manufacture" of cloth. It would be difficult to regard goods used only in the process of weaving cloth and not goods used in the anterior processes as goods used in the manufacture of cloth. To read the expression "in the manufacture" of cloth in that restricted sense, would raise many anomalies.......... 9. In our judgment, if a process or activity is so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially in expedient, goods intended for use in the process or activity as specified in Rule 13 will qualify for special treatment. ..........."(emphasis supplied) In the said judgment, the Hon'ble Supreme Court was considering the provision of Section- 8(1) and 8(3)(b) of the Central Sales Tax Act, 1956 which is almost parametria to the provisions of Section 18(4)(iii) of the JVAT Act, 2005 and has held, in substance, that if a process or activity is so integrally related to the ultimate production of goods so that without that process or activity manufacture would be commercially inexpedient, goods required ....
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....eme Court rendered in the case of "Commercial Taxation Officer, Udaipur Vs. Rajasthan Taxchem Ltd, (Supra). In the said judgment, specific question for consideration before the Hon'ble Supreme Court was "Whether diesel can be called raw material in the manufacture of Polyester yarn"? The Hon'ble Supreme Court in the said judgment noticed that Assessee in the said case was manufacturer of polyester yarn and it purchased diesel which was used by it for manufacturing electricity through Diesel Generator Set and the electricity so generated was used for manufacture of ultimate final product i.e. polyester yarn. In the aforesaid factual background, the Hon'ble Supreme Court in the said judgment held as under: - "29. In view of the fact that the diesel is being used for the purpose of running the generator set for the production of the ultimate product which is also required for the purpose of manufacturing the end product, the diesel can only be termed as raw material and not otherwise. The Rajasthan Tax Board was, therefore, justified in setting aside the orders passed by the Assessing authority as confirmed by the Deputy Commissioner (Appeal)" 30. The learned counsel for the respon....
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....it shall not be admissible in respect of such goods which do not generate any output tax liability. By relying upon the aforesaid finding as well as provision of Section- 18(1) of the JVAT Act, 2005, it has been contended by the State-Respondent that since coal was utilized for generation of electricity which was captively consumed and not sold in the market generating any output tax liability, petitioner was not entitled to the benefit of Input Tax Credit. In our opinion, finding given by learned Commercial Taxes Tribunal that Input Tax credit is only available in respect of such goods which generate output tax liability is wholly misplaced and beyond the scheme of JVAT Act, 2005. From a bare reading of Section- 18(4)(iii) of the JVAT Act, 2005 it would be evident that Input Tax Credit is available even in respect of goods which are "intended for use in mining" without there being any condition that mined goods should be sold. Similarly, under section- 18(4)(iii), Input Tax Credit is even available in respect of goods which are used as capital goods other than the goods exempted from tax under the Act. Thus, the legislature was conscious while extending the benefit of Input Tax Cr....
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....n allowed the benefit of ITC on electricity in view of provision of Section- 18(4) of the Act which uses the term "Input tax Credit shall be allowed on purchase of goods". 34. The counsel for the respondent-State further contended inter-alia that since in the certificate of registration of the petitioner, coal is not shown as a raw material for the purpose of generation of electricity, the petitioner cannot be extended benefit of ITC on tax paid on such coal. In this regard, we may hasten to state that in the preceding paragraphs of the present judgment, we have already enumerated three conditions which are required to be fulfilled by a dealer for claiming benefit of ITC, from which it would be evident that there is no stipulation under the JVAT Act, 2005 that Input Tax Credit shall be allowed only in respect of such goods which are enumerated in the certificate of registration of the petitioner. In absence of such condition being stipulated in the JVAT Act, 2005, we are unable to accept the arguments of the learned Counsel for the State in that regard. 35. Further, the counsel for the respondent-State has relied upon judgments to contend that ITC is a concession and the conditio....
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....a dealer, the State Government is required to extend benefit of ITC to such dealer subject to other provisions of the Act. Merely because a dealer has failed to produce JVAT 404 would not be sufficient to deny the benefit of Input Tax Credit. 38. It is always open for the State Tax Authorities on the strength of tax invoices produced before it by a dealer to verify the genuineness of said invoices and to ascertain that said dealer has in fact discharged liability of input tax on such invoices in respect of which ITC is being claimed. Thus, in our opinion, production of JVAT- 404 Form for the purpose of claiming ITC is merely directory in nature and not mandatory. Under similar circumstances, Hon' be Supreme Court in the case of "State of Orissa Vs. M.A. Tulloch & Co. Ltd, reported in AIR 1966 SC 365: (1964) 7 SCR 816, had occasion to interpret the provision of Section - 5(2)(a)(ii) of the Orissa Sales Tax Act, 1947 read with Rule- 27(2) of the Orissa Sales Tax Rules, 1947. The Hon'ble Supreme Court while interpreting almost similar provisions of the Act and the Rules, has held as under: - "........,.. In our opinion, Rule 27(2) must be reconciled with the Section and the Rule ca....