TaxTMI 
TaxTMI 
2026 (7) TMI 1843
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....ranules partly used by it for manufacturing plastic products and partly sold as granules for manufacturing other plastic products like pet-bottles, hence entitled to utilise the aforesaid Input Tax Credit for discharging tax on sale of plastic granules imported. 3. According to the assessee, as a registered dealer is entitled to ITC on the purchase of DEPB license which is used in the course of its business namely import of plastic granules. Hence, entitled to claim ITC as per the provisions of Section 19(1) of TNVAT. The purchase of DEPB license is an ancillary activity of business connected to the main activity of import and sale of plastic granules. The purchase of DEPB license was 'in the course of the business' occurring in section 21 (10) of the TNVAT Act, hence DEPB license is an input as defined under Section 2(23) of the TNVAT Act. 4. Relying on the clarification of the Commissioner of Commercial Tax vide proceedings No.VAT Cell/2/5640/2007/VCC 78 dated 12.03.2007, the assessee contended that there need not be one to one relation between the input (i.e.,) DEPB license and the goods (i.e.,) the plastic granules ITC sought. The terms 'sale' and 'purchase' are interchan....
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....ed for the assessment year 2013-2014. 9. The Learned Judge, on considering the challenge to the reassessment order passed by the respondent, dismissed the writ petitions holding that he was bound by the judgment of the Division Bench of this Court rendered in Sha Kantilal Jayanthilal vs. State of Tamil Nadu, reported in 2016 (339) ELT 520 (Mad) has given a finding that the rate of tax mentioned in the First schedule is not applicable in respect of purchase of DEPB. However, he made certain observations that the view expressed in the above judgment requires relook. 10. Being aggrieved by the dismissal of the writ petitions challenging the re-assessment, the above two appeals were filed for consideration by the Division Bench. 11. The Learned Counsel appearing for the appellants contended that the order of the Learned Single Judge confirming the impugned order of reassessment passed by the respondent suffers infirmity. The observations made by the Court do not synchronize with the conclusion. Particularly, it is contended that, after giving categorical finding that the initiation of assessment proceedings is not ill-conceived, the Learned Single Judge ought to have struck do....
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....certain observations made by the Learned Single Judge cast cloud over the assessment order passed by the respondent. The judgment rendered by the Division Bench of this Court in M/s.Sha Kantilal Jayantilal vs. The State of Tamil Nadu, reported in 2016 (339) ELT 520 (Mad) and followed by the Learned Single Judge, does not carry any iota of infirmity. It is inconsonance with the interpretation of the Hon'ble Supreme Court in respect of the term "input" and "input tax credit," applying process-and-use test. The input and the goods manufactured are used in the process of manufacture must have nexus to each other, though they may not be one-to-one correlation. The DEPB license, though fall under the definition of tangible goods that by itself will not enure to the benefit of ITC for the import of plastic granules and sold as plastic granules to the manufactures, without establishing the nexus between the input and the goods manufactured. Hence, the assessee is not entitled for Input Tax Credit. 15. The Learned Government Advocate appearing for the respondent submitted that the Division Bench of this Court in M/s.Sha Kantilal Jayantilal (cited supra) had dealt with the claim of input ....
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....ns as follows : (i) Sub-section (1) of section 19 entitles a registered dealer to input- tax credit, of the amount of tax paid or payable under the Act, to the seller, on the purchases of taxable goods specified in the First Schedule, subject to the condition that the registered dealer establishes that the tax on such purchases had actually been paid by him in the manner prescribed. (ii) Sub-section (2) stipulates that input-tax credit should be allowed for the purchase of goods made within the State from a registered dealer, if such purchase was for any one of the 6 purposes indicated in clauses (i) to (vi) of sub-section (2). (iii) Sub-section (3) provides for input-tax credit, in respect of purchases of capital goods, whenever they are used in the manufacture of taxable goods. (iv) Sub-section (4) allows input-tax credit on tax paid or payable in the State on the purchase of goods in excess of a prescribed percentage, if the purchases are intended either for transfer to a place outside the State otherwise than by way of sale or for use in the manufacture of other goods and transferred to a place outside the State otherwise than by way of sale.....
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....i) the persons, who are entitled to tax credit, (iv) the transactions on which, there is no entitlement, (v) persons, who are not entitled to tax credit, (vi) the manner and the period, within which, a claim for credit is to be made, (vii) the circumstances, under which, the credit availed of could be reversed and the authority, who is competent to reverse the credit, (viii) the circumstances, under which, transfer of input-tax credit could be allowed, (ix) the circumstances, under which, the credit could be carried over to the next year and so on and so forth. 16. From the scheme of section 19(1), it appears that to become eligible for input-tax credit, the following conditions should be satisfied by a person : (i) he should be a registered dealer; (ii) he must have paid or become obliged to pay a tax under this Act, to the seller on the purchase of taxable goods; and (iii) such taxable goods, on the purchase of which, he paid or became liable to pay tax under the Act, are also specified in the First Schedule. 20. On analysis of the scope of Section 19, the facts, which are similar to the case in hand, the Division Bench arrived at the follow....
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.... decision of the Supreme Court in Yasha Overseas v. Commissioner of Sales Tax [2008] 17 VST 182 (SC). 21. How DEPS though be tangible goods, but not entitled for ITC is explained by the Division Bench in the following Paragraphs by tracing the march of law on this issue. 21. We have carefully considered the above submissions. 22. Before considering the issue as to whether DEPB licences constitute "goods" within the meaning of section 2(21) of the TNVAT Act, 2006, it may be useful to look at the ratio decidendi of the decision of the Supreme Court in Yasha Overseas [2008] 17 VST 182 (SC). The said decision arose under interesting circumstances. In H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165 (SC) ; (1986) 1 SCC 414, the Supreme Court held that lottery tickets constituted "goods" within the meaning of the expression "goods" as given in the Tamil Nadu General Sales tax Act, 1959 and the Bengal Finance (Sales Tax) Act, 1941. 23. After 10 years of the decision in H. Anraj [1986] 61 STC 165 (SC) ; (1986) 1 SCC 414, another question arose before the Supreme Court in Vikas Sales Corporation v. Commissioner of Commercial Taxes [1996] 102STC 106 (SC) ;....
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....6] 61 STC 165 (SC) ; (1986) 1 SCC 414, Vikas Sales Corporation [1996] 102 STC 106 (SC) ; (1996) 4 SCC 431 and Sunrise Associates [2006] 3 VST 151 (SC) ; [2006] 145 STC 576 (SC) ; (2006) 5 SCC 603, the Supreme Court came to the conclusion in Yasha Overseas [2008] 17 VST 182 (SC) that the decision in Sunrise Associates [2006] 3 VST 151 (SC) ; [2006] 145 STC 576 (SC) ; (2006) 5 SCC 603 did not affect the position in so far as REP licences are concerned and that the decision in Vikas Sales Corporation [1996] 102 STC 106 (SC) ; (1996) 4 SCC 431 reflected the correct legal position. Having arrived at such a conclusion with regard to REP licences, the court then went on to consider whether the rationale applied in respect of REP licences could be equally applied in the case of DEPB licences. 27. It was contended on behalf of the assessee's in Yasha Overseas [2008] 17VST 182 (SC) that the transfer of a DEPB licence was nothing more than a mere transfer of a credit in the pass book and that therefore, such a credit could never be called goods under the sales tax laws. Alternatively, it was contended that the sale of DEPB licence involved a mere transfer of the right to claim credit....
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....the goods in relation to which, the petitioner claims input-tax credit namely DEPB licences, despite coming within the purview of the expression "goods" under section 2(21), do not constitute goods specified in the First Schedule. Hence, section 19(1) has no application. 33. DEPB licences do not even fall under any of the categories mentioned in section 19(2). The case of the petitioner does not even fall under sub- section (3) or subsection (4) of section 19. Therefore, our answer to the first question of law would be that the Department was right in denying the benefit of input-tax credit in respect of the duty paid by the petitioner on the purchase of DEPB licences, despite the fact that these licences constitute goods within the meaning of section 2(21). 34. Despite the fact that DEPB licences are goods, they are certainly different and distinct from the goods that can be imported on the strength of those licences. These licences confer a right upon the licensees to import goods at some concession. It is only the goods that are imported on the strength of these DEPB licences, that may fall within the ambit of section 19(1) provided a tax is payable or paid und....