Allowed

The Commissioner,Commercial Tax v. S/S Modi Naturals Ltd.

Allahabad HC3 May 2019STRE/148/2018

Case brief

AI extract

What is this about?

Assessee claimed full input tax credit though the taxable rice bran oil sold below the cost of the rice bran purchased, the bulk of output being exempt de-oiled rice bran. The court held Section 13(1)(f) of the U.P. VAT Act governed, set aside the Tribunal's orders granting full credit and answered the question for the revenue.

What did the court decide?

Both revisions allowed; the judgments and orders of the Commercial Tax Tribunal dated 5.7.2017 and 4.5.2016 set aside; the question of law answered in favour of the revenue and against the assessee.

The Commissioner,Commercial Tax Vs S/S Modi Naturals… — GST and Indirect Tax | Allahabad HC (2019)

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AFR RESERVED

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Commercial Tax Revision No.148 of 2018

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The Commissioner of Commercial Tax, U.P., Lucknow Vs.

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M/s Modi Natural Ltd., Bisalpur Road, Bareilly

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Connected with

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Commercial Tax Revision No.315 of 2017

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The Commissioner of Commercial Tax, U.P., Lucknow Vs.

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M/s Modi Natural Ltd., Bisalpur Road, Bareilly *****

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Hon'ble Rohit Ranjan Agarwal, J.

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Heard Sri Manish Goyal, learned Additional Advocate General along with Sri Bipin Kumar Pandey, learned Standing Counsel for the revisionist and Sri Rahul Agarwal, learned counsel for the respondentassessee.

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The question involved in both the revisions is common and by order dated 10.7.2018 Sales/Trade Tax Revision No.315 of 2017 was tagged with Sales/Trade Tax Revision No.148 of 2018. Thus, both the revisions are being heard and decided together.

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Revision No.148 of 2018 has been filed challenging the judgment and order dated 5.7.2017 passed by the Commercial Tax Tribunal, Bareilly Bench Bareilly, while Revision No.315 of 2017 assails the judgment and order dated 4.5.2016, passed by the Commercial Tax Tribunal, Bareilly Bench, Bareilly.

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The revision No.148 of 2018 was admitted on following question of law:

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“Whether under the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in granting the benefit of input tax credit of Rs.19088763.00 which was rightly reversed by the assessing authority ?”

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The fact of the case in nutshell is that respondent-assessee is a Company engaged in the business of manufacture and sale of rice bran oil and physical refined rice bran oil. The dispute relates to the Assessment Year 2013-14. The respondent-assessee is a registered dealer under the U.P. Value Added Tax Act (hereinafter referred to as the “VAT Act”). The respondent-assessee by processing the rice bran in his solvent extraction plant recovered 13.77% taxable goods, i.e., rice bran oil and 83.60% bye product, i.e., de-oiled rice bran (hereinafter called as “DORB”). Further, by refining of rice bran oil, physical refined rice bran oil is produced.

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For the Assessment Year 2013-14, respondent-assessee purchased 8,21,935.71 Quintals rice bran for Rs.93,69,53,404/- and paid a tax of Rs.4,68,47,670/-. 7. On the basis of provision of Section 13(3)(b) read with Explanation(iii) of Section 13 treating that all such purchased rice bran has been used in production of only taxable goods, i.e., rice bran oil and claimed credit of full amount of input tax credit of Rs.4,68,47,670/by processing the rice bran so purchased and 1,13,180.54 Quintals rice bran oil was produced and 6,87,138.25 Quintals DORB was recovered. Out of 1,13,180.54 Quintals rice bran oil, 93,241.15 Quintals was further refined to produce 76,068.37 Quintals physical refined rice bran oil and rest 19,939.40 Quintal rice bran oil was sold within the State for Rs.9,60,11,540/-, and 76,068.37 Quintals of physical refined rice bran oil was also sold within the State for Rs.45,91,66,611/-.Out of the total value of rice bran oil and physical rice bran oil of Rs.55,51,78,151/- the assessee liability of tax was Rs.2,77,58,908/- as compared to the input tax credit claim of Rs.4,68,47,670/- resulting in loss of Rs.1,90,88,762/- to the State Exchequer. The assessing authority while passing the assessment order under Section 28(2)(i) of the VAT Act on 31.3.2017 reversed input tax credit claim of Rs.1,90,88,763/-.

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Aggrieved by the said order respondent-assessee filed First Appeal, the Appellate Authority allowed the appeal setting aside the assessment order and remanded back the matter to the assessing authority on 15.5.2017. Aggrieved by the said order, respondentassessee filed Second Appeal before the Commercial Tax Tribunal, Bareilly. The said appeal was allowed by order dated 5.7.2017 and the input tax credit of Rs.1,90,88,763/- reversed by the assessing authority was allowed.

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Before coming to the argument of the counsel for the parties, it would be appropriate to have a glance of the relevant provisions of VAT Act.

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Section 2(m)defines the “goods” as under:

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“(m) "goods" means every kind or class of movable property and includes all materials, commodities and articles involved in the execution of a works contract, and growing crops, grass, trees and things attached to, or fastened to anything permanently attached to the earth which, under the contract of sale, are agreed to be severed, but does not include actionable claims, stocks, shares or securities;

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Section 2(p) defines “input tax” as under:

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“ (p) "input tax", in relation to a registered dealer who has purchased any goods from within the State, means the aggregate of the amounts of tax, -

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(i) paid or payable by such registered dealer to the registered selling dealer of such goods in respect of purchase of such goods; and

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(ii) paid directly to the State Government by the purchasing dealer himself in respect of purchase of such goods where such purchasing dealer is liable to pay tax under this Act on the turnover of purchase of such goods;

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[Provided that tax paid or payable in respect of transfer of right to use any goods shall not form part of the input tax;]

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Section 2(u) defines “manufacturer” as under:

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(u) “manufacturer” in relation to any goods mentioned or described in column 2 of Schedule IV, means a dealer who, by application of any process of manufacture, after manufacture of a new commercial commodity inside the State, makes first sale of such new commercial commodity within the State, whether directly or otherwise; and includes a selling agent who makes sale of such new commodity on behalf of the person who has manufactured it;

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Section 2(v) deals with “non-vat goods” as under:

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(v) “ non-vat goods” means any of the goods mentioned or described in column 2 of Schedule-IV; Section 2(ai) defines “taxable goods” as under:

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(ai) "taxable goods" means any goods except goods mentioned or described in column 2 of Schedule I of this Act;

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Section 13 of the Act deals with input tax credit, which reads as under:

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“13. Input tax credit. - (1) Subject to provisions of this Act, dealers referred to in the following clauses and holding valid registration certificate under this Act, shall, in respect of taxable goods purchased from within the State and mentioned in such clauses, subject to conditions given therein and such other conditions and restrictions as may be prescribed, be allowed credit of an amount, as input tax credit, to the extent provided by or under the relevant clause: [See Rule 24]

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(a) Subject to conditions given in column 2, every dealer liable to pay tax, shall, in respect of all taxable goods except non-vat goods, capital goods and captive power plant, where such taxable goods are purchased on or after the date of commencement of this Act, be allowed credit of the amount, as input tax credit, to the extent provided in column 3 of the table below:

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	TABLE
Sl. No.	Conditions	Extent of amount of input tax credit
(1)	(2)	(3)
1.	If purchased goods are re-sold-	Full amount of input tax
	(i) inside the State, or
	(ii) in the course of inter-state trade or commence; or
	(iii) in the course of the export of the goods out of the territoryof India.
2.	If purchased goods are used in manufacture of -	Full amount of input Tax
	(i) any goods except non-vat goods and where such manufactured goods are sold in the course of the export of the goods out of the territory of India; or (ii) any taxable goods except non-vat goods and where such manufactured goods are sold either inside the State or in the course of inter-state trade or commerce
3.	If purchased goods are – (i)transferred or consigned outside the State	Partial amount of input tax, which is in excess of rateprescribed under

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otherwise than as a result of a sale; or	sub section(1) of section-8 of the Central
(ii) used in manufacture of any taxable goods except non-vat goods and such manufactured goods are transferred or consigned outside the State otherwise than as a result of a sale.	Sales Tax Act, 1956 of the purchase price on which the dealer as paid tax either to the registered selling dealer or to the State
	Government

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(b) Input tax credit of full amount of input tax shall be allowed to every dealer, liable to pay tax, in respect of capital goods purchased on or after the date on which dealer becomes liable for payment of tax under this Act, if such goods are to be used in,-

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(i) manufacture of any taxable goods except non-vat goods and where such manufactured goods is, -

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A. sold within the State, in the course of inter-state trade or commerce or in the course of the export of the goods out of the territory of India; or

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B. transferred or consigned outside the State otherwise than as a result or a sale; or

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(ii) manufacture of any exempt goods except non-vat goods and where such manufactured goods are sold in the course of export of the goods out of the territory of India;

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(iii) generation of electrical energy, where such energy is used for the manufacture of any taxable goods other than non-vat goods and such manufactured goods is,-

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A. Sold within the State or in the course of inter-State trade or commerce or in the course of the export of the goods out of the Territory of India,or

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B. transferred or consigned outsi8de the State otherwise than as a result or a sale; or

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(iv) generation of electrical energy where such energy is used for the manufacture of any exempt goods and such exempt goods is sold in the course of export of the goods out of Territory of India.

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and the amount of input tax shall be computed and be claimed in prescribed manner.

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([ Explanation: - For the purposes of this clause,-

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(a) if 90% of electrical energy generated is consumed for the purposes referred to in sub-clauses (iii) and (iv), 100% Input Tax may be claimed and be allowed as Input Tax Credit.

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(b) the expression 'generation of electrical energy' shall mean generation of electrical energy by using captive power plant including repairing any maintenance thereof.

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(c) Subject to conditions mentioned in column 2 of the table under clause (a), every dealer, who is liable to pay tax on January 1, 2008 shall, in respect of all taxable goods except non-vat goods, capital goods and captive power plant, where such goods have been purchased within a period of six months ending on the date of commencement of this Act and where such goods-

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(i) are held in opening stock on January 1, 2008 in the same form and condition in which they were purchased; or

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(ii) have been used in manufacture of finished or semifinished goods (in the process of manufacture of taxable goods except non-vat goods) or finished taxable goods, except nonvat goods and such finished or semi-finished goods are held in opening stock on January 1, 2008; and

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(iii) have suffered levy of tax under the erstwhile Act, be allowed credit of partial or full, as provided in column (3) against relevant entry of the said table, amount of input tax as input tax credit and for this purpose amount of input tax shall be computed in the prescribed manner.

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(d) Subject to conditions mentioned in column 2 of the table under clause (a), every dealer, who becomes liable to pay tax on a date after January 1, 2008, shall, in respect of all taxable goods, except non-vat goods, capital goods and captive power plant, where such taxable goods have been purchased on or after January 1, 2008 but within a period of six months ending on the day preceding the date on which such dealer has become liable to pay tax and -

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(i) are held in opening stock, on the date on which the dealer has become liable to pay tax, in the same form and condition in which they were purchased;

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(ii) have been used in manufacture of semi-finished goods (in the process of manufacture of taxable goods except non-vat goods) or finished taxable goods, except non-vat goods and such semi-finished or finished goods as are held in opening stock on the date on which the dealer has become liable to pay tax; or

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(iii) have been purchased from a registered dealer after obtaining sale invoice bearing name and address of purchasing dealer,

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be allowed credit of partial or full, as provided in column 3 against relevant entry of the said table, amount of input tax as input tax credit and for this purpose amount of input tax shall be computed in the prescribed manner.

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[For prescribed manner see Rule 24]

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(e) Every dealer who is liable to pay tax and who opts for payment of tax or lump sum under provisions of section 6, shall, in respect of all taxable goods, except non-vat goods, capital goods and captive

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power plant, which are held in stock at the end of the period during which provisions of section 6 remain applicable, be allowed credit of full or partial amount of input tax or deemed input tax, as the case may be, in accordance with provisions of clauses (a) to (d) above, as may be applicable:

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PROVIDED that unless the State Government, in exercise of its powers under second proviso of sub-section (1) of section 4, issues notification prescribing rate of tax and point of tax in respect of sale of sugar or textile referred to therein, no facility of input tax credit, in respect of goods purchased for use in manufacture of said goods, shall be allowed under any of the aforesaid clauses. [(f) Notwithstanding anything to the contrary contained in this subsection where goods purchased are resold or goods manufactured or processed by using or utilizing such purchased goods are sold, at the price which in lower than

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(i) purchase price of such goods in case of release; or

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(ii) cost price in case of manufacture.

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the amount of input tax credit shall be claimed and be allowed to the extent of tax payable on the sale value of goods or manufactured goods]

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EXPLANATION―For the purposes of this sub-section, -

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(a) for entry against serial no. (1) of the table under clause (a), re-sale of goods includes transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

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(b) goods, required for use in manufacture of any goods, do not include captive power plant, or parts, components and accessories of a captive power plant or any other goods required for running or maintenance of a captive power plant.

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(2) Notwithstanding anything to the contrary in any provision of subsection (1) of this section, credit of full or partial amount of input tax, in respect of all taxable goods, may be allowed to developer, codeveloper and units established in Special Economic Zone for authorized operations subject to such conditions as may be specified in the notification issued by the state government.

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Explanation — For the purposes of this sub-section the word "codeveloper" or "developer" and expressions "Special Economic Zone" or "authorized operations" shall have the meanings assigned to them in the Special Economic Zones Act, 2005.

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[(3) (a) Where purchased goods are to be used or disposed of partially for the purposes specified in clause (a) of sub-section (1), the input tax credit shall be claimed and allowed proportionate to the extent they are used or disposed of for the purposes specified in such clause.

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(b) Subject to the provisions of this section where during process of manufacture of vat goods, exempt and non-vat goods except as by

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product or waste product are produced, the amount of input tax credit may be claimed and be allowed in proportion to the extent they are used or consumed in manufacture or taxable goods other than non vat goods and exempt goods.

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Explanation: For the purpose of this sub-section the “exempt goods” shall include taxable goods other than non vat goods, which are disposed of otherwise than by way of sale within the State or in the course of inter State trade or commerce or sale in the course of export or goods out of the territory of India or sale out side the State.”] (4) Except as provided otherwise in any provision of this Act or the rules framed thereunder, in respect of purchase of any goods in respect of which facility of input tax credit is admissible, input tax credit of the full amount of input tax can provisionally be claimed on the date on which tax invoice related to such goods is received by the dealer and where dealer himself is liable to pay tax in respect of purchase of any goods, on the date on which amount of tax payable is accounted for by the dealer in the account of [tax payable by him and possesses the proof of payment of tax on the turnover of purchase liable to tax”][See Rule 26).

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(5) Where a dealer has claimed input tax credit in respect of any goods under subsection (4), but such goods; or goods manufactured by using such goods; or goods packed by using or consuming such goods, are consigned outside the State or disposed of or dispossessed in a manner for which facility of input tax credit is not admissible or such facility is admissible for partial amount of input tax, the amount which is the difference, of the full amount of input tax and admissible amount of input tax credit, shall be deducted from the amount of the input tax credit, already claimed by the dealer by debiting such amount into the account of input tax credit maintained by him. Provided that before debiting the amount of input tax credit reasonable opportunity of being heard shall be given to the dealer.

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(6) In the circumstances referred to in sub-section (5), the amount of difference of full amount of input tax and admissible amount of input tax credit, shall be debited by the dealer into the account of input tax credit maintained by him on the day on which –

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(i) goods, in respect of which credit of full amount of input tax was claimed; or

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(ii) goods, manufactured by using goods in respect of which credit of full amount of input tax was claimed; or

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(iii) where goods, in respect of which credit of full amount of input tax was claimed, are used or consumed in packing of any goods,

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such packed goods, are consigned outside the State; or disposed of or dispossessed by the dealer in a manner for which facility of input tax credit is not admissible or such facility is admissible for partial amount of input tax:

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Provided that where the dealer discontinues his business, full amount of input tax, which was claimed under sub-section (4), in respect of-

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(i) goods held by the dealer in the same form and condition in which those were purchased; or

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(ii) goods which have been used in manufacture of any goods held by the dealer, (whether in semi-manufactured or manufactured state);

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(iii) goods which have been used or consumed in packing of any goods held by the dealer,

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in closing stock on the day on which he has discontinued business, shall, before end of the tax period prescribed for submission of the tax return for the tax period in which business is discontinued, shall be debited by the dealer into the account of input tax credit maintained by him.

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(7) Except where-

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(a) purchased goods; or

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(b) manufactured goods which are manufactured by using purchased goods; or

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are to be sold in the course of the export of the goods out of the territory of India, no credit of any amount of input tax shall be claimed by a dealer under sub section (4) and no facility of input tax credit shall be allowed to a dealer in respect of purchase of any goods where -

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(i) sale of such goods by the dealer is exempt from payment of tax under clause (c) of section 7; or

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(ii) such goods are to be used or consumed in manufacture or packing of any goods and sale of such manufactured or packed goods by the dealer is exempt from payment of tax either under clause (b) or clause (c) of section 7.

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[(iii) such goods are for transfer of right to use such goods.]

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(8) Amount of admissible input tax credit for a tax period and for an assessment year shall be computed in the prescribed manner and shall be claimed and allowed within such time and in such manner as may be prescribed.

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(9) (a) Where any goods, purchased from within the State, are sold by a principal through a selling agent or where any goods are purchased by a purchasing agent on behalf of a principal, input tax credit, in respect of purchase of such goods, shall be claimed by and be allowed to the principal in such manner as may be prescribed. [see Rule 17].

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[(b) Where works contract is partially executed by a sub contractor, the amount of input tax credit, in respect of purchase of goods

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involved in the execution of works contract shall be claimed by and be allowed to the contractor or such sub contractor to the extent or purchase of goods by them.]

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(10) Every dealer, who claims input tax credit under this section, shall, in respect of input tax, input tax credit and inventory of goods, maintain such records and furnish such statements as may be prescribed.(see Rules 28 & 29)

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(11) Where it appears to the assessing authority that amount of input tax or amount of input tax credit shown in any statement furnished by any dealer is incorrect or is not worthy of credence, it may, after giving reasonable opportunity of being heard to such dealer and after making such inquiry as it may deem fit, determine the amount of input tax or amount of input tax credit, as the case may be, by making an order in writing:

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Provided that where matter relates to any tax return submitted under section 24 or in any assessment proceedings under any section of this Act, proceedings shall be completed in accordance with provisions of relevant sections.

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Explanation (1) For the purposes of this section, – (i) goods for use in manufacture of any goods includes goods required for use, consumption or utilization in manufacture or processing of such goods or goods required for use in packing of such manufactured or processed goods;

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(ii) manufacture of any goods includes processing of such goods and packing of such manufactured or processed goods; and

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(iii) where during the process of manufacture of any taxable goods any exempt goods are produced as by-product or waste-product, it shall be deemed that purchased goods have been used in the manufacture of taxable goods. Conversely, where during the process of manufacture of any exempt goods any taxable goods are produced as by-product or waste-product; it shall be deemed that purchased goods have been used in the manufacture of exempt goods.

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[(iv) where during the process of manufacture of any vat goods and non-vat goods are produced as by-product or waste-product, it shall be deemed that purchased goods have been used in the manufacture of vat goods. Similarly, where during the process of manufacture of any non-vat goods any vat-goods are produced as by-product or waste-product, it shall be deemed that purchased goods have been used in the manufacture of non-vat goods.]

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Sri Manish Goyal learned Additional Advocate General submitted that under the VAT Act every taxable turnover of a dealer is liable to tax at each and every stage but Section 13 has been incorporated to grant concession and allowed input tax credit. According to Sri Goyal dealers

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referred in the clauses having valid registration certificate under the Act shall in respect of taxable goods purchased from within the State and mentioned in such clauses subject to conditions given therein and restrictions as may be prescribed, be allowed credit of an amount, as input tax credit.

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Sub-section(a) of Section 13(1) prescribes subject to the condition given in column (2) every dealer liable to pay tax, shall in respect of all taxable goods except non-VAT goods, capital goods and captive power plant where such taxable goods are purchased on or after the date of commencement of this Act be allowed credit of the amount as input tax credit to the extent provided in column (3) of the table. He further invited attention to sub-clause (2) of the table which prescribes that if the goods are used in manufacture of any taxable goods except non-VAT goods and where such manufactured goods are sold either inside the State or in the course of inter State Trade or Commerce full amount of input tax credit has to be allowed. Thus, Section 13(1) makes it clear that goods purchased must be taxable goods as well as goods manufactured must be taxable goods and no input tax credit is to be allowed if the goods are not taxable goods or non VAT goods. He further submitted that in the present case DORB is an exempted commodity under Schedule-I at Sl.No.4. He further submitted that Legislature to clarify the said fact by amendment, which was effected from 20.8.2010. Section 13(1)(f) of the VAT Act was added which provides that where the goods manufactured by using or utilizing such purchased goods or sold at a price which is lower than the cost price, the amount of input tax credit shall be claimed and be allowed to the extent of tax payable on the sale value of the manufactured goods.

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Sri Goyal submitted that the Tribunal had wrongly allowed full amount of input tax credit by recording a finding that provisions of Section 13(1)(f) of the VAT Act are not applicable and the case is

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covered under Section 13(3)(b) read with Explanation-III of Section 13 of the Act.

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He further submitted that in the transaction of manufacture of rice bran oil (taxable goods) have been sold at a price which is lower than its cost price (value of rice bran) as such provisions of Section 13(1)(f) of the Act are applicable and hence the amount of input tax credit was to be allowed only to the extent of tax payable on the sale value of manufactured goods (rice bran oil).

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He further relied upon Rule 23(6) of the VAT Rules, which deals with reversal of input tax credit. He further argued that Section 13(1)(f) of the VAT Act begins with non-obstante clause as such it has an overriding affect over the other provisions of Section 13(1)of the Act and Tribunal had wrongly noted only one part of the Section that is “the goods manufactured or processed by using or utilizing such purchased goods or sold at a price which is lower than”.

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It was also contended that the Tribunal had wrongly come to the conclusion that value of DORB has to be added for holding that the goods have been sold at a higher price than the purchase price. According to Sri Goyal, Section 13(1)(f) of the Act mandates that input tax credit shall be claimed and be allowed to the extent of tax payable on sale value of manufactured goods, it prescribes only in relation to taxable goods produced and not the turnover as the bye product which is exempted from tax.

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According to him provisions of Section 13(3)(b) was wrongly interpreted by the Tribunal because it prescribes subject to the provisions of this Section, where during the process of manufacture of vat goods, exempted goods and non-vat goods, except as bye product or waste product are produced, the amount of input tax credit may be claimed and be allowed in proportion to the extent they are used or consumed in a manufacture of taxable goods other than non-vat goods

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and exempted goods. This provision is not applicable in the present case as “DORB” which is an exempted goods has been produced as a byproduct. Neither the dealer set up this case for partial benefit under Section 13(3)(b) nor has claimed, the benefit of this Sub-clause, as such the same is not applicable.

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Sri Goyal laid stress on the fact that scheme of Section 13(1)(f) is entirely different from Section 13(3)(b) and in the present case all the ingredients of Section 13(1)(f) are present and the case is covered under the said provision. As the dealer has not set up his case under Section 13(3)(b), the Tribunal was not correct in considering the Explanation (iii) of Section 13 and granting him the benefit. According to him, intention of the “VAT Act” is not to allow full amount of ITC if “DORB” (exempted goods) are produced along with the rice-bran oil (taxable goods). He has placed reliance upon the judgment of the Apex Court in case of State of Karnataka Vs. M.K. Agro Tech Private Ltd., 2018 (52) GSTR 215 (SC), 1992 (3) SCC 624, Godrej Boyce Manufacturing Company Pvt. Ltd & others Vs. Commissioner of Sales Tax and others and the judgment of Apex Court in case of Jayam and Company Vs. Assistant Commissioner and others, 2016 (96) VST 1 (SC) .

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Sri Rahul Agarwal appearing for the dealer-opposite party submitted that the respondent-assessee is entitled to full input tax credit when the sale price of taxable product is less than the cost price of manufacture, but the cumulative sale price of the taxable product and the exempted by product (produced in the process of manufacture) is more than the cost price of manufacture. He submitted that the Tribunal had relied upon the definition of “goods” as envisaged in Section 2(m) of the Act, as also in the scheme of Section 13 and particularly Section 13(3)(b) and Explanation (iii) of the Act to hold that while considering the applicability of Section 13(1)(f), the cumulative sale price of the taxable product and the exempted by product have to

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be considered, since in the case in hand the cumulative sale price of taxable rice bran oil and the exempted “DORB” was more than the cost price of manufacture, thus provisions of Section 13(1)(f) was not applicable and the Tribunal rightly granted the full benefit of ITC.

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Sri Agarwal further submits that Section 13(1)(f) was inserted in the year 2010, and the same beginning with non-obstante clause, is limited to Sub-section (1) of Section 13 and not to entire Section 13, in other words, Section 13(1)(f) would prevail over Section 13(1)(a)-(e), but not over Section 13(2)-(12). According to him Section 13(1)(f) is a provision which restricts the allowability of ITC to an assessee and narrows the scope of benefit so available.

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He further contended that the word “goods” used in Section 13(1) (f) is not qualified by the word “taxable”, thus there is no indication in the said provision that the goods which are manufactured by using or utilizing such purchased goods and whose sale price is being considered for applying Section 13(1)(f) ought to be taxable goods.

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Sri Agarwal further submits that argument of the State using the word “taxable” before the word “goods” manufactured or processed is not permissible in law. He further submitted that the definition of “goods” in Section 2(m) does not differentiate between exempted product and taxable product, it includes all types of goods. Further, the legislature in Section 13(1) itself uses phrase “taxable goods” in main part of Section 13(1), 13(1)(a), row (ii) of the Table in 13(1)(a), in main part of 13(1)(c), main part of 13(1)(d) as also in 13(1)(e). “Taxable goods” is also used in Section 13(2), 13(3)(b), Explanation to Section 13 (iii), Explanation (iii) to Section 13 and Explanation 13(iii).

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He further submitted that the legislature if wanted to apply “taxable” goods in Section 13(1)(f), there was nothing that prevented it from using the phrase “taxable good”, but unlike in other places, the omission in Section 13(1)(f) is all mere stark considering that the said

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Section was inserted in the year, 2010. He further submitted that a harmonious interpretation has to be given while considering Section 13(1)(f) of the Act with other provisions of Section 13 keeping in mind the legislative scheme in Section 13, and in this context Section 13(3) (b) and Explanation (iii) to Section 13 assume importance. According to him, Section 13(3)(b) provides that where during process of manufacture “vat goods, exempted goods and non- vat goods except as a byproduct or waste product” are produced, the amount of ITC would be claimed and allowed in proportion to the extent they are used or consumed in manufacture of taxable goods other than non- vat goods/taxable goods. Thus, it is clear that exempted goods and nonvat goods may be produced in two ways i.e. firstly by deliberately in the process of manufacture and secondly inadvertently/incidentally as a bye product or waste product.

¶137

Section 13(3)(b) restricts the eligibility to proportionate ITC only where exempted goods and non- vat goods are deliberately produced in the process of manufacture, the aforesaid section carves out an exception where exempted good and non-VAT goods are produced inadvertently/incidentally as a byproduct or waste product in the process of manufacture. Further it is made more clear by Explanation (iii) to Section 13 which provides that during process of manufacture of taxable goods, any exempted goods are produced as a waste product/byproduct, it shall be deemed that the purchased goods had been used in the process of manufacture of taxable goods. Similarly, during manufacture of exempted goods, any taxable product are being produced as a waste product/byproduct, it is deemed that purchased goods have been used in the manufacture of exempted goods. Explanation (iii) to Section 13 forbids the assessing authority as well as the assessee from raising any dispute as to the allowability of ITC in case, exempted goods/taxable goods are being produced as a waste product/byproduct during manufacture.

¶138

¶139

According to Sri Agarwal if the argument of the State is accepted it would permit the assessing authority to do indirectly what it cannot do directly i.e. permitting the assessing authority to get around the exception in Section 13(3)(b) by invoking Section Section 13(1)(f). He further relied upon the judgments of Apex Court in case of M/s Polestar Electronic (Pvt.) Ltd Vs. Additional Commissioner Sales Tax and another, 1978 1 SCC 636 (paras 6, 7 and 8), Assessing Authority-cum- Excise and Taxation Officer, Gurgaon Vs. East India Cotton Manufacturing Co. Ltd. (1981) 3 SCC 531 (para 6), Mathuram Agarawal Vs. State of Madhya Pradesh (1999) 8 SCC 667 (para 12), Kalyan Roller Flour Mills Pvt. Ltd Vs. Commissioner of Commercial Taxes Andhra Pradesh (2014) 16 SCC 375 (para 10– 16) , Hansraj and Sons Vs. State of Jammu & Kashmir and others (2002) 6 SCC 227 (paras 22–25) and State of Karnataka Vs. M.K. Agro Tech Pvt. Ltd (2017) 16 SCC 210.

¶140

Heard learned counsel for the parties and perused the material on record.

¶141

The sole dispute is confined in regard to the grant of input tax credit (ITC), according to Section 13(1)(f) of the Act or the benefit to be extended as granted by the Tribunal applying the provisions of Section 13(3)(b) read with Explanation (iii)of Section 13 of the Act.

¶142

Section 13(1)(f) of the Act was introduced by amending the VAT Act in the year 2010, and the same becoming applicable from 20.8.2010. The object and reason for amending the Act and for introduction of Section 13(1)(f) was brought making certain provisions in the interest of revenue of the State. According to learned Additional Advocate General appearing for the State, previously the State Government was incurring loss as the dealers claimed the entire tax paid on purchases made by them while claiming ITC on the goods manufactured, which was sold at lower the cost price.

¶143

¶144

An example was submitted, that if the dealer has purchased taxable raw material worth Rs.1000/-, which was taxed at 10%, he paid Rs.100/- as tax, thereafter manufactured taxable goods worth Rs.700/on which he paid Rs.70/- as tax, and further exempted goods in the nature of bye-product are manufactured worth Rs.400/-, then according to Section 13(1)(f) introduced in the year 2010 he will get ITC of Rs.70/-, but the dealers are claiming the entire amount of Rs.100/- as ITC on the basis of cumulative sale price, i.e., manufactured goods Rs.700/- plus exempted goods worth Rs.400/-. Thus, the amendment took care of those cases where the sale price of the manufactured goods was less the cost price, then ITC was allowable only to the extent of taxable turnover manufactured by the manufacturer.

¶145

The question regarding allowability of excess input tax credit came up for consideration before the Supreme Court in the case of Jayam & Co. (supra) in which the provisions of Tamilnadu VAT Act was under consideration, their Lordship held as under:

¶146

“ It is a trite law that whenever concession is given by statute or notification, etc., the conditions thereof are to be strictly complied with in order to avail of such concession. Thus, it is not the right of the "dealers" to get the benefit of ITC but its a concession granted by virtue of section 19. As a fortiorari, conditions specified in section 10 must be fulfilled. In that hue, we find that section 10 makes original tax invoice relevant for the purpose of claiming tax. Therefore, under the scheme of the VAT Act, it is not permissible for the dealers to argue that the price as indicated in the tax invoice should not have been taken into consideration but the net purchase price after discount is to be the basis. If we were dealing with any other aspect dehors the issue of ITC as per section 19 of the VAT Act, possibly the arguments of Mr. Bagaria would have assumed some relevance. But, keeping in view the scope of the issue, such a plea is not admissible having regard to the plain language of sections of the VAT Act, read along with other provisions of the said Act as referred to above.”

¶147

From perusal of the aforesaid judgment of the Supreme Court one thing emerges, is that claim of ITC is not a right but concession granted by virtue of Section 13 of the Act. Further from reading of Section 13(1)(f) of the Act, I find that there are valid and cogent reason for inserting the aforesaid provision, as it was to protect the revenue

¶148

¶149

against clandestine transactions resulting in evasion of tax. Further the argument of learned Additional Advocate General is fortified that the aforesaid provision protected the dent which was made on the State Revenue previously and the same was inserted as a safeguard.

¶150

Subsequently, the Apex Court in the case of M/s M.K. Agro Tech Pvt. Ltd. (supra) while considering the provisions of Sections 11 and 17 of the Karnataka VAT Act held that when final product is sold and VAT is paid, component of raw material would be included again and keeping this objective, the legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstances, is the domain of the legislature and the Courts are not to tinker with the same. Relevant portion of the judgment as contained in paragraph nos.29, 30 and 32, are extracted hereunder:

¶151

“29) The first mistake which is committed by the High Court is to ignore the plain language of sub-section (1) of Section 17. This provision which allows partial rebate makes the said provision applicable on the ‘sales’ of taxable goods and goods exempt under Section 5. Thus, this sub-section refers to ‘sale’ of the ‘goods’, taxable as well as exempt, and is not relatable to the ‘manufacture’ of the goods. The High Court has been swayed by the fact that while extracting oil from sunflower, cake emerges only as a by-product. Relevant event is not the manufacture of an item from which the said by-product is emerging. On the contrary, it is the sale of goods which triggers the provisions of Section 17 of the KVAT Act. Whether it is by-product or manufactured product is immaterial and irrelevant. Fact remains that de-oiled cake is a saleable commodity which is actually sold by the respondent assessee. Therefore, de-oiled cake fits into the definition of “goods” and this commodity is exempt from payment of any VAT under Section 5 of the KVAT Act. Thus, provisions of Section 17 clearly get attracted when “sale” of these goods takes place.

¶152

Secondly, as rightly pointed out by the learned counsel for the appellant, the High Court has not considered the import and effect of sub-rule (3) of Rule 131 of the KVAT Rules. We have already reproduced Rule 131, including sub-rule (3) thereof. After perusing Rule 131 in its entirety, it becomes clear that sub-rule (1) pertains to input tax directly relatable to sales of exempt goods which is nondeductible. Likewise, sub-rule (2) mandates that input tax directly relating to sale of goods shall be deductible. On the other hand, sub-rule (3) covers those cases where input tax is not directly relatable to exempt goods and taxable goods. It is therefore, applied in those cases where input tax relating to both sale and taxable goods and exempt goods is known. In that situation, formula is given under this sub-rule to work out the partial deduction. The High Court has neither take note of nor discussed sub-rule (3).

¶153

Fourthly, the entire scheme of the KVAT Act is to be kept in mind and Section 17 is to be applied in that context. Sunflowr oil cake is subject to input tax. The Legislature, however, has incorporated the provision, in the form of Section 10, to

¶154

¶155

give tax credit in respect of such goods which are used as inputs/ raw material for manufacturing other goods. Rationale behind the same is simple. When the finished product, after manufacture, is sold, VAT would be again payable thereon. This VAT is payable on the price at which such goods are sold, costing whereof is done keeping in view the expenses involved in the manufacture of such goods plus the profits which the manufacturer intends to earn. Insofar as costing is concerned, element of expenses incurred on raw material would be included. In this manner, when the final product is sold and the VAT paid, component of raw material would be included again. Keeping in view this objective, the Legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstances, is the domain of the Legislature and the courts are not to tinker with the same. This proposition is authoritatively determined by this Court in series of judgments. We may refer to the judgment in Godrej & Boyce Mfg. Co. (P) Ltd. vs. CST and the relevant extract which is relevant for our purposes is as follows:

¶156

“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 respect of goods which are dispatched by the appellant to his branches and agents outside the State of Maharashtra and sold there. In law (apart from Rules 41 and 41-A) the appellant has no legal right to claim set-off of the purchase tax paid by him on his purchases within the State from out of the sales tax payable by him on the sale of the goods manufactured by him. It is only by virtue of the said Rules — which, as stated above, are conceived mainly in the interest of public — that he is entitled to such set-off. It is really a concession and an indulgence. More particularly, where the manufactured goods are not sold within the State of Maharashtra but are dispatched to out-State branches and agents and sold there, no sales tax can be or is levied by the State of Maharashtra. The State of Maharashtra gets nothing in respect of such sales effected outside the State. In respect of such sales, the rule-making authority could well have denied the benefit of set-off. But it chose to be generous and has extended the said benefit to such out-State sales as well, subject, however to deduction of one per cent of the sale price of such goods sent out of the State and sold there. We fail to understand how a valid grievance can be made in respect of such deduction when the very extension of the benefit of set-off is itself a boon or a concession. It was open to the rule-making authority to provide for a small abridgement or curtailment while extending a concession. Viewed from this angle, the argument that providing for such deduction amounts to levy of tax either on purchases of raw material effected outside the State or on sale of manufactured goods effected outside the State of Maharashtra appears to be beside the point and is unacceptable. So is the argument about apportioning the sale price with reference to the proportion in which raw material was

¶157

¶158

purchased within and outside the State. “

¶159

(emphasis supplied)

¶160

As far as the reliance placed by the learned counsel for the respondent/dealer on the judgment of the Apex Court in the case of Polestar Electronic (P) Ltd. (supra) in regard to the interpretation given to a taxing statute. In paragraph nos.6, 7 and 8 of the said judgment Court held as under:

¶161

Now, the first question that arises for consideration is whether 're-sale' in section 5 (2) (a) (ii) and the, Second Proviso means re-sale any where without any geographical limitation or it is confined only to re-sale inside Delhi. The contention of the Revenue was that though the words "inside the Union Territory of Delhi" are not to be found in section 5 (2) (a) (ii) and the Second Proviso, they must be read in these provisions as a matter of construction and three reasons were given in support of this contention. The first reason was that if re-sale outside Delhi were held to be within the terms of section 5(2) (a) (ii) and the Second Proviso, the Union Territory of Delhi would lose tax altogether in cases where the goods were resold outside Delhi, because in that event the first sale would escape tax by reason of the deduction granted under section 5 (2) (a) (ii) and the re-sale would also be free from tax since, it is outside Delhi and- hence covered by the exempting provision contained in section 27. The Legislature could never have intended to bring about such a result where the Union Territory of Delhi would be deprived altogether of tax. The intention of the Legislature was to recover tax at only one point whilst the goods were in the stream of trade and the Legislature, therefore, granted deduction in respect of the first sale on the basis that it would be levying tax when the goods were resold and that postulated the requirement that the resale should be inside Delhi. Secondly it was urged that the Legislature had no legislative competence to tax sale outside Delhi and moreover, by reason of section 27 sale outside Delhi was taken out of the purview of the Act and re-sale within the meaning of section 5 (2) (a) (ii) and the Second Proviso could not, therefore, possibly include resale outside Delhi. The last argument was that the words 'by him following upon the word 're-sale' in section 5(2) (a) (ii) and the Second Proviso clearly indicated that the resale contemplated under these provisions was re-sale by the purchasing dealer as registered dealer and since the concept of registered dealer has relation only to sale inside Delhi, the resale must be within the territory of Delhi. We do not think there is any substance or validity in these arguments and we see no cogent or compelling reasons to add the words "inside the Union Territory of Delhi" to qualify 're-sale' in section 5(2) (a) (ii) and the Second Proviso.

¶162

Now, if there is one principle of interpretation more well settled than any other, it is that a statutory enactment must ordinarily be construed according to the plain natural meaning of its language and that no words should be added, altered or modified unless it is plainly necessary to do so in order to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or total irreconcilable with the rest of the statute. This rule of literal construction is, firmly established and it has received judicial recognition in numerous cases. Crawford in his book on "Construction of

¶163

¶164

Statutes" (1940 ed.) at page 269 explains the rule in the following terms:

¶165

"Where the statute's. meaning is clear and explicit, words cannot be interpolated. In the first place, in such a case they are not needed. If they should be interpolated, the statute would more than likely fail to express the legislative intent, as the thought intended to be conveyed might be altered by the addition of new words. They should not be interpolated even though the remedy of the statute would thereby be advanced, or a more desirable or just result would occur. Even where the meaning of the statute is clear, and sensible, either with or without the omitted word, interpolation is improper, since the primary source of the legislative intent is in the language of the statute."

¶166

Lord Parker applied the rule, in R. v. Oakes to: construe "and", as "or" in section 7 of the Official Secrets Act, 1920 and stated:

¶167

"It seems to this Court that where the literal reading of a statute, and a penal statute, produces an intelligible result, clearly there is no ground for reading in words or changing words according to what may be the supposed intention of Parliament. But here we venture to think that the result is unintelligible."

¶168

Lord Reid also with great clarity and precision which always characterise his judgments enunciated the rule as follows in Federal Steam Navigation Co. Ltd. v. Department of Trade and Industry :

¶169

"Cases where it has properly been held that a word can be struck out of a deed or statute and another substituted can as far as I am aware be grouped under three heads : where without such substitution the provision is unintelligible or absurd or totally unreasonable where it is unworkable and where it is totally irreconcilable with the plain intention shown by the rest of the deed or statute."

¶170

This rule in regard to reading words into a statute was also affirmed by this Court in several decisions of which we may refer only to one, namely, Naraynaswami v. Pannerselvam where the Court pointed out that:

¶171

'.... addition to or modification of words used in statutory provision is generally not permissible.......', but 'courts 'may depart from this rule to avoid a patent absurdity.'

¶172

Here, the word used in section 5 (2) (a) (ii) and the Second Proviso is 'resale' simpliciter without any geographical limitation and according to its plain natural meaning it would mean re-sale any where and not necessarily inside Delhi. Even where the purchasing dealer resells the goods outside Delhi, he would satisfy the requirement of the statutory provision according to its plain grammatical meaning. There are no words such as 'inside the Union Territory of Delhi' qualifying 're-sale' so as to limit it to re-sale within the territory of Delhi. The argument urged on behalf of the Revenue requires us to read such limitative words in section 5 (2) (a) (ii) and the Second Proviso. The question is whether there is any necessity or justification for doing so? If 're-sale is construed as not confined to the territory of Delhi, but it may take place any where, does section 5(2) (a) (ii) or the Second Proviso lead to a result manifestly unintelligible, absurd, unreasonable, unworkable or irreconcilable with the rest of the Act ? Is there any compulsive necessity to

¶173

¶174

depart from the rule of plain and natural construction and read words of limitation in section 5 (2) (a) (ii) and the Second Proviso when such words have been omitted by the law-giver ? We do not think so.

¶175

It may be pointed out in the first place that the Legislature could have easily used some such,words as "inside the Union Territory of Delhi" to qualify the word 're-sale', if its intention was to confine re-sale within the territory of Delhi, but it omitted to do what was obvious and used the word 're-sale' without any limitation or qualification, knowing full well that unless restriction were imposed as to situs, 're-sale would mean re-sale any where and not merely inside the territory of Delhi. The Legislature was enacting a piece of legislation intended to levy tax on dealers who are laymen and we have no doubt that if the legislative intent was that 're-sale' should be within the territory of Delhi and not outside, the.Legislature would have said so in plain unambiguous language which no laymen could possibly misunderstand. It is a well settled rule of interpretation that where there are two expressions which might have been used to convey a certain intention, but one of those expressions will convey that intention more clearly than the other, it is proper to conclude that, if the legislature used that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all. We may repeat what Pollock C. B. said in AttorneyGeneral v. Sillem that:

¶176

If this had been the object of our legislature, it might have been accomplished by the simplest possible piece of legislation; it might have been expressed in language so clear that no human being could entertain a doubt about it.

¶177

We think that in a taxing statue like the present which is intended to tax the dealings of ordinary traders, if the intention of the legislature were that in order to qualify a sale of goods for deduction, 're-sale' of it must necessarily be inside Delhi, the Legislature would have expressed itself clearly and not left its intention to be gathered by doubtful implication from other provisions of the Act. The absence of specific words limiting 're-sale' inside the territory of Delhi is not without significance and it cannot be made good by aprocess of judicial construction, for to do 'so would be to attribute to the legislature an intention which it has chosen not to express and to usurp the legislative function.

¶178

Further reliance has been placed on the judgment of the Supreme Court in the case of Assessing Authority-cum- Excise and Taxation Officer (supra). Relevant paragraph no.6 of the said judgment is extracted hereunder:

¶179

“The question which therefore arises for consideration is as to what is the scope and meaning of the expression "for use.......in the manufacture..........of goods for sale" occurring in section 8 (3) (b) and in the declaration in Form C and Rule 13. Does it mean that the goods manufactured by a registered dealer by using the goods purchased against his Certificate of Registration and the declaration in Form C must be intended for sale by him or does it also include a case where goods are manufactured by a registered dealer for the third party under a job contract

¶180

¶181

and the manufactured goods are intended for sale by such third party ? Now it is a well-settled rule of interpretation that a statute must be construed according to its plain language and neither should anything be added nor subtracted unless there are adequate grounds to justify the inference that the legislature clearly so intended. It was said more than seven decades ago by Lord Mersey in Thompson vs. Goold and Company :

¶182

It is a strong thing to read into an Act of Parliament words which are not there and in the absence of clear necessity, it is a wrong thing to do.

¶183

Lord Loreborn, L.C. also observed in Vickers, Sons and Maxim Limited v. Evans:

¶184

We are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself.

¶185

Now here we find that the expression used by the legislature as also the rule making authority is simpliciter "for use.....in the manufacture.......of goods for sale" without any addition of words indicating that the sale must be by any particular individual. The legislature has designedly abstained from using any words of limitation indicating that the sale should be by the registered dealer manufacturing goods. It is significant to note that where the legislature wanted to restrict the sale to one by the registered dealer himself, the legislature used the qualifying words "by him" after the words "for resale" in the first sub-clause of section 8 (3) (b) indicating clearly that the resale contemplated by that provision is resale by the registered dealer purchasing the goods and by no one else, but while enacting the second sub- clause of section 8 (3) (b) the legislature did not qualify the words "for sale" by adding the words "by him". This deliberate omission of the words "by him" after the words "for sale" clearly indicates that the legislature did not intend that the sale of the manufactured goods should be restricted to the registered dealer manufacturing the goods. If the legislature intended that the sale of the manufactured goods should be by the registered dealer manufacturing the goods and by no one else, there is no reason why the words "by him should have been omitted after the words "for sale" when the legislature considered it necessary to introduce those words after the words "for resale" in the first sub-clause of section 8 (3) (b). The omission of the words "by him" is clearly deliberate and intentional and it cannot be explained away on any reasonable hypothesis except that the legislature did not intend that the sale should be limited to that by the registered dealer manufacturing the goods. The Court must construe the language of section 8 (3) (b) according to its plain words and it cannot write in the section words which are not there. To read the words "by him" after the words "for sale" in section 8 (3) (b) would not be construction but judicial paraphrase which is impermissible to the Court. It is also important to note that the word 'use' is followed by the words "by him" clearly indicating that the use of the goods purchased in the manufacture of goods for sale must be by the registered dealer himself but these words are significantly absent after the words "for sale", On a plain grammatical construction, these words govern and qualify only "use" and cannot be projected into the words "for sale". The goods purchased by the registered dealer must be used by him in the manufacture of goods which are intended for sale but such sale need not be by the registered dealer himself: it may be by any one.”

¶186

¶187

Further, Sri Rahul Agarwal emphasizd that intention of the legislature in a taxation statute is to be gathered from the language of the provisions, where the language is plain and unambiguous. He placed reliance upon judgment in the case of Mathuram Agarwal (supra). Relevant paragraph no.12 of the said judgment is extracted hereunder:

¶188

“Another question that arises for consideration in this connection is whether sub-section (1) of Section 127-A and the proviso to sub-section 2(b) should be construed together and the annual letting values of all the buildings owned by a person to be taken together for determining the amount to be paid as tax in respect of each building. In our considered view this position cannot be accepted. The intention of the Legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e., the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter.”

¶189

36. Sri Agarwal, further to support his contention has relied upon the judgment of the Apex Court in the case of Kalyan Roller Flour Mills Pvt. Ltd (supra) which is as under:

¶190

The revisional authority as well as the High Court accept that the language of the notification is clear, but resort to interpreting the notification in light of the intention behind its issuance and proceed on the presumption that the State Government was made to issue the aforesaid notification in order to give an advantage ot the dealers in the State of Andhra Pradeh who deal in sale or purchase of wheat and wheat products. According to the revisional authority as well as the High Court a roller flour mill would be entitled for exemption only if firstly, it manufactures a product from wheat that they purchase from Food Corporation of India and secondly , if it effects the sale of such product.

¶191

This Court has reiterated in numerous decisions that if the language of the notification or an executive order is clear and unambiguous, the courts need not presume anything on the issuance of such notification or order need or delve into the intention behind issuance of such notification or order. When the language is clear and plain, the courts cannot enlarge their

¶192

¶193

scope by interpretative purposes. [H.H.Sri Rama Verma vs. CIT and Maharashtra State Financial Corpn. vs. Jaycee Drug and Pharmaceuticals (P) Ltd.].

¶194

It was said more thand seven decades ago by Lord Mersey in Thompson vs. Goold and Co.:(AC p.420)

¶195

“.... It is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do”

¶196

Lord Loreburn, L.C. Also observed in Vickers, Sons and Maxim Ltd. vs. Evans; (AC p. 445)

¶197

“..... we are not entitled to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself.”

¶198

In Assessing Authority-cum-Excise and Taxation Officer vs. East India Cotton Mfg. Co. Ltd., this Court had reiterated the aforesaid proposition and observed that in ordinary course when the language of a statutory provision is plain and unambiguous, there is no need to resort to the object and purpose of the enactment because in such a case, the language best declares the intention of the lawgiver.

¶199

In Oswal Agro Mills Ltd. vs. CCE , this Court has observed that: (SCC 721, para 4)-

¶200

“Where the words of the statute are plain and clear, there is no room for applying any of the principles of interpretation which are merely presumption in cases of ambiguity in the statute. The court would interpret them as they stand. The object and purpose has to be gathered from such word themselves. Words should not be regarded as being surplus nor be rendered Otiose. Strictly speaking there is no place in such cases for interpretation or construction except where the words of statute admit of two meanings. The safer and more correct course to deal with a question of construction of statute is to take the words themselves and arrive, if possible, at their meaning, without, in the first place, reference to cases for theories of construction.”

¶201

In CST vs. Modi Sugar Mills Ltd. , this Court has observed as follows:

¶202

“11......In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency.”

¶203

As the issue before the Court is not in regard to any ambiguity in the provision of Section 13 of the Act, it is only whether the provisions of Section 13(1)(f) inserted in the year 2010 is applicable or the benefit

¶204

¶205

granted by the Tribunal under Section 13(3)(b) read with Explanation(iii) of Section13 of the Act was applicable.

¶206

As the Apex Court in the case of Jayam & Co. (supra) as well as M.K.Agro Tech (supra) has categorically held that the claim of ITC is not the right of a dealer but is a concession granted under the provisions of the Act. Similarly in Section 13 of the U.P.VAT Act, input tax credit has been provided as a concession to a dealer who in respect of taxable goods purchased within the State subject to conditions given therein, and such other conditions and restrictions as may be prescribed, is allowed credit of an amount as input tax credit, to the extent provided by, or under the relevant clause, meaning thereby that it is not a vested right but it is a concession which is given on the fulfillment of certain conditions as enumerated under the given clause. Here in the present case Section 13(1)(f) was inserted on 20.8.2010 and the reason and object of the Amending Act was to protect the revenue of the State, which was being misused by the dealers and the said provision was provided as a safeguard.

¶207

This provision was applicable in those cases where the goods purchased was either resold or goods manufactured or processed by using or utilizing such purchased goods at the price which is lower than the cost price in the case of manufacturer.

¶208

In the present case, it is rice bran which is purchased, and rice bran oil and physical refined rice bran oil is manufactured from the raw material. Further, only 13.77 % of taxable goods, i.e., rice bran oil is produced and rest of 83.60 % bye product i.e. DORB is produced, which is exempted from tax under Schedule-I of the VAT Act. Thus, the case of the dealer is covered under this provision as sale price is lower than the cost price. While the benefit granted by the Tribunal would amount to loss to the revenue if the argument of the counsel for the assessee is accepted that cumulative sale price of the taxable product and exempted bye product have to be considered.

¶209

¶210

Reliance placed by him on the judgment of the Apex Court in relation to the language of the statute and the interpretation of the same will not help his case, as I find that provision of Section 13(1)(f) of the VAT Act are very clear and there is no ambiguity in the same.

¶211

The argument of learned counsel for the respondents to the extent that Section 13(1)(f), which begins with a non-obstante clause is restricted only to Section13(1) and not to Section 13(2) to Section 13(11) of the Act, while granting the exemption, the entire provision of Section 13 has to be read in harmony and the benefit or denial cannot be restricted only to Section 13(1)(f), cannot be accepted as Section 13 in the beginning itself provides that ITC will be allowed to the extent provided by or under the relevant clause.

¶212

Present case specifically falls under Section 13(1)(f) of the Act. Supreme Court in the case of Jayam & Co. (supra) as well as in the case of M.K.Agro Tech (supra) have held that it is not a right of a dealer to get the benefit of ITC but it is a concession by virtue of the provisions of the Act. Further, it is a trite law that whenever concession is given by statute or notification etc., the condition thereof are to be strictly complied with in order to avail such concession. Further, the observation of the Apex Court that how much tax credit is to be given and under what circumstances, is the domain of the Legislature and the Courts are not to tinker with the same.

¶213

Thus, in the present case by Amending Act of 2010, the Legislature had made specific provision in regard to those cases where the sale price of the manufactured goods was lower than the cost price. Argument of Sri Rahul Agarwal relying on paragraph 34 of the judgment of the Supreme Court in M.K. Agra Tech (supra) is of no help to him, as the Apex Court had made it clear that de-oil cake which was an exempted item itself is a marketable goods having market value. Thus the benefit restricted by Karnataka VAT Act was upheld by the Apex Court. Para 34 of the said judgment is reproduced below:

¶214

¶215

“34. On literal interpretation of Section 17 it can be gathered that it does not distinguish between by-product, ancillary product, intermediary product or final product. The expressions used are ‘goods’ and ‘sale’ of such goods is covered under Section 17. Both these ingredients stand satisfied as de-oiled cakes are goods and the respondent assessee had sold those goods for valuable consideration. We may point out there that the assessing authorities recorded a clear finding, which was accepted by the Tribunal as well, that records and statement of accounts of the respondent assessee clearly stipulates that after solvent extraction is completed, 88% of de-oiled cake remains and only 12% remains is the oil which is further refined in the refinery. This clearly shows that major outcome (88%) of the solvent extraction plant is de-oiled cake which in itself is a marketable good having market value.”

¶216

Further argument of Sri Agarwal as to the provisions of Section 13(3)(b) read with Explanation (iii) to Section 13 does not have any force, as in the present case the sale price of manufactured goods is lower than the cost price, which is covered in clear and categorical terms of Section 13(1)(f) of the Act.

¶217

Further, the help taken by the assessee of the provision of Section 13(3)(b) and Explanation (iii) of Section13 does not in any way help him as these provisions only provide for those cases where in the manufacture of taxable goods exempted and non VAT goods as bye product or waste products are produced the amount of ITC claimed will be allowed in proportion to the extent they are used or consumed in the manufacture or taxable goods and further explanation providing that in the manufacturing process of any taxable or any exempted goods are produced as bye product or waste product, it shall be deemed that purchased goods have been used in the manufacture as taxable goods. But, from reading of portion of these two provisions contained in Section 13 of the Act does not provide for contingency as in the case of respondent dealer, where the sale price of the manufactured or taxable goods is lower than the cost price and the only provision in the entire scheme of Section 13 is provided under Section 13(1)(f) of the Act. Thus, the case of respondent dealer will not fall under the said provision as specific provision has been made in Section 13 of the Act.

¶218

As Section 13, which is in form of concession given to registered

¶219

¶220

dealer, specifically in its opening line provides for these concession on fulfillment of certain conditions, these conditions and restrictions have been provided under the relevant clause, as such the dealers who are covered under the relevant clause can claim benefit /concession only as far as it has been provided, under the said clause and cannot take the benefit and advantage as provided under other clauses because all these concessions/benefits are subject to certain restrictions and conditions and only on fulfillment of those conditions that concession is given to the dealer.

¶221

Reliance placed by counsel for the respondents on the judgments of the Supreme Court in regard to the interpretation of statute and the interpretation of taxing statute are not applicable in the present case as the entire scheme of Section 13 of the VAT Act is very clear and there is no ambiguity in any of the said provisions. Further, the aid of any clause of provision of Section 13 can only be taken into account, when there is no specific provision in regard to any dispute, but in the present case, the case of the assessee is well covered under Section 13(1)(f) of the Act, as such no aid of Section13(3)(b) read with Explanation (iii) of Section 13 is needed, and the Tribunal fell in the trap of these provisions and wrongly allowed the benefit of ITC of Rs.1,90,88,763/- by reversing the order of assessing authority.

¶222

In view of the above, both the judgments and orders dated 5.7.2017 and 4.5.2016, passed by the Commercial Tax Tribunal,Bareilly Bench, Bareilly are set aside. The question stands answered in negative, i.e., in favour of the revenue and against the assesse.

¶223

Both the revision stand allowed.

¶224

Dated: 3.5.2019 AKJ

The Commissioner,Commercial Tax v. S/S Modi Naturals Ltd.

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The Commissioner,Commercial Tax v. S/S Modi Naturals Ltd.

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