Allowed

Ms Ramkrishna Forgings Limited Through Its Senior General Manager Finance Rahul Kumar Bagaria v. Finance

Jharkhand HC26 Feb 2020WPC/4931/2016

Case brief

AI extract

What is this about?

The court quashed a demand order denying Input Tax Credit for inter-State sales to Indian Railways and Defence. It held such sales to Government entities are deemed sales to registered dealers for ITC purposes, requiring certificates instead of Form C.

What did the court decide?

Quashed impugned order and demand notice; remanded for fresh order with liberty to produce government certificates.

Ms Ramkrishna Forgings Limited Through Its… — Pension and Retirement Benefits | Jharkhand HC (2020)

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W.P.(T) No. 4931 of 2016

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IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 4931 of 2016

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With

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I.A. No.438 of 2020

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M/s. Ramkrishna Forgings Limited, Kolkata,

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Works at Adityapur Industrial Area, Gamharia, District Sareikella-Kharsawan.

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… Petitioner

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Versus

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The State of Jharkhand through the Secretary, Finance Department, Ranchi.

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Commissioner of Commercial Taxes, Ranchi.

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Joint Commissioner, Commercial Taxes (Administration), Jamshedpur Division, Jamshedpur.

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Deputy Commissioner of Commercial Taxes, Adityapur Circle, Jamshedpur. .…. … Respondents

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CORAM : HON’BLE MR. JUSTICE H. C. MISHRA : HON’BLE MR. JUSTICE DEEPAK ROSHAN -------For the Petitioner : Mrs. Darshana Poddar Mishra, Advocate. For the State : Mr. Atanu Banerjee, Sr. S.C.-III. Miss Pooja Kumari, A.C. to Sr. S.C.-III. --------

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12/ 26.02.2020 Heard learned counsel for the petitioner Company and learned counsel for the respondent State.

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2 . In the instant writ application, the petitioner has challenged the impugned order dated 20.5.2016, passed by the Assistant Commissioner of Commercial Taxes, Adityapur Circle, Jamshedpur, and the consequent demand notice dated 20.5.2016, as contained in Annexures-8 and 9 respectively, to the writ application, whereby, the claims of Input Tax Credit (herein after referred to as 'ITC'), for the inter-State sales made to the Indian Railways and also to the Department of Defence, Government of India, have been denied, in view of the amendment, brought in Section 18 of the Jharkhand Value Added Tax Act, 2005, (hereinafter referred to as the 'JVAT Act'), by the Jharkhand Value Added (Amendment) Act, 2015, which was notified on 13.5.2015.

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The petitioner Company is duly registered under the provisions of JVAT Act, as well as Central Sales Tax Act, 1956 (hereinafter referred to as the 'CST Act'), and engaged in the business of manufacturing forged, semi finished and finished parts of automobiles, railways, defence, mining and other general engineering products. It sells its products to the

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W.P.(T) No. 4931 of 2016

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inter-State dealers as well as intra-State dealers, both registered and unregistered. So far as the sales made to the inter-State registered dealers are concerned, undoubtedly, the petitioner Company was entitled to ITC, under Section 18 of the JVAT Act.

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Under Section 8(1) of the CST Act, the dealers making inter-State sales to a registered dealers, are entitled to concessional rate of tax on their turnover, which at the present is 2%, whereas under Section 8(2), thereof no such concession in the rate of tax is allowed in cases of inter-State sales made to unregistered dealers, in which case, the selling dealers are liable to pay the tax, at the rate of tax applicable in the States of the selling dealers.

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Section 8 of the CST Act was amended with effect from 1.4.2007, and prior to the amendment, there was a provision under Section 8(4)(b) of the CST Act, that if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled up and signed by a duly authorized officer of the Government, was required for claiming the concessional rate of tax Under Section 8(1) of the CST Act. By virtue of the Amendment Act of 2007, this provision was down away with, with effect from 1.4.2007.

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Thus, prior to 1.4.2007, when the registered selling dealers were entitled to the concessional rate of tax under Section 8(1) of the CST Act, for the inter-State sales made to the Government even though the Government was not a registered dealer, by virtue of Section 8(4)(b) of the CST Act, the registered selling dealers were also entitled to claim ITC under Section 18(4)(iii) of the JVAT Act, and this entitlement of the registered selling dealers continued even after 1.4.2007, after the amendment in the CST Act, until there were amendments in Section 18 of the JVAT Act by virtue of the JVAT (Amendment) Act, 2015, which were notified on 13.5.2015. Presently, we are concerned with two amendments in Section 18 of the JVAT Act, carried out by the JVAT (Amendment) Act, 2015, which read as follows:-

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" 3. Amendment in Section-18

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(a) In clause (iii) of sub-section (4), after the words ‘trade and commerce’, the words ‘falling under sub-section (1) of Section 8 of the Central Sales Tax Act, 1956 (74 of 1956)’ shall be added.

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*** *** ***

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W.P.(T) No. 4931 of 2016

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(c) In the existing sub-section (8), after clause (xiv), a new clause as (xv) shall be added in the following manner:-

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(xv) ‘On the purchase of goods sold as such or used in the manufacture of other goods and sold in course of interstate trade of commerce falling under sub-section (2) of Section 8 of Central Sales Tax Act, 1956 (Central Act, 74 of 1956)' "

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Thus, by virtue of these amendments in Section 18 of the JVAT Act, on the inter-State sales made to unregistered dealers, ITC could no more be claimed by the registered selling dealers, as the same were not falling under Section 8(1) of the CST Act, and were falling under Section 8(2) of the CST Act, even if such sales were made to the Government, not being registered dealers, irrespective of the fact that there is no possibility of any tax evasion in such sales or transactions.

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For the same reason, the claim of ITC was denied to the petitioner Company, for the inter-State sales made by it during the financial year 2015-16, to the Indian Railways and the Department of Defence of the Government of India. Thus the petitioner Company and such other selling dealers were put to a disadvantageous position by virtue of the JVAT (Amendment) Act, 2015, with effect from 13.5.2015.

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The petitioner Company, thus, filed the present writ application challenging the vires of the aforesaid amendments, stating inter alia, that treating inter-State sales to the Government at par with inter-State sales to the unregistered dealers, in the matter of grant of ITC, by the impugned amendments are violative of Articles-14, 19(1)(g) and 21 of the Constitution of India.

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Learned counsel for the petitioner Company has submitted that by the aforesaid amendments, the inter-State sales made even to the Government have been made at par with the inter-State sales to the unregistered dealers, in spite of the fact that in case of the inter-State sales made to the Government, there is no scope or chance for any evasion of tax. Thus, treating the inter-State sale made to the Government at par with the inter-State sale made to the unregistered dealers, shall be discouraging the inter-State sales made to the Government, inasmuch as, it would not be profitable to make the inter-State sale with the Government organizations, who are the unregistered dealers, as in that case, the tax liability of the selling dealers shall be much higher, i.e., at the rate of tax applicable in the

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State of Jharkhand, whereas if the same inter-State sale is made to any unregistered dealer, the tax liability of the selling dealer shall be much lower, @ 2% on the turnover.

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Learned counsel for the petitioner has thus, submitted that there is no rationale in treating the inter-State sales to the Government at par with inter-State sales to the unregistered dealers, and in fact both of them cannot be treated at par, as in the former case there can be no chance or scope of any tax evasion, whereas such chances may be there in the later case. In support of her contention, learned counsel has placed reliance upon the decision of the Hon’ble Apex Court in TVS Motor Company Ltd. Vs. State of Tamil Nadu & Ors , reported in (2019) 13 SCC 403 , wherein where, in the similar situation when the traders in the State of Tamil Nadu making the inter-State sales to the Government, were denied the ITC on the same grounds, pursuant to the similar amendments made in the Tamil Nadu VAT Act and the Rules, and the amendments made in Section 8 of the CST Act, the Hon’ble Apex Court taking note of its decision pronounced on the same day in ALD Automotive Pvt. Ltd. Vs. The commercial Tax Officer , reported in (2019) 13 SCC 225, wherein it had been held that ITC is a form of concession, which is provided by the Act, and it cannot be claimed as a matter of right, but only in terms of the provisions of the Statute, therefore, the conditions mentioned in the aforesaid Section had to be fulfilled by the dealer, the Hon’ble Apex Court has further laid down the law as follows:-

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"45. Section 2(15) defines the term “dealer” and includes the State Government as well by means of Explanation II which reads as under:

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“Explanation II.—The Central Government or any State Government which, whether or not in the course of business, buys, sells, supplies or distributes goods, directly or otherwise, for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of this Act.”

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46. Thus, wherever the State Government buys, sells, supplies or distributes goods, it shall be deemed to be the dealer for the purposes of the TNVAT Act. At the same time, the TNVAT Act does not require registration by the State Government inasmuch as Section 38 which deals with registration of dealers explicitly provides, under sub-section (8) thereof, that this

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W.P.(T) No. 4931 of 2016

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provision shall not apply to any State Government or Central Government. A conjoint reading of the aforesaid two provisions would show that when a sale is made to the State of Karnataka, it is made to a dealer but that dealer is under no obligation to get itself registered under the TNVAT Act. Because of this exemption, no State Government does that and since it is not a registered dealer, it would not be in a position to issue any Form C. But for that, the genuineness of sales made to a State Government cannot be doubted. This situation puts those dealers who are making sales to the State Government in disadvantageous position, even when it is clear that there is no possibility of tax evasion as there cannot be any such apprehension in case of sales to the State Government. We may point out here that benefit of ITC is given whenever sale is made to a dealer outside the State of Tamil Nadu and the said dealer is a registered dealer.

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47. Having regard to the above, we are of the opinion that the provisions of Section 19(5)(c) are to be read down by construing that those dealers who are making sales exclusively to the other State Governments (i.e. outside the State of Tamil Nadu), the said States would be deemed as registered dealers for the purposes of availing benefits of ITC. Otherwise, in such a situation, it would be difficult to hold that test of reasonable classification is met in this limited context. It becomes unnecessary to deal with other contentions of Mr Bagaria.

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48. Result of the aforesaid discussion would be to uphold the judgment of the High Court with one rider, namely, that in those cases where a dealer makes sales exclusively to the other State Government(s), benefit of ITC would be allowed without insisting on the furnishing of Form C. However, in order to avail this benefit, a certificate from the said State Government to whom the supplies are made would be obtained by the dealer claiming ITC and submitted to the VAT authorities." (Emphasis Supplied).

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Placing reliance on this decision, learned counsel for the petitioner Company has submitted that in the present case also, the situation is the same, as in the present case the inter-State sales made to the Indian Railways and also to the Department of Defence of the Government of India, who are only the dealers within the meaning of JVAT Act and not the registered dealers, and consequently, not in position to issue the prescribed Form-C, for claiming ITC on the sales made to them, but the genuineness of the sales cannot be doubted, and accordingly, the petitioner has been put to a disadvantageous position, even when it is clear

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W.P.(T) No. 4931 of 2016

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that there is no possibility of the tax evasion and there cannot be any such apprehension in case of the sales made to the Indian Railways and also to the Department of Defence of the Government of India. Learned counsel, accordingly, submitted that the petitioner is also entitled to the protection given by the Apex Court in the aforesaid decision, reading down the amendments and treating the sales made to the Indian Railways and to the Department of Defence of the Government of India, as the inter-State sales made to the registered dealers for availing the benefits of ITC. Learned counsel, thus, submitted that in view of the law settled by the Hon’ble Apex Court, the impugned order and the demand notice, cannot be sustained in the eyes of law.

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Learned counsel for the State, on the other hand, has opposed the prayer and has submitted that the decision of Hon’ble Apex court in TVS Motor Company Ltd.'s case (supra), shall not be applicable to the facts of this case. The term ‘dealer’ defined under Section 2(15) of the Tamil Nadu VAT Act, included State Government and the Central Government, as explanation to that Section clearly stated that the Central Government or any State Government shall be deemed to be the dealer for the purpose of the Act. It is further submitted that Section 38 of the Tamil Nadu VAT Act did not require any registration of the Government, as Section 38(8) of the said Act stated that this provision shall not apply to the State Government or the Central Government. Learned counsel has submitted that in the backdrop of the aforesaid facts, the said decision of the Hon’ble Apex Court in TVS Motor Company Ltd.'s case (supra), is not applicable to the present case, as the said provisions are not there in the JVAT Act. Learned counsel for the State has also placed strong reliance upon the decision of the Hon’ble Apex court in the case of ALD Automotive Pvt. Ltd. (supra), wherein the law has been laid down by the Hon’ble Apex Court that the ITC is a form of concession, which is provided by the Act, and it cannot be claimed as a matter of right but only in terms of the provisions of the statute, therefore, the conditions, mentioned in the amended Section 18 of the JVAT Act had to be fulfilled by the dealer for availing the ITC. It is submitted that since the Indian Railways and the Department of Defence of the Government of India are not the registered dealers, the conditions of the statute are not fulfilled and,

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accordingly, the petitioner Company cannot claim ITC by way of right, for the inter-State sales made to them.

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Having heard learned counsels for both the sides and upon going through the record, we find that the fact that the Indian Railways and the Department of Defence of the Government of India shall be the purchasing dealers, under the JVAT Act, cannot be disputed. The term ‘Dealer’ has been defined under Section 2(xiii) of the JVAT Act, which means 'any person' who carries on the business of buying and selling etc., whereas the term ‘Person’ has been defined under Section 2 (xxxviii) thereof, which includes the Central Government or the Government of any State or Union Territory in India, amongst others. In that view of the matter, it cannot be held that the Indian Railways and the Department of Defence of the Government of India are not the dealers within the meaning of the JVAT Act, as the provisions akin to Section 2(15) of Section 38(8) of the Tamil Nadu VAT Act, are not there in the JVAT Act.

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The second limb of contention of learned counsel for the State is that in Section 38 (8) of the Tamil Nadu VAT Act, the State Government or the Central Government are not required to be a registered, does not make any difference in the present case. By giving such exemption, the Central Government or the State Government, did not become the registered dealers in the State of Tamil Nadu, their status remained only of the unregistered dealers. Same is the situation in the State of Jharkhand also, irrespective of the fact, whether such provision is there in the JVAT Act or not. In this State also, the Indian Railways and the Department of Defence of the Government of India are only the unregistered dealers and not the registered dealers.

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As such, we find that there is practically no difference between the situations, prevailing in the State of Tamil Nadu and in the State of Jharkhand, and the present case is also squarely covered by the decision of the Hon’ble Apex Court in TVS Motor Company Ltd.'s case (supra). In the present case also, the genuineness of the transactions made to the Indian Railways and the Department of Defence of the Government of India, cannot be doubted and there can be no scope of any evasion of tax and in that view of the matter, we find and hold, that there is no reason to take a different stand than the one taken by the Hon’ble Apex Court in

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W.P.(T) No. 4931 of 2016

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TVS Motor Company Ltd.'s case (supra) . Accordingly, we make it clear that irrespective of the amendments, carried out by the JVAT (Amendment) Act, 2015, in Section 18 of the JVAT Act, inter-State sales made by any selling dealer from the State of Jharkhand to any State Government or any department of the Government of India or the Union Territory, shall be treated and deemed to be inter-State sales made to the registered dealers for the purpose of availing the benefits of ITC. We however, clarify that as held in TVS Motor Company Ltd.'s case (supra), the said benefit shall be allowed to the selling dealers in the State of Jharkhand, without insisting for furnishing the Form-C, but the certificates from the purchasing Government or the department thereof, have to be made available to the Commercial Taxes authorities for claiming such benefit.

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In view of the aforesaid discussions, the impugned order dated 20.5.2016, passed by the Assistant Commissioner of Commercial Taxes, Adityapur Circle, Jamshedpur, as contained in Annexure-8 to the writ application, to the extent it denies the claim of ITC to the petitioner Company for making inter-State sales to the Indian Railways and also to the Department of Defence of the Government of India, is hereby, quashed. Consequently, the demand notice dated 20.5.2016, as contained in Annexure-9 to the writ application is also quashed to that extent. The matter is remanded back to the Assessing Authority for passing the order afresh in the light of the aforesaid decision, with the liberty to the petitioner Company to produce the required certificates from the purchasing dealers, i.e. the Indian Railways and the Department of Defence of the Government of India.

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In view of this Judgement, the interlocutory application, being I.A. No.438 of 2020, filed in the case, challenging the amendments made in the JVAT Rules, 2006, has not been pressed by the learned counsel for the petitioner, which stands dismissed as not pressed.

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This writ application is accordingly, allowed with the directions as above.

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(H. C. Mishra, J.)

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(Deepak Roshan, J.)

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Amitesh/-

Ms Ramkrishna Forgings Limited Through Its Senior General Manager Finance Rahul Kumar Bagaria v. Finance

Case brief

What is this about?

What did the court decide?

Ms Ramkrishna Forgings Limited Through Its Senior General Manager Finance Rahul Kumar Bagaria v. Finance

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

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