Madras High Court
The State Of Tamilnadu vs Tvl. The Madras Cements Limited on 11 September, 2024
Author: V.Bhavani Subbaroyan
Bench: V.Bhavani Subbaroyan
TCR (MD) No.1 of 2024
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 11.09.2024
CORAM:
THE HON'BLE Mrs.JUSTICE V.BHAVANI SUBBAROYAN
and
THE HON'BLE Mr.JUSTICE K.K.RAMAKRISHNAN
TCR (MD) No.1 of 2024
The State of Tamilnadu
rep.by the Joint Commissioner (CT)
Tirunelveli Division ... Appellant
Vs.
Tvl. The Madras Cements Limited
R.R.Nagar,
Virudhunagar ... Respondent
Prayer:
Tax Revision Case filed under Section 60 of the Tamilnadu Value
Added Tax Act, 2006 to set aside the order dated 22.09.2023 passed by
the Tamilnadu Sales Tax Appellate Tribunal (AB) Madurai in M.T.S.A. No.
339 of 2017 and confirm the order passed by the Assessing Authority.
For Appellant : Mr. A.K.Manikkam
Special Government Pleader
For Respondent : Mr.S.Karunakar
JUDGMENT
V.BHAVANI SUBBAROYAN J.,
The present Revision is filed seeking to set aside the order dated
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22.09.2023 passed by the Tamilnadu Sales Tax Appellate Tribunal (AB)
Madurai in MTSA No.3339 of 2017 and confirm the order passed by the
Assessing Authority.
2. The brief facts of the case are as follows:-
(i) The respondent, who is the registered dealer in an assessment
circle of Assistant Commissioner (CT)-3, Virudhunagar claimed ITC of Rs.
1,07,79,215/- by its return submitted for the assessment year 2006-2007
under Section 21 of Tamilnadu Value Added Tax Act, 2006, [hereinafter
referred to as TNVAT, 2006]. The Assessing Authority by an order dated
10.09.2013 disallowed the ITC to the tune of Rs.28,63,208/-. As against
the same, the respondent preferred an appeal before the Appellate Deputy
Commissioner (CT) Virudhunagar in A.P. No.55/2013 and by an order
dated 23.12.2015, the said appeal was allowed by taking note of the
Judgment of Hon'ble Supreme Court in the case of Vikram Cement that
explosives, lubricating oils used in mines have been held to be inputs
eligible for availment of Cenvat under Central Excise Rules. Not being
satisfied with the said order, the State has preferred the present appeal.
3. The learned counsel for the appellant challenges the impugned
order on three grounds, (i) There is a incorrect calculation of reversal of
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credit on donation sales to certain institutions along with inter-state stock
transfer etc., to the tune of Rs.23,22,640/- (ii) ITC is ineligible in RR Nagar
unit for the year 2006-2007 (iii) ITC is ineligible on lubricants, explosive
materials used in Mines, Mining Machineries and its spares, consumables
like electrodes. Further, instead of remanding the issue of ITC reversal,
Tribunal has allowed reversal of ITC, which is not sustainable in the
interest of Revenue, hence pleaded to allow the appeal.
4. Per contra, the learned counsel for the respondent submitted that
the manufacture of cement is a continuous process, commencing from
extracting lime stones, from quarries, grinding the same into cement after
undertaking various process of heating, powdering, mixing and ultimately
packing the same for marketing. The disputed ITC is relatable to purchase
of parts, accessories and components for the machinery already installed
and processing of goods, the respondent is eligible to claim the ITC for
those purchases. Further, the respondent-concern, is eligible to claim ITC
relating to purchases of consumables like explosives, welding rods and
lubricants, which are used in machineries for mining operation and in the
factory for running the machinery installed, thereby pleaded to confirm the
order passed by the appellate authority and to dismiss the present
Revision.
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5. Heard the learned counsel for the appellant and the learned
counsel for the respondent and perused the documents placed on record.
6. On considering the facts and circumstances of the case and the
contentions made on either side, the following issues arises for
consideration:-
1. Whether the respondent has established about the genuine
purchase of said category of goods for allowing the claim of ITC?
2. Whether the reversal of ITC is sustainable in the interest of
revenue?
7. The quesion raised in this case revolves around an interpretation
of the statutory provisions, specifically touching upon the eligibility or
otherwise to ITC. The facts are undisputed. The appellant is seeking to
adopt a categoric view that the respondent is not entitled to ITC in a
situation where the lubricants and explosives are not used as raw materials
for the manufacturing of cement, an exempt product, though admittedly
such exempt product is not sold as an independent commodity.
8. It is to be noted that Section 19(5)(c) is very specific to state that it
is only sale of exempted products that would result in denial of ITC on
inputs. There is nothing therein to suggest and hence support the
proposition that mere purchase / generation and consumption of fuel /
electricity respectively would attract the bar under Section 19(5)(c).
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9. In order to answer the 1st question, it is important to extract
Section 2(11) 'Capital goods', which stipulates that,
(a) Plant, machinery, equipment, apparatus, tools,
appliances or electrical installation for producing, making,
extracting or processing of any goods or for extracting or for
bringing about any change in any substance for the
manufacture of final products
(b) Pollution control, quality control, laboratory and cold
storage equipments;
(c) Components, spare parts and accessories of the
goods specified in (a) and (b) above;
(d) Moulds, dies, jigs and fixtures;
(e) Refractors and refractory materials ;
(f) Storage tanks ; and
(g) Tubes, pipes and fitting thereof;
wherein, used in the state for the purpose of manufacture,
processing, packing or storing of goods in the course of busines
excluding civil structures and such goods as may be notified by
the government.
10. From the above, it is clear that Section 2(11) of TNVAT, 2006,
'Capital Goods' not only includes plant and machinery, equipment's
apparatus, tools, appliances or electricial installation for producing, making
extracting or processing of any goods or for extracting or for bringing about
any change in any substance for the manufacture of final products, it also
includes goods used for post manufacturing of other goods including
pollution control equipment's quality control equipment, laboratory and
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spares components accessories etc., hence, concluded that the wind mill
used by the respondent qualifies as 'capital goods' as long as it is used for
the purpose of manufacture, processing, packing or storing of the goods in
the course of business.
11. The question that arose was whether the aforementioned
materials would come within the meaning of the expressions 'raw material'
or 'processing material' or 'consumable stores'. On earlier occasion, the
Hon'ble Bench recorded that the parties had referred to the tests laid down
in Ballarpur Industries and J.K.Cotton on the one hand and Coastal
Chemicals Limited on the other and directed the Gujarat High Court to
reconcile which line of decisions should be applied while deciding the
question framed by them.
12. In Ballapur Industries (supra), rendered in the context of the
Central Excise and Salt Act of 1944, the Hon’ble Supreme Court
considered the meaning of the term ‘raw material’ in the context of whether
such raw material should be discernible in the end product in order to
satisfy such usage. The Bench considered that several ingredients used in
the manufacture of any end product might be consumed in the process of
manufacture itself, while some may retain their dominant individual identity
and character and may still be discernible in the end product. Thus, for an
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item to qualify as a raw material, it need not necessarily find place in the
end product.
13. In the case of Commercial Taxation Officer, Udaipur V.
Rajasthan Taxchem Ltd. ((2007) 5 VST 529, it was the interpretation
of Section 2(34) of the Rajasthan Sales Tax Act, 1994 (in short ‘RST Act’)
that came up for consideration. The statutory provision has been extracted
in paragraph 7 of that judgement and reads as under:-
‘7. It is also beneficial to reproduce the definition of “raw material”
which reads as under:-
"Section 2(34). ‘Raw material’ means goods used as an ingredient in
the manufacture of other goods and includes preservatives, fuel and
lubricant required for the process of manufacture."
14. That apart, this Court, in W.P.Nos.4487, 4488 of 2008 etc., batch
in the case of Sri Kannapiran Mills Limited Vs. The Assistant
Commissioner, at paragraph no.45 has held as follows:-
“45. A lower rate of tax had been paid on a raw material used in
the manufacture of final product. The Assessing Officer had held that
since diesel was not used directly for the manufacture of the final
product, the benefit of low tax claimed by the petitioner was not liable
to be accepted. The Court noticed that there was a list of raw materials
that had been annexed to the Registration Certification of that
petitioner which included fuel and lubricants and, in light of such
provision in Section 2(34), accepted the assessee’s claim for lower
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rate of tax.
In light of the abovesaid detailed discussion and the overwhelming
conclusion arrived at by the Courts in the judgements cited and discussed,
the impugned order is perfectly valid in the eye of law and the present
Appeal fails and the same is dismissed. The substantial questions raised
are answered against the petitioner. No costs.
(V.B.S.,J.) (K.K.R.,J.)
11.09.2024
Index:Yes/No
Internet:Yes/No
Speaking / Nonspeaking Judgment
ssd
To
Tvl. The Madras Cements Limited
R.R.Nagar,
Virudhunagar
https://www.mhc.tn.gov.in/judis
V.BHAVANI SUBBAROYAN J.
and
K.K.RAMAKRISHNAN J.
ssd/sbn
11.09.2024
https://www.mhc.tn.gov.in/judis
