Madras High Court
M/S.Shri Natraj Ceramic & Chenical ... vs The State Of Tamil Nadu Represented By on 12 May, 2025
Author: P.Velmurugan
Bench: P.Velmurugan
TC (MD).No.21 of 2010
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Dated : 12.05.2025
CORAM:
THE HON'BLE Mr.JUSTICE P.VELMURUGAN
and
THE HON'BLE Mr.JUSTICE K.K.RAMAKRISHNAN
TC (MD).No.21 of 2010
M/s.Shri Natraj Ceramic & Chenical Industries Ltd.,
Dalmiapuram,
Trichy. ... Appellant
Vs.
The State of Tamil Nadu represented by
The Joint Commissioner (CT),
Trichy Division, Trichy. ... Respondent
Prayer:
Tax Revision Case has been filed under Section 60(1) of the
Tamilnadu Value Added Tax Act, 2006, to set aside the order of the Tamil
Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai, in
MTA.No.48 of 2009 dated 17.08.2010.
1/10
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TC (MD).No.21 of 2010
For Appellant : Mr. S.Karunakar
For Respondent : Mr.R.Suresh Kumar,
Additional General Pleader
JUDGMENT
(Order of the Court was made by K.K.RAMAKRISHNAN J.,)
The present Tax Case Appeal is filed seeking to set aside the order
dated 17.08.2010 passed by the Tamil Nadu Sales Tax Appellate Tribunal
(Additional Bench), Madurai, in MTA.No.48 of 2009.
2. The brief facts of the case are as follows:-
The appellant is a manufacturar of Refratory products. They entered
into an agreement with M/s.Dalmia Cement (Bharat) Limited (herein
thereafter called DCL) on 27.11.1997 wherein they undertook to carry out
the job work of manufacturing the refratory products by using the basic
raw materials supplied by DCL. They are the registered dealer under the
Tamil Nadu Value Added Tax Act, 2006. They made the assessment for the
year 2006 – 2007 under the Tamil Nadu Value Added Tax Act, 2006 as per
the original assessment order dated 30.06.2008 passed against them.
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Subsequently, the assessment was revised by the assessing authority for the
wrong claim of 'input tax credit' on capital goods for the reason that the
appellant was only doing job work to the Tvl.Dalmia Cements (P) Limited
and they are not eligible to claim input tax credit on capital goods and
therefore, there is a claim of Rs.3,06,337/-. The said reassessment order
was challenged by the appellant before the Appellate Deputy
Commissioner (CT), Trichy. The Appellate Deputy Commissioner (CT),
Trichy, declined to accept their appeal and hence, they preferred further
appeal before the Tamil Nadu Sales Tax Appellate Tribunal (Additional
Bench), Madurai, in MTA.No.48 of 2009 and the same was dismissed by
the order dated 17.08.2010. Aggrieved over the said order, the appellant
has preferred the present appeal.
2.1. The learned counsel for the appellant would submit that both
the Authorities failed to consider that the appellant is entitled to input tax
credit on the purchase of capital goods as per Section 19(2)(iv) of the
TNVAT Act, 2006.
2.2. He would further submit that the authorities erroneously held
that since the appellant who undertook the job work of manufacture for
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others, are not eligible to avail input tax credit on the purchase of capital
goods since the capital goods were used for job work of others. The
Appellate Tribunal failed to consider the clause(e) in sub rule (4) of Rule
10 of the TNVAT Rules, 2007, and hence, there are legal infirmities in the
order of both the authorities. Hence, he seeks to allow this appeal by
setting aside the order dated 17.08.2010, passed by the Tamil Nadu Sales
Tax Appellate Tribunal (Additional Bench), Madurai, in MTA.No.48 of
2009.
3. Per contra, Mr.R.Suresh Kumar, the learned Additional
Government Pleader for the respondent would submit that first of all, to
claim benefit of input tax credit, the appellant should be a dealer and also
manufacturing capital goods. In this case, the appellant is neither a dealer
nor manufacturing capital goods. DCL produced the final products by
using the products supplied by the appellant vide the job work. The job
work does not come under the purview of the Act. Even though, there is no
definition for 'job work' under TNVAT Act, it was incorborated in Rule
2(n) of the Cenvat Credit Rules, 2004, which reads as follows:-
“(n) “job work” means processing or working upon
of raw material or semi-furnished goods supplied tothe
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job worker, so as to complete a part or whole of the
process resulting in the manufacture or finishing of an
article or any operation which is essential for aforesaid
process and the expression “job work” shall be construed
accordingly;”
3.1. In view of the above definition, the appellant is not entitled to
claim the benefit of input tax credit and both the authorities considered the
said fact. As per the judgment of the Hon'ble Supreme Court in Prestige
Engineering (India) Ltd., and Others Vs. Collector of Central Excise,
Meerut and Others reported in 1994 6 SCC 465, the appellant's claim is
not legally maintainable. Therefore, he prayed for dismissal of the appeal.
4. Heard the learned counsel for the appellant and the learned
Additional Government Pleader for the respondent and perused the
documents placed on record.
5. At the time of admission, the following questions of law have
been framed:-
i) Whether the Appellate Tribunal is correct in
holding that the purchase of goods and use of these
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goods as capital goods in the manufacture of taxable
goods should be doen by the same registered dealer who
effects taxable sales of the manufactured goods?
ii) Whether the Appellate Tribunal is correct in
holding that it is only the registered dealers who effects
the taxable sales of the manufactured goods are eligible
to avail input tax credit on the purchase of goods by
them which are used as capital goods by them in the
manufacture of taxable goods?
iii) Whether the Appellate Tribunal is correct in
holding that a plain reading of Section 19(2)(iv) of the
TNVAT Act, 2006 clearly reveal that the purchase of
goods and use of these goods as capital goods in the
manufacture of taxable goods should be done by the
same registered dealser who effects taxable sales of the
manufactured goods?
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6. To consider the petitioner's case, it is relevant to extract the
material clause of the agreement which reads as follows:-
And whereas DCB has That DCB shall supply the basic
approached SNCCIL for getting raw material viz., Bauxite, Clays,
Refractory products manufactured Magnesite, Chromite etc., and other
on a job-work basis at SNCCIL's fuel material viz., Coal, Coke and
plant at Dalmiapuram so as to Furnace oil etc,, which may be
widen its range of Refractory required by SNCCIL for the
products. manufacture of the products.
7. As per the job work agreement entered by the appellant with DCL,
they only manufactured the refractory products by using the material
supplied by DCL. The said components are further used in the
manufacturing of final product of DCL. Thereafter, DCL would produce
the final products by using the said components. Therefore, job work
entrusted with the appellant by DCL can not be treated as manufactuing of
capital goods in order to claim themselves as a dealer. They were only
doing a job work by using the materials supplied by DCL. In the said
circumstances, both the authorities correctly rejected the appellant's claim
that they are not entitled to claim the benefit of the input tax credit. It is
well settled principle as per Section 17 of the TNVAT Act, the burden of
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proving claim of input tax credit would always lie on the dealer. In this
case, in view of the above discussion, the appellant has not discharged the
same. The further plea of the respondent is that manufacturing of some of
the additional material by the appellant would not make any difference in
the above said reasoning. The Hon'ble Supreme Court in the case of
Prestige Engineering (India) Ltd., and Others Vs. Collector of Central
Excise, Meerut and Others (Cited supra), has made an elaborate
discussion on this aspect and the ratio laid down by the Hon'ble Supreme
Court is applicable to the present case.
8. Another submission of the learned counsel for the assessee on the
basis of the Clause (e) in Sub Rule (4) of Rule 10 of the TNVAT, 2007, is
misconceived one for the reason that the same was incorporated in the
Rule on 03.12.2008 i.e., much after the assessment made in this case.
9. In the result, all the questions of law framed by this Court were
answered against the appellant/assessee and answered in favour of the
respondent/Revenue.
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10. In light of the abovesaid detailed discussion and the
overwhelming reasons for the conclusion arrived at by the Courts in the
judgment 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 appellant/assessee
and answered in favour of the respondent/Revenue. No costs.
(P.V.,J.) (K.K.R.,J.)
12.05.2025
NCC : Yes/No
Index:Yes/No
Internet:Yes/No
dss
To
The State of Tamil Nadu represented by
The Joint Commissioner (CT),
Trichy Division, Trichy.
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P.VELMURUGAN
and
K.K.RAMAKRISHNAN
dss
12.05.2025
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