Rajasthan High Court
National Engineering Industries ... vs Assistant Commissioner, Anti ... on 27 September, 2023
Bench: Sameer Jain
[2023:RJ-JP:25250]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Sales Tax Revision / Reference No. 13/2019
National Engineering Industries Limited, Khatipura Road, Jaipur
----Petitioner
Versus
Assistant Commissioner, Anti, Evasion, Rajasthan-I, Jaipur
----Respondent
Connected With
S.B. Sales Tax Revision / Reference No. 8/2019
National Engineering Industries Limited, Khatipura Road Jaipur
----Petitioner
Versus
Assistant Commissioner Anti Evasion, Rajasthan-I Jaipur
----Respondent
S.B. Sales Tax Revision / Reference No. 11/2019
National Engineering Industries Limited, Khatipura Road Jaipur
----Petitioner
Versus
Assistant Commissioner Anti Evasion, Rajasthan-I Jaipur
----Respondent
S.B. Sales Tax Revision / Reference No. 15/2019
National Engineering Industries Limited, Khatipura Road, Jaipur
----Petitioner
Versus
Assistant Commissioner, Anti Evasion, Rajasthan-I, Jaipur
----Respondent
For Petitioner(s) : Mr. Anant Kasliwal, Sr. Advocate with
Mr. Vaibhav Kasliwal
For Respondent(s) : Mr. Ayush Singh for
Mr. Punit Singhvi
HON'BLE MR. JUSTICE SAMEER JAIN
Order
Reportable
Reserved on - 08/08/2023
Pronounced on - 27/09/2023
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1. The present Sales Tax Revisions / References (for short
"STRs"), filed under Section 84 of the Rajasthan Value Added Tax
Act, 2003 (for short "RVAT Act"), were admitted on following
questions of law:
"i) Whether the claim of Input Tax Credit (for short
"ITC") on tax paid for purchase of Duty Entitlement
Pass Book (for short "DEPB") / Duty Free Licences /
Duty Credit Scrip can be refused, even though the
scrips have been used for the purpose of manufacture
of finished goods, within the State of Rajasthan?
ii) Whether interest can be levied and charged, even
though full amount of tax due from the dealer under
the Act according to returns has been deposited and as
such, interest on differential tax determined on
reopened assessment could be validly and legally
charged?"
2. As common issue is involved in all these STRs, with the
consent of the parties, they were heard together and are now
being decided by way of this common order. STR No. 13/2019 is
taken as lead file to peruse the facts.
3. Brief facts leading to these STRs are that the petitioner-
assessee is a manufacturer of various types of bearings used for
automotive, industrial and railway purposes. The Anti-Evasion
Authorities surveyed the business premises of the appellant on
23.08.2016 and found that the appellant has purchased DEPB /
Duty Free Licenses / Duty Credit Scrip within the State and has
claimed and availed the ITC of the tax paid on purchase of these
intangible goods. The enquiry officer found that no ITC is available
on these items if the same are not disposed off in accordance with
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Section 18 of the RVAT Act. Accordingly, a case of tax-evasion was
made out and it was transferred to the adjudicating/assessing
officer (for short "AO"), who after affording an opportunity of
hearing to the petitioner-assessee disallowed the input credit
availed by them and levied interest on non-deposition of the due
tax. The AO also held that the petitioner-assessee has availed
wrong input tax credit and caused evasion of tax, and therefore
imposed penalty under Section 61(2)(b) of the RVAT Act. Being
aggrieved of the assessment order, the petitioner-assessee
preferred appeals before the appellate authority, who vide order
dated 16.08.2017 confirmed the reversal of ITC and levy of
interest and penalty and rejected the appeals. Against the
appellate orders, the petitioner-assessee preferred appeal under
Section 83 of the RVAT Act before the Rajasthan Tax Board, who
vide its order dated 13.09.2018, confirmed the reversal of ITC and
levy of interest, but set aside the penalty.
4. Learned counsel for the petitioner-assessee submits that
they had purchased DEPB / Duty Free Licenses / Duty Credit Scrip
from the registered dealer which are used for import of
machinery/raw material and that raw material was further used in
manufacturing of the taxable goods in the State of Rajasthan. The
claim of ITC on purchase of DEPB is on the basis of VAT charged
by the selling dealer in the invoices. Learned counsel for the
petitioner-assessee further submits that VAT paid on purchase of
such DEPB Scrips shall be deemed to be input tax paid on the
goods purchased for further use in manufacturing of the final
products, therefore, it fulfills the conditions of Section 18 of the
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RVAT Act and the petitioner-assessee is eligible for ITC on these
DEPB / Duty Free Licenses / Duty Credit Scrip. In support of his
submissions, learned counsel for the petitioner-assessee has relied
on Apex Court judgments of J.K. Cotton Spinning and Weaving
Mills Co. Ltd. vs. Sales Tax Officer, Kanpur and Ors. reported
in AIR 1965 SC 1310; Vikas Sales Corporation and Ors. vs.
Commissioner of Commercial Taxes and Ors. reported in AIR
1996 SC 2082; Yasha Overseas and Ors. vs. Commissioner
of Sales Tax and Ors. reported in (2008) 8 SCC 681; judgment
of Division Bench of Madhya Pradesh High Court in the case of
Commercial Engineers and Body Building Company Ltd. vs.
Divisional Deputy Commissioner, Commercial Tax Office
and Ors. reported in ILR (2015) MP 2668; and judgment of
Division Bench of Delhi High Court in the case of Jagriti Plastics
Ltd. and Ors. vs. Commissioner of Trade and Taxes reported
in (2015) 223 DLT 571.
5. Per contra, supporting the concurrent findings of the
authorities below, learned counsels for the revenue submits that
no question of law worth consideration arises in the present STRs.
Learned counsel for the revenue further submits that as per
scheme of Section 18 of the RVAT Act, the ITC is allowed only in
cases as enumerated under clause (a) to (g) of sub-section (1).
Since the goods in question, i.e. DEPB / Duty Free Licenses / Duty
Credit Scrip, have been utilized against payment of the custom
duty on imports of machinery/raw material, which does not fall
under any of the clauses of Section 18(1) of the RVAT Act and
therefore the ITC was rightly disallowed. In support of his
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submissions, learned counsel for the revenue has placed reliance
on Division Bench judgment of Madras High Court in the case of
Sha Kantilal Jayantilal vs. The State of Tamilnadu reported in
(2017) 97 VST 295 (Mad). Learned counsel for the revenue has
also relied on Apex Court judgment of Jayam and Co. vs.
Assistant Commissioner and Ors. reported in (2016) 15 SCC
125 to submit that the dealer has no vested right to claim benefit
of ITC as the same is a concession granted by virtue of a statute
and whenever concession is given by a statute or notification, the
conditions mentioned thereof are strictly required to be complied
with in order to avail the concession. Learned counsel for the
revenue further submits that the judgments of Jagriti Plastics
(supra) and Commercial Engineers and Body Building
Company Ltd. (supra), relied upon by the petitioner-assessee,
are under the regime of Delhi VAT Act and Madhya Pradesh VAT
Act and the provision of ITC in RVAT Act are not pari materia with
those statutes, and therefore these judgments have no application
in the facts and circumstances of the present case.
6. Heard the arguments advanced by both the sides, scanned
the record of the STRs and considered the judgments cited at Bar.
7. In the case in hand, the main question involved is as to
whether the purchase of DEPB / Duty Free Licenses / Duty Credit
Scrip within the State after paying VAT on it, can a dealer claim
ITC on VAT so paid, if the goods in question are used for set off
against or payment of custom duty payable on import of raw
materials.
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8. Since the issue involved pertains to entitlement of ITC under
RVAT Act, the relevant part of Section 18 of RVAT Act is
reproduced as under:
"Section 18 - Input Tax Credit
(1) Input tax credit shall be allowed, to registered
dealers, other than the dealers covered by sub-section
(2) of section 3 or section 5, in respect of purchase
of any taxable goods made within the State from a
registered dealer to the extent and in such manner as
may be prescribed, for the purpose of.-
(a) sale within the State of Rajasthan; or
(b) sale in the course of inter-State trade and
commerce; or
(c) sale in the course of export outside the
territory of India; or
(d) being used as packing material of goods,
other than exempted goods, for sale; or
(e) being used as raw material, except those as
may be notified by the State Government, in
the manufacture of goods other than exempted
goods, for sale within the State or in the course of
Inter-State trade or commerce; or
(f) being used as packing material of goods or as
raw material in manufacture of goods for sale in
the course of export outside the territory of India;
or
(g) being used in the State as capital goods in
manufacture of goods other than exempted
goods;
However, if the goods purchased are used partly for
the purposes specified in this sub-section and partly as
otherwise, input tax credit shall be allowed
proportionate to the extent they are used for the
purposes specified in this sub-section.
(2) The input tax credit under sub-section (1) shall be
allowed only after verification of the deposit of tax
payable by the selling dealer in the manner as may be
notified by the Commissioner.
...
(emphasis supplied)"
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9. It is settled and undisputed that DEPB / Duty Free License /
Duty Credit Scrip are 'goods' for the purpose of RVAT Act. The said
legal position has been settled by the Hon'ble Supreme Court in
Vikas Sales Corporation (supra) and Yasha Overseas and
Ors (supra).
10. It is an admitted position that the petitioner-assessee, a
registered dealer, had purchased the goods in question from
another registered dealer after payment of VAT. Therefore, the
petitioner-assessee has satisfied the first condition mentioned in
Section 18(1) of the RVAT Act. The goods in question were then
admittedly used for import of raw materials. The bone of
contention in the present case is the second condition mentioned
in Section 18(1) of the RVAT Act, which prescribes the various
purposes under which the dealer can claim ITC. The petitioner-
assessee was denied the availment of ITC because, as per the
Revenue, the case of the petitioner-assessee is not covered under
any of the sub-clause of Section 18(1) of the RVAT Act. To
understand and interpret Section 18, the following provisions of
the RVAT Act are also required to be analysed:
"Section 2 - Definitions
(15) "goods" means all kinds of movable property,
whether tangible or intangible, other than newspapers,
money, actionable claims, stocks, shares and
securities, and includes materials, articles and
commodities used in any form in the execution of
works contract, livestock and all other things attached
to or forming part of the land which is agreed to be
severed before sale or under the contract of sale;
(17) "input tax" means tax paid or payable by a
registered dealer in the course of business, on the
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purchase of any goods made from a registered
dealer;
(28) "purchase price" means the amount paid or
payable by a dealer as valuable consideration for the
purchase of goods including all ancillary and
incidental expenses and statutory levies payable but
excluding the tax payable under this Act;
(29) "raw material" means goods used as an
ingredient in the manufacture of other goods and
includes processing material, consumables,
preservative, fuel and lubricant required for the
process of manufacture;
(35) "sale" with all its grammatical variations and
cognate expressions means every transfer of property
in goods by one person to another for cash, deferred
payment or other valuable consideration and includes,
(i) a transfer, otherwise than in pursuance of a
contract, of property in goods for cash, deferred
payment or other valuable consideration;
(ii) a transfer of property in goods (whether as
goods or in some other form) involved in the
execution of a works contract;
(iii) any delivery of goods on hire-purchase or
other system of payment by installments;
(iv) a transfer of the right to use goods for any
purpose (whether or not for a specified period)
for cash, deferred payment or other valuable
consideration;
(v) a supply of goods by an unincorporated
association or body of persons to a member
thereof for cash, deferred payment or other
valuable consideration; and
(vi) a supply, by way of or as part of any service
or in any other manner whatsoever, of goods,
being food or any other article for human
consumption or any drink (whether or not
intoxicating), where such supply is for cash,
deferred payment or other valuable consideration,
and such transfer, delivery or supply shall be deemed
to be a sale and the word "purchase" or "buy" shall be
construed accordingly;
Explanation.-Notwithstanding anything contained
in this Act, where any goods are sold in packing,
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the packing material in such case shall be
deemed to have been sold with the goods;
(36) "sale price" means the amount paid or payable to
a dealer as consideration for the sale of any goods less
any sum allowed by way of any kind of discount or
rebate according to the practice normally prevailing in
the trade, but inclusive of any statutory levy or any
sum charged for anything done by the dealer in respect
of the goods or services rendered at the time of or
before the delivery thereof, except the tax imposed
under this Act;
Explanation I.-In the case of a sale by hire
purchase agreement, the prevailing market price
of the goods on the date on which such goods are
delivered to the buyer under such agreement,
shall be deemed to be the sale price of such
goods;
Explanation II.-Cash or trade discount at the time
of sale as evident from the invoice shall be
excluded from the sale price but any ex post facto
grant of discounts or incentives or rebates or
rewards and the like shall not be excluded;
Explanation III.-Where according to the terms of
a contract, the cost of freight and other expenses
in respect of the transportation of goods are
incurred by the dealer for or on behalf of the
buyer, such cost of freight and other expenses
shall not be included in the sale price, if charged
separately in the invoice
(emphasis supplied)"
11. The term 'input tax' has been given a wide meaning to
include tax paid on any goods. The definition of 'raw material' is
also inclusive and not exhaustive and any good which is used in
the manufacture of other good is included in the broad definition
of 'raw material'.
12. The concept of input tax was introduced by the RVAT Act as
the erstwhile Rajasthan Sales Tax Act, 1994 had no provision of
input tax. The concept of input tax and credit thereupon was
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introduced to avoid the cascading effect of tax. The jurisprudence
of ITC in VAT regime was discussed in detail by Division Bench of
Delhi High Court in the case of Jagriti Plastics Ltd. (supra), the
relevant part of which is reproduced as under:
"17. The next question that, therefore, arises is
whether it can be said that the DEPB scrips on which
input tax had already been paid by the Assessee at the
time of purchasing the DEPB scrips could be adjusted
against output tax collected by them at the time of sale
of the imported commodity? The case of the DTT is
that unless the DEPB scrips are 'used' in the imported
goods which are then sold, no such input tax credit can
be availed of. According to Mr. Satyakam, the mere
using of DEPB scrips as cash to reduce the incidence of
customs duty cannot constitute usage for the purposes
of Section 9(4) of the Act.
18. Section 9(4) has to be read with Section 9(3) both
of which read as under:
"9. Tax Credit
...
(3) The amount of the tax credit to which a dealer
is entitled in respect of the purchase of goods
shall be the amount of input tax arising in the tax
period reduced in the manner described in sub-
sections (4), (6) and (10) of this section.
(4) Where a dealer has purchased goods and the
goods are to be used partly for the purpose of
making the sales referred to in sub-section (1) of
this section and partly for other purposes, the
amount of the tax credit shall be reduced
proportionately."
19. There can be no doubt that the price of the goods
imported has an element of customs duty paid on such
goods. The component of customs duty is reduced to
the extent of the usage by the Assessee of the DEPB
scrips. The reduced customs duty is embedded in the
resale price of the imported goods. Thus, the use of the
DEPB scrips is for the purpose of the Assessee selling
the imported goods. 'Usage' in this context has to be
seen as a use that affects the price of the goods
although it may not be used tangibly in the goods
themselves. There is no warrant to limit the
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understanding of the word 'use' to an actual direct
tangible or physical use in the imported goods.
20. It is possible in this context to draw an
analogy with CENVAT or MODVAT credit, the
purpose of which, like VAT, was to mitigate the
cascading effect of multiple taxes at various
stages of the trade in goods. In Oil & Natural Gas
Corporation Limited v. Commissioner of Central Excise,
Sales Tax & Custom, Raigad: 2013 (32) STR 31 (Bom)
the facts were that the Appellant set up a plant to
make economic use of the crude oil and associated
natural gas extracted from the oil wells. This resulted
in production of lighter hydro carbons, natural gas and
other downstream products. The crude oil was
exempted from payment of excise duty, which was
therefore, an exempted commodity. Inasmuch as
ONGC also manufactured the downstream products,
which were dutiable, it availed of the CENVAT credit in
respect of the service tax paid on the input services in
terms of the facility extended to manufacturer of
excisable goods under the CENVAT Credit Rules. The
Department took the stand that CENVAT credit
pertained to the input service availed of and used
exclusively at the oil fields of Mumbai Offshore and that
since the crude oil and natural gas were exempted
from excise duty, the CENVAT credit was not
admissible. Allowing the appeal of ONGC against the
confirmation of the demand the Bombay High Court
interpreted the word "input service" occurring in Rule
2(1) as well as Rule 3(1)(ii) of the CENVAT Credit
Rules, 2004 to comprehend within its meaning "a
service which is used by the manufacturer even
indirectly, or in relation to the manufacture of a final
product." It was noticed that the manufacture of the
dutiable final products could not take place without the
process in question.
21. The High Court of Madhya Pradesh in M/s.
Commercial Engineers & Body Building Company Ltd.
v. Divisional Deputy Commissioner, Commercial Tax
Office (decision dated 5th August 2015 in WP No.
7628/2015) was dealing with the claim of an Assessee
to input tax credit under the Madhya Pradesh Value
Added Tax Act (MPVAT Act). There certain components
on which the input tax was paid were used for
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fabricating plant and machinery used in the
manufacture of the final product, i.e. the motor vehicle
body. The Court was called upon to decide whether the
Assessee would be eligible for rebate of input tax under
Section 14 of the MPVAT Act. It was held that the
intention of the legislature in providing rebate of
input tax was akin to provisions of MODVAT
credit and CENVAT credit. Section 14(1)(a) of the
MPVAT Act stated where "goods purchased by a
registered dealer from another registered dealer after
payment of duty is used by the purchasing registered
dealer or is consumed in the manufacturing or
processing of something or used as a plant, machinery,
equipment and parts in respect of goods then the final
product would be entitled for input rebate." The High
Court rejected the contention of the Department
that the material on which input tax was paid
should itself be sold and should not be further
used in respect of anything for the making of a
final product which is ultimately sold.
22. In Coca Cola India Pvt. Ltd. v. Commissioner of
Central Excise Pune-III: 2009 (15) STR 657 (Bom.) it
was held in the context of CENVAT credit that service
tax paid on advertisement sales promotion and market
research was admissible as credit for payment of
excise duty on the soft drink concentrate particularly
when such expenses formed part of the price of the
final product on which excise duty was paid. In para 13
of the said judgement it was held "in order to avoid the
cascading effect the benefit of CENVAT credit on input
stage goods and services must be ordinarily allowed as
long as a connection between the input stage goods
and services is established. Conceptually as well as a
matter of policy, any input service that forms a part of
the value of the final product should be eligible for the
benefit of CENVAT credit."
23. Other decisions which hold likewise include Deepak
Fertilisers and Chemicals Corporation Ltd. v. CCE,
Belapur: 2013 (32) S.T.R. 532 (Bom.) and National
Aluminium Co. Ltd. v. Deputy Commissioner of
Commercial Taxes: (2012) 56 VST 68 (Orissa). In the
latter decision, the Orissa High Court was considering
the question: "Whether coal, alum, caustic soda, and
other consumables used for generation of electricity is
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to be treated as an "input" as defined under section
2(25) of the Orissa Value Added Tax Act and the tax
which has been paid on purchase of coal, alum, caustic
soda and other consumables, etc., can be claimed as
input-tax credit under Section 2(27) of the OVAT Act
against the tax payable on sale of finished product,
i.e., aluminium, aluminium ingots and sheets, etc.?" In
answering the said question in the affirmative, the
Orissa High Court held:
"It is not at all necessary that coal, alum, caustic
soda and other consumables, etc., purchased on
payment of tax and used in manufacturing of
electrical energy in order to qualify as input
should directly go into composition of the finished
products, what is required is that those goods
should be directly used in manufacturing and
processing for production of finished goods. The
expressions "directly go into composition of
finished product" and "directly used for
manufacturing or processing of finished products"
are not one and the same thing. There is a clear
distinction between the two. In the former, while
the goods directly go into the composition of
finished products, in the latter the goods are
directly used in manufacturing/processing of the
finished products. Therefore, coal, alum, caustic
soda and other consumables, etc., which are used
for manufacturing/generating of electrical energy,
are inextricably connected with the manufacturing
process of aluminium and aluminium ingots; they
are nothing but input and tax paid on purchase of
such input shall qualify for set off against output
tax paid/payable on sale of finished products."
24. The Court finds no reason why in respect of the
input tax credit provided under Section 9(1) read with
Section 9(4) of the DVAT Act a similar approach should
not be adopted. The usage by the Assessees, who
are registered dealers, of the DEPB scrips
purchased by them from another registered
dealer after paying the input tax for reducing the
incidence of customs duty should be held to
constitute use of such DEPB scrip for the
purposes of sale of the imported commodity. The
DEPB scrip has contributed, if not directly then
indirectly, to the price of the imported commodity
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sold by the Assessees in the market. There could
be any number of intangibles that have an impact on
the value of the final product like advertisement costs
in respect of which input service tax credit may have
been availed of, as was in the case of Coca Cola India
Pvt. Ltd. (supra). All that is to be shown is that
such input tax paid goods have contributed to the
sale of the final product in some way directly or
indirectly.
25. The Court also rejects the other contention of the
DTT that input tax credit cannot be availed of unless
the Assessees are themselves dealing in DEPB scrips.
In other words, in order to avail of the input tax credit
in the present case it is not necessary that the
Assessees have to be dealers in the same commodity,
i.e. the DEPB scrips which were used in payment of
customs duty on the imported goods in which they
were dealing. Such an interpretation will negate the
object of introducing the system of value added taxes,
i.e. to reduce the cascading effect of multiple taxes at
various stages. As long as it is shown that use of
the DEPB scrip has impacted the cost of the
product that is sold, either directly or indirectly,
the credit of the input tax paid on the DEPB scrip
cannot be denied to the Assessees.
(emphasis supplied)"
13. Para 14 of the judgment of Division Bench of Madhya
Pradesh High Court in the case of Commercial Engineers &
Body Building Company Ltd. (supra) is also noteworthy:
"14. The intention of the legislature in providing a
provision for grant of rebate of input tax as contained
in the VAT Act is akin to the provisions of MODVAT
credit and CENVAT Credit applicable in Excise Law and
when sub section 2 and 4 of Section 14(1)(a) indicates
that the goods purchased by a registered dealer from
another registered dealer after payment of duty is used
by the purchasing registered dealer or is consumed in
the manufacturing or processing of something or used
as a plant, machinery, equipment and parts in respect
of goods i.e. the final product is entitled for input
rebate. If that be the intention of the legislature in
giving input rebate to a dealer then it would be beyond
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the legislative purpose if the intention of the legislature
is interpreted as done by the department by holding
that the material used or consumed should be sold and
should not be further used in respect of anything for
the making of a final product which is ultimately sold.
This could never be the intention of the legislature."
14. The Tax Board had distinguished the judgment of Jagriti
Plastics Ltd. (supra), passed by Division Bench of Delhi High
Court, in the following manner:
"11. On bare perusal of the above section of the Delhi
VAT Act, it is apparent that the tax credit is available to
a dealer in respect of the purchase made in the course
of his business activities and the goods are used by him
directly or indirectly for the purpose of making sales.
The Hon'ble Delhi High Court in the above referred
judgment has analysed the terms 'be used by him
directly or indirectly' and allowed the input tax credit on
the purchase of DEPB Scrip. But provisions of the RVAT
Act, precisely as contained in section 18, are not
identical to the section 9 of Delhi VAT Act, therefore,
the said judgment cannot be applied in the cases under
the RVAT Act.
14. On perusal of the provisions of various States
about allowability of ITC it appears beyond any doubt
that wherever any particular State intended to allow the
ITC on DEPB for any use, the specific provision was
made in their statutes. So, had the State Legislature
any intent to allow input credit on purchase of
DEPB/Duty Entitlement Scrips, which is subsequently
used against payment of customs duty, the express
provisions could have been incorporated. But the
language of the section 18 does not provide any such
availability of ITC. Therefore, it is held that ITC shall not
be allowed on purchase of DEPB/Duty Entitlement
Scrips when the same is used for payment of Customs
duty. In the backdrop of the legal position discussed
above, the AO has rightly disallowed the ITC and has
rightly levied interest on non-deposit of the due tax.
Therefore, the appellate order on this issue is confirmed
and appeals of the appellant on this issue are rejected."
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15. Having gone through the material on record extensively and
after careful consideration of the arguments advanced, this Court
is of the view that the case of the petitioner-assessee is covered
by Section 18(1)(e) of the RVAT Act, and therefore this Court is
not in agreement with the view taken by the Tax Board, for the
following reasons:
15.1) Because the petitioner-assessee has purchased the goods in
question from a registered dealer, after payment of VAT, and used
the same against the import of raw material, which was
admittedly used in the manufacturing of final product in the State
of Rajasthan. The goods in question i.e. DEPB / Duty Free
License / Duty Credit Scrip, by extension, would also necessarily
be deemed to be part of the raw material as the cost of the goods
in question would be embedded in cost of the raw materials,
thereby affecting the 'purchase price' and 'sale price'.
15.2) Because there is no specific exclusion of the goods in
question by way of notification of the State Government, as
prescribed in Section 18(1)(e) of the RVAT Act and as observed
earlier, the definition of 'raw material' is broad and exhaustive and
not narrow and inclusive.
15.3) Because not allowing input tax credit on the goods in
question, which form part of raw material, would not only defeat
the objective of RVAT Act (avoiding cascading effect of tax and
thereby resulting in double taxation) but also the objective of the
prevalent EXIM Policy, which is aimed to give level playing field to
the exporters by giving export incentive like that given on DEPB,
which enhances the value addition and the assessable value.
[2023:RJ-JP:25250] (17 of 18) [STR-13/2019]
15.4) Because the component of VAT paid on the goods in
question forms part of the assessable value of the
final/manufactured goods and when the component of VAT is
embedded in the final/manufactured goods, the same is
permissible for ITC, unless the same is specifically excluded.
15.5) Because the Apex Court judgment of Jayam and Co.
(supra), relied upon by learned counsel for the respondent-
revenue, wherein it was held that ITC is in nature of a concession
and dealer has no vested right to get benefit of ITC without
following the conditions imposed by the statute, has no application
in the facts and circumstances of the present case as it is not the
case where the petitioner-assessee has failed to comply with some
mandatory conditions. Rather, the present case involves around
the interpretation of 'raw material' and 'input tax credit'.
15.6) Because the Madras High Court (Division Bench) judgment
of Sha Kantilal Jayantilal (supra), relied upon by learned
counsel for the respondent-revenue, wherein the benefit of ITC
was denied to the dealer therein on DEPB License under Section
19(1) of Tamil Nadu VAT Act, 2006 because the DEPB License,
though held to be goods, did not find its place in the taxable
goods specified in the First Schedule to the Tamil Nadu VAT Act,
2006, also has no application in the facts and circumstances of the
present case as the DEPB License in the case in hand are held to
be covered under the broad definition of 'raw material' and
included under Section 18(1)(e) of the RVAT Act.
15.7) Although the judgment of Jagriti Plastics Ltd. (supra) is
based on provisions which are not pari materia to Section 18 of
[2023:RJ-JP:25250] (18 of 18) [STR-13/2019]
the RVAT Act, the fact remains that the underlying principle /
jurisprudence of ITC has been outlined in great detail and this
Court is in complete agreement with the view adopted by the
Division Bench of Delhi High Court. Applying the principles which
emerge therein to the provisions of RVAT Act, the inevitable
consequence would be that the petitioner-assessee would be held
entitled to the benefit of ITC under Section 18(1)(e) of the RVAT
Act, especially when there is no specific exclusion qua the same.
16. In view of the foregoing analysis, the questions of law
framed herein-above have to be answered in favour of the
petitioner-assessee and against the respondent-revenue.
17. Accordingly, all these STRs are allowed. The orders of the
Tax Board and the authorities below are quashed and set aside.
18. Pending application(s), if any, shall stand disposed of.
(SAMEER JAIN),J
ANIL SHARMA /31-34
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