Sterlite Industries (INDIA) vs. The Assistant Commissioner

Held

The Court held that the impugned orders were vitiated due to the non-issuance of a specific personal hearing notice to the petitioner, which is a violation of the principles of natural justice as mandated by Section 27 of the Tamil Nadu Value Added Tax Act, 2006. The Court referenced the decision in M/s. Amararaja Batteries Limited vs. The Assistant Commissioner (CT) to emphasize that a personal hearing must be fixed and afforded, not merely implied. Furthermore, the Court found merit in the petitioner's core contention that the furnace oil was used as a fuel in the manufacturing process of copper. Relying on the Orissa High Court's decision in Reliance Industries Ltd. vs. Asst. Commissioner Of Sales Tax, the Court noted that furnace oil used in the manufacturing process should be treated as an input for which ITC is available. The Court observed that this crucial aspect was not adequately considered by the assessing authority, who failed to conduct a proper study or spot inspection to verify the petitioner's claim. Consequently, the Court quashed the impugned orders and remitted the matter back to the assessing authority for fresh consideration. The assessing authority was directed to issue a fresh pre-revision notice and conduct a personal hearing, leaving all contentions of the petitioner open for adjudication.

Facts

Sterlite Industries (India) Limited (the petitioner) filed three writ petitions challenging orders passed by the Assistant Commissioner (CT) and the Appellate Deputy Commissioner (CT) concerning input tax credit (ITC) for furnace oil and LSHS oil used in their captive power plant. The tax periods in question relate to assessment years 2006-07, 2007-08, and 2008-09. The revenue authorities sought to reverse the ITC claimed on these oils, contending they were used for producing electricity, an exempted commodity, and that the petitioner was claiming a double benefit. The petitioner argued that the oils were used as fuel for smelting purposes in manufacturing copper, not for electricity generation, and requested a spot study. The impugned orders were passed without issuing specific personal hearing notices, despite the petitioner's objections and requests for a factory visit.

Key Issues

1. Whether the impugned orders passed by the respondent authorities are vitiated due to the non-issuance of a specific personal hearing notice to the petitioner, thereby violating principles of natural justice, as contemplated under Section 27 of the Tamil Nadu Value Added Tax Act, 2006? 2. Whether the furnace oil and LSHS oil purchased by the petitioner and used in their captive power plant should be treated as inputs for manufacturing copper, entitling the petitioner to claim input tax credit under Section 19(2) of the Tamil Nadu Value Added Tax Act, 2006, or if they were used for generating electricity, an exempted commodity, thus disentitling the ITC claim? Petitioner's Contentions: The petitioner argued that the furnace oil was used solely as a fuel for maintaining heat for smelting purposes in the manufacturing of copper, not for generating electricity. They relied on the decision in Reliance Industries Ltd. vs. Asst. Commissioner Of Sales Tax ((2008) 15 VST 228 Orissa) to support their claim that furnace oil used in the manufacturing process should be treated as an input for ITC. The petitioner also contended that the assessing authority failed to consider this core issue and did not conduct a spot inspection or study as requested. Respondents' Contentions: The respondents argued that the petitioner was seeking a double benefit and that the furnace oil was used for producing electricity, which is an exempted commodity, justifying the reversal of ITC. They also contended that personal discussions had taken place, negating the need for an independent personal hearing.