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

Held

The Court held that the Indian Railways and the Department of Defence of the Government of India are 'dealers' within the meaning of the JVAT Act, as the definition of 'dealer' includes 'any person' and 'person' includes the Central Government or any State Government. The Court found no material difference between the situation in Jharkhand and Tamil Nadu, despite the absence of specific provisions in the JVAT Act similar to those in the Tamil Nadu VAT Act. The Court agreed with the petitioner that there is no scope for tax evasion in sales to the Government and that treating them at par with unregistered dealers is unreasonable. Therefore, the Court held that the case is squarely covered by the Supreme Court's decision in TVS Motor Company Ltd.'s case. The Court ruled that inter-State sales made from Jharkhand to any State Government, any department of the Government of India, or the Union Territory shall be treated as inter-State sales made to registered dealers for the purpose of availing ITC benefits. This benefit will be allowed without insisting on Form-C, but certificates from the purchasing Government or department must be provided. The impugned order and demand notice denying ITC were quashed to the extent they denied claims for sales to the Indian Railways and Department of Defence. The matter was remanded to the Assessing Authority for fresh orders, with liberty to the petitioner to produce required certificates.

Facts

M/s. Ramkrishna Forgings Limited (the petitioner) challenged an order dated 20.5.2016 by the Assistant Commissioner of Commercial Taxes, Adityapur Circle, Jamshedpur, and a consequent demand notice. These actions denied the petitioner's claims for Input Tax Credit (ITC) on inter-State sales made to the Indian Railways and the Department of Defence, Government of India. The denial was based on amendments made to Section 18 of the Jharkhand Value Added Tax Act, 2005 (JVAT Act) by the JVAT (Amendment) Act, 2015, effective from 13.5.2015. The petitioner argued that these amendments treated inter-State sales to the Government at par with sales to unregistered dealers, which was discriminatory and violated constitutional rights. The petitioner is registered under the JVAT Act and Central Sales Tax Act, 1956 (CST Act).

Key Issues

1. Whether the amendments to Section 18 of the JVAT Act, 2015, which deny ITC on inter-State sales to the Government (not being registered dealers) by treating them at par with inter-State sales to unregistered dealers, are violative of Articles 14, 19(1)(g), and 21 of the Constitution of India? Petitioner's arguments: The petitioner contended that inter-State sales to the Government should not be treated at par with sales to unregistered dealers because there is no possibility of tax evasion in sales to the Government. Treating them similarly discourages sales to government organizations, as it leads to higher tax liability for the selling dealer (at the rate applicable in the selling state) compared to sales to unregistered dealers (at 2% concessional rate). The petitioner relied on the Supreme Court's decision in TVS Motor Company Ltd. Vs. State of Tamil Nadu & Ors. Revenue's arguments: The State argued that ITC is a concession and cannot be claimed as a right, but only in terms of statutory provisions. They contended that the conditions in the amended Section 18 of the JVAT Act must be fulfilled. Since the Indian Railways and Department of Defence are not registered dealers, the conditions are not met. The State also argued that the TVS Motor Company Ltd. case was distinguishable as the JVAT Act lacked provisions similar to Section 2(15) and Section 38(8) of the Tamil Nadu VAT Act, which exempted government entities from registration requirements. The State relied on ALD Automotive Pvt. Ltd. Vs. The Commercial Taxes Department.