Brahmaputra Metallics Limited Through Its Director Cum Authorized Signatory Aarsh Sahu vs. Comercial Taxes

Held

The Court held that coal used for generating electricity in the petitioner's captive power plant, where the electricity is exclusively used for manufacturing finished goods, is to be treated as raw material for those finished goods. Consequently, it qualifies for ITC under Section 18(4)(iii) of the JVAT Act, 2005. The Court directed the State to extend ITC benefits on the tax paid for coal used for electricity generation. Regarding the second issue, the Court concluded that Rule 35(2) of the JVAT Rules, 2006, prescribing the furnishing of JVAT-404 Forms for claiming ITC, is merely directory and not mandatory. However, an assessee failing to produce JVAT-404 must substantiate its ITC claim by producing documents as enumerated under Section 18(6) of the JVAT Act, 2005. The Court directed the State to re-examine the petitioner's claim of ITC amounting to Rs. 33,38,740/- by verifying original tax invoices evidencing input tax payment. The impugned assessment order, appellate order, and revision order were quashed.

Facts

The petitioner, Brahmaputra Metallics Limited, challenged orders denying Input Tax Credit (ITC) on coal used for its captive power plant. The coal was used to generate electricity, which in turn powered the petitioner's manufacturing of Sponge Iron and M.S. Billet. The Assessing Officer denied ITC, holding that electricity is not 'goods' and therefore coal used for its generation is not a raw material. This was upheld by the Appellate Authority and the Commercial Taxes Tribunal. The petitioner argued that the electricity generated was integral to the manufacturing process, making the coal a raw material. The petitioner also contended that the requirement to produce statutory declaration form JVAT 404 was directory, not mandatory, and substantial evidence of tax payment on coal was provided.

Key Issues

1. Whether the petitioner is entitled to claim Input Tax Credit (ITC) on tax paid for coal used in its captive power plant to generate electricity, which is then used for manufacturing finished goods for sale? This issue turns on Section 18(4)(iii) of the Jharkhand Value Added Tax Act, 2005 (JVAT Act, 2005). The petitioner argued that coal is a raw material for the finished goods as electricity generation is integral to manufacturing. The respondents argued that electricity is not 'goods' as defined, thus coal used for its generation is not eligible for ITC. 2. Whether the claim for ITC can be denied solely for the absence of statutory declaration form JVAT 404, despite the petitioner providing substantial evidence of tax payment on the purchased goods (coal)? This issue relates to Rule 35(2) of the JVAT Rules, 2006, and Section 18(6) of the JVAT Act, 2005. The petitioner contended that the requirement of JVAT 404 is directory. The respondents' position, as reflected in the lower authorities' orders, was that non-production of JVAT 404 was a fatal flaw.