M/S Saravgi Roller Floor Mills vs. C.T.O.A/E Sriganganagar

Held

The Court held that the controversy was squarely covered by its previous decision in M/s. Durgeshwari Food Ltd.'s case. The Court found that Section 3 of the Gujarat Value Added Tax Act, 2003, and Section 18 of the Rajasthan VAT Act, 2003, were not pari materia. Having already decided the issue with reference to Section 18 of the VAT Act, the Court was not inclined to reopen the issue or take a different view. The Court noted that the raw material and manufactured products in the present cases were the same as in the Durgeshwari Food Ltd. case. Therefore, the proportionate denial of input tax credit was upheld. The Court dismissed the revision petitions.

Facts

The petitioner, M/s Saravgi Roller Floor Mills Pvt. Ltd., challenged orders dated August 14, 2012, and September 14, 2012, passed by the Rajasthan Tax Board, Ajmer. These orders allowed revisions filed by the Assessing Authority against an appellate order from the Deputy Commissioner (Appeals), Jodhpur. The petitioner was denied input tax credit proportionately for tax paid on raw material partly used for manufacturing goods exempted under the Rajasthan Value Added Tax Act, 2003. The dispute concerns the tax period(s) leading up to these orders.

Key Issues

1. Whether input tax credit can be proportionately denied when raw material is used for manufacturing both taxable goods ('Aata', 'Maida', 'Suji') and VAT-exempted goods ('wheat bran'/'Chaff'/'Chokar') as a by-product, under Section 18 of the Rajasthan Value Added Tax Act, 2003. Petitioner's argument: The petitioner contended that the raw material (wheat) was not intended for manufacturing wheat bran, which was merely a small by-product of manufacturing 'Aata' and 'Maida'. They argued that the raw material was fully used for the specified taxable products and relied on the Gujarat High Court decision in 'Arya Lumbers Pvt. Ltd. vs. State of Gujarat'. Respondent's argument: The Revenue argued that the issue was covered by a coordinate bench decision in 'CTO (A-E), Sriganganagar vs. M/s. Durgeshwari Food Ltd.', which held that input tax credit should be reduced proportionately for VAT-exempted goods and reverse tax imposed. They asserted that Section 18 of the VAT Act supported this proportionate denial.