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

Held

The Court held that the controversy in the present cases is squarely covered by the decision in M/s. Durgeshwari Food Ltd.'s case. The Court noted that the provisions of Section 3 of the Gujarat Value Added Tax Act, 2003, and Section 18 of the Rajasthan VAT Act are 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 found that the raw material used and the product manufactured in the present cases were not different from those involved in the Durgeshwari Food Ltd. case. Therefore, the Court dismissed the revision petitions in light of the prior decision.

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 revision petitions filed by the Assessing Authority against an appellate order by the Deputy Commissioner (Appeals), Jodhpur. Consequently, the petitioner was denied input tax credit (ITC) proportionately for tax paid on raw materials partly used for manufacturing goods exempted under the Rajasthan Value Added Tax Act, 2003 (VAT Act). The dispute concerns the tax period(s) leading to these orders.

Key Issues

1. Whether input tax credit (ITC) can be proportionately denied in respect of tax paid on raw material partly used for manufacturing exempted goods under Section 18 of the Rajasthan Value Added Tax Act, 2003? Petitioner's arguments: The petitioner contended that the raw material was not intended for manufacturing 'wheat bran (Chaff/Chokar)' and that its production as a by-product during the manufacturing of 'Aata' and 'Maida' should not lead to a denial of ITC for the entire raw material. They relied on the Gujarat High Court decision in "Arya Lumbers Pvt. Ltd. vs. State of Gujarat". Revenue's arguments: The Revenue argued that the issue is covered by a coordinate bench decision in "CTO (A-E), Sriganganagar vs. M/s. Durgeshwari Food Ltd.", which held that ITC was rightly reduced and allowed only proportionately to the extent of taxable goods manufactured, and could not be allowed for exempted goods like wheat bran. They cited Section 18 of the VAT Act.