M/S Diamond Cement Jhansi vs. Commercial Of Trade/Commercial Tax U.P. Lucknow
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1 Reserved On: 28.03.2022 Delivered On:18.04.2022 Court No. - 1 Case :- SALES/TRADE TAX REVISION No. - 205 of 2017 Revisionist :- M/S Diamond Cement Jhansi Opposite Party :- Commercial Of Trade/Commercial Tax U.P. Lucknow Counsel for Revisionist :- Krishna Agarawal, Counsel for Opposite Party :- C.S.C. WITH Case :- SALES/TRADE TAX REVISION No. - 204 of 2017 Revisionist :- M/S Diamond Cement Jhansi Opposite Party :- Commercial Of Trade/Commercial Tax U.P. Lucknow Counsel for Revisionist :- Krishna Agarawal, Counsel for Opposite Party :- C.S.C. Hon'ble Piyush Agrawal,J.
Heard Shri Krishna Agarwal, learned counsel for the revisionist and Shri A.C. Tripathi, learned Standing Counsel for the opposite party.
These two revisions were listed together as the issue involved are interlinked and therefore, the same are being decided by the common order.
The present revisions have been filed against the judgement & order dated 12.01.2017 passed by Commercial Tax Tribunal, Jhansi in Second Appeal Nos. 39 of 2016 (2011-12) and 40 of 2016 (2012-13), in which following common questions of law have been framed:- (i) Whether on the facts and in the circumstances of the case, the Tribunal is legally justified in not allowing the claim of exemption
2 of Entry Tax on Iron & Steel (MS Angle, MS Channel, MS Plate, MS Beam, etc.) used in expansion of Cent Plan on the ground that it is not a capital goods? (ii) Whether, on the facts and in the circumstances of the case, the imported MS Angle, MS Channel, MS Plate, MS Beam, etc. used by the applicant in expansion of Cement Plant is exempt from levy of Entry Tax being capital goods and exempt under the Entry Tax Act, as well as under Notification No. 927 dated 18.02.2003? (iii) Whether inspite of holding that 'MS Angle, MS Channel, MS Plate, MS Beam, etc.' can be a capital goods is used in the Plant and Machinery, the Tribunal is legally justified in denying the claim of the applicant for exemption from Entry Tax without any material on record to dispute the use of iron & steel in expansion of cement plant rendering the order of the Tribunal as illegal and perverse?
Learned counsel for the applicant submits that the applicant is a Company incorporated under the Indian Companies Act and is engaged in the business of manufacture and sale of cement. In the disputed years, the revisionist has undertaken expansion of the cement plant, for which iron & steel were purchased. The revisionist, treated the same as capital goods, but the authorities below have wrongly rejected the claim of capital goods. He prays for allowing the revision.
Per contra, learned Standing Counsel submits that the iron & steel cannot, by any stretch of imagination, be treated as capital goods. Further, all the authorities have recorded a finding that no details of use of such iron & steel directly as capital goods have been furnished. The revisionist used iron & steel for construction of buildings. He further submits that some details have been furnished mentioning therein construction of certain buildings, but has failed to show any evidence or material that these iron & steel were used as capital goods, which are directly connected with the plant & machinery or equipment. He prays for dismissal
3 of the revision.
The Court has perused the records.
Admittedly, the revisionist is manufacturer of cement. For expansion of its unit/cement plant, the revisionist purchased iron & steel and used the same for construction of various buildings, sheds, etc. The revisionist claimed the iron & steel, purchased and used for construction of various buildings for expansion of its unit, as “capital goods” so that benefit of input tax credit can be granted to it.
For the purposes of deciding the issue, as to whether iron & steel used in the constructions of various buildings for expansion of the unit can be said to be “capital goods” or not, which was not directly connected with the plant & machinery or accessories of such plant & machinery, sections 2(f) and 13(1)(b) of the VAT Act would be relevant, which are quoted below:- “Section 2(f) “capital goods” means any plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation used for manufacture or processing of any goods for sale by the dealer and includes:- (i) components, spare parts and accessories of such plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation; (ii) moulds and dies; (iii) storage tank; (iv) pollution control equipment; (v) refractory and refractory materials; (vi) tubes and pipes and fittings thereof, (vii) lab equipments, instruments and accessories, (viii) machinery, loader, equipment for lifting or moving goods within factory premises, or (ix) generator and boiler used in manufacture of goods
4 for sale by him but for the purpose of section 13, does not include:- (i) air-conditioning units or air conditioners, refrigerators, air coolers, fans, and air circulators if not connected with manufacturing process; (ii) an automobile including commercial vehicles, and two or three wheelers, and parts, components and accessories for repair and maintenance thereof; (iii) goods purchased and accounted for in business but utilised for the purpose of providing facility to the employees. (iv) vehicle used for transporting goods or passengers or both; (v) capital goods used in the execution of a works contract; Section 13. Input tax credit: (1) Subject to provisions of this Act, dealers referred to in the following clauses and holding valid registration certificate under this Act, shall, in respect of taxable goods purchased from within the State and mentioned in such clauses, subject to conditions given therein and such other conditions and restrictions as may be prescribed, be allowed credit of an amount, as input tax credit, to the extent provided by or under the relevant clause: (a) ….. (b) Input tax credit of full amount of input tax shall be allowed to every dealer, liable to pay tax, in respect of capital goods purchased on or after the date on which dealer becomes liable for payment of tax under this Act, if such goods are to be used in,- (i) manufacture of any taxable goods except non-vat goods and where such manufactured goods is,- A- sold within the State or in the course of inter- state trade or commerce or in the course of the export of the goods out of the territory of India; or B-transferred or consigned outside the State otherwise than as a result of a sale; or (ii) manufacture of any exempt goods except non-vat goods and where such manufactured goods are sold in 5 the course of export of the goods out of the territory of India; or (iii) generation of electrical energy, where such energy is used for the manufacture of any taxable goods other than non vat goods and such manufactured goods is,- A- sold within the State or in the course of interstate trade or commerce or in the course of export of the goods out of territory of India; or B-transferred or consigned outside the State otherwise than as a result of a sale; or (iv) generation of electrical energy where such energy is used for the manufacture of any exempt goods and such exempt goods is sold in the course of export of the goods out of territory of India; and the amount of input tax shall be computed and be claimed in prescribed manner. Explanation: For the purposes of this clause,- (a) if 90% of electrical energy generated is consumed for the purposes referred to in sub clauses (iii) and (iv), 100% Input Tax may be claimed and be allowed as Input Tax Credit. (b) the expression 'generation of electrical energy' shall mean generation of electrical energy by using captive power plant including repairing and maintenance thereof.”
Bare perusal of section 2(f) of the VAT Act it has been clearly stated that “capital goods” means any plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation used for manufacture or processing of any goods for sale by the dealer. Further, perusal of section 13(1)(b) of the VAT Act would reveal that the dealer shall be entitled for claim of ITC only in respect of taxable goods purchased.
Now, in view of the afore-quoted provisions of the VAT Act, the claim of the dealer for “capital goods” is to be examined.
The argument learned counsel for the revisionist was that the iron & steel, used for expansion of its unit were used for construction
6 of various buildings, should be treated as plant & machinery, particularly, as accessories or components of such plant & machinery. In support of his claim, a certificate of the Charted Accountant has been filed as Annexure No. 8 to the revision; wherein, consumption of iron & steel was given by mentioning the building name and it describes under the head of “Assets Description” as plant & machinery. On close scrutiny of the submissions of the learned counsel for the revisionist and the certificate brought on record to justify its claim, would clearly show that various buildings have been constructed for various other purposes, which have been tried to bring within the definition of “capital goods”. Further, the said certificate of Charted Accountant nowhere mentions as to how the consumption of iron & steel is directly connected with the plant & machinery or its accessories or its components. On perusal of column no. 3 of the said certificate (Assets Description), would show various names of buildings and plant & machinery, but failed to show as to how the iron & steel so purchased is used in such plant & machinery as mentioned therein. Only by referring or describing the user will not help the assessee for treating the iron & steel used for the constructions of buildings as “capital goods”, more precisely, as “plant & machinery”.
Learned counsel for the revisionist has also relied upon the judgement of the Hon'ble Supreme Court in Scientific are not applicable in the facts & circumstances of the present case, as the revisionist has failed to bring on record any material to show as to how the iron & steel, so purchased, have been used which is directly connected with plant & machinery for claiming the same as “capital goods”.
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In absence of any material having been brought on record, the claim “capital goods” by the revisionist has rightly been rejected by the authorities below. No case is made out for interference by this Court with the impugned order.
In view of the aforesaid facts & circumstances of the case, both the revisions fail and the same are hereby dismissed.
The questions of law are answered accordingly. Order Date :-18/04/2022 Amit Mishra MISHRA Date: 2022.04.18 15:01:29 IST Reason: Location: High Court of Judicature at Allahabad
Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.