M/S.Birla Tyres vs. Commnr.Of Sales Tax - Orissa High Court, 13 November 2019

14.

13.11.2019 By way of this writ petition, the petitioner assails the order dated 15.03.2008 passed by the opposite party No.2-Assistant Commissioner of Sales Tax (LTU), Balasore Range, Balasore holding the petitioner not entitled to avail ‘input tax credit’ on purchase turnover of Coal.

The opposite party No.2, while deciding the preliminary question as to “whether ‘Coal’ is a consumable item and is an input in the manufacturing of tyres, tubes and flaps”, without affording an opportunity of hearing to the petitioner, unilaterally decided the issue by holding that ‘Coal’ is not directly used as raw material or consumable in manufacturing of finished products, i.e., tyre, tube and flaps.

On perusal of record as well as case law relied upon, it transpires that the issue is now squarely covered by the decision of this Court in the case of M/s National of Commercial Taxes, Bhubaneswar-III, reported in (2013) 116 CLT 331 and the same has been accepted by the authorities subsequently, which is produced before this Court and is taken on record. For ready reference, paragraph-29 of the aforesaid judgment is quoted below, which is relevant for our consideration for just decision of the instant writ petition.

“29. It is not at all necessary that coal, alum, caustic soda and other consumables etc. purchased on payment of tax and used in manufacturing of electrical energy in order to qualify as input should directly go into composition of the finished products, what is required is that those goods should be directly used in manufacturing and processing for production of finished goods. The expression “directly go into composition of finished product” W.P.(C) No.4979 of 2008

2 and “directly used for manufacturing or processing of finished products” are not one and the same thing. There is a clear distinction between the two. In the former, while the goods directly go into the composition of finished products, in the latter the goods are directly used in manufacturing/processing of the finished products. Therefore, coal, alum, caustic soda and other consumables etc. which are used for manufacturing/generating of electrical energy, are inextricably connected with the manufacturing 16 process of aluminum and aluminum ingots; they are nothing but input and tax paid on purchase of such input shall qualify for set off against output tax paid/payable on sale of finished products. There is no dispute that coal, alum, caustic soda and other consumables etc. are used to generate electricity through Captive Power Plant which is admittedly used for the purpose of manufacturing the end/finished products viz. aluminum, aluminum ingots and sheets etc. Therefore, coal, alum, caustic soda and other consumables etc. can only be termed as input in terms of Section 2(25) of the OVAT Act.”

In that view of the matter, the petitioner is entitled to input tax credit on coal as input for manufacturing of tyre, tube and flaps and it is entitled to the benefit pursuant to the judgment of this Court in M/s National Aluminum Company Ltd. (supra) referred to herein above.

However, it is submitted by learned counsel for Revenue that against the said judgment in M/s National Aluminum Company Ltd. (supra) SLP has been admitted, but there is no stay order operating against such judgment of this Court.

In that view of the matter, this writ petition is disposed of with a direction that the petitioner-Company is entitled to the benefit granted in the case of M/s National Aluminum Company Ltd. (supra). It is, however,

3 made clear that if judgment is passed reversing the judgment of this Court in M/s National Aluminum Company Ltd. (supra) by the Hon’ble Supreme Court, then the parties shall be governed by the judgment of the Hon’ble Supreme Court.

Issue urgent certified copy of the order on proper application.

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K.S. JHAVERI

(Chief Justice)

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K.R. MOHAPATRA

(Judge)