M/S Bharat Aluminium Co.LTD. vs. State Of Chhattisgarh

Held

The Court held that the challenge to the constitutional validity of Entry 8 of Schedule III and the impugned notification was unacceptable. The Court found that the arguments presented by the petitioners were not different from those made in the earlier case of Chhattisgarh Sponge Iron Manufacturers Association v. State of Chhattisgarh & Others, which was dismissed by a Division Bench of the same High Court. The Court relied on the principles laid down in Pandit Banarsi Das Bhanot v. The State of Madhya Pradesh and M/s. Hiralal Rattanlal etc. etc., which affirmed the legislative practice of empowering the government to amend schedules and consider various factors like economic consequences and administrative convenience. The Court reasoned that Section 13(1)(b) of the Act explicitly makes a provision for rebate of input tax only with respect to goods other than those specified in Schedule III. The exclusion of coal from Schedule III, therefore, disentitles dealers from claiming input tax rebate on coal purchased as an input. The Court concluded that Entry 8 of Schedule III and the notification issued thereunder were intra vires. The writ application was dismissed.

Facts

The petitioner, M/s. Bharat Aluminium Co. Ltd., challenged Notification No. F 10-180/2007/CT/V(59), dated 17.12.2012, issued under Entry 8 of Schedule III of the Chhattisgarh Value Added Tax Act, 2005. This notification excluded coal and coke from the benefit of input tax credit. Previously, input tax credit was available on coal, which is a declared good and an essential input for the petitioner's manufacture of aluminium. The petitioner argued that this exclusion defeats the purpose of the VAT scheme and is arbitrary. The State contended that the challenge was meritless, noting that coal was previously included in Schedule III in 2007, and a similar challenge by the Chhattisgarh Sponge Iron Manufacturers Association was dismissed by a Division Bench of the same High Court in 2010. The State further argued that the power to notify goods under Entry 8 of Schedule III was intra vires.

Key Issues

1. Whether Notification No. F 10-180/2007/CT/V(59), dated 17.12.2012, issued under Entry 8 of Schedule III of the Chhattisgarh Value Added Tax Act, 2005, is ultra vires the Act and the Constitution. The petitioner argued that the notification, by excluding coal from input tax credit, defeats the purpose of the VAT scheme, is irrational, arbitrary, and violates Article 14 of the Constitution due to lack of policy guidelines. The petitioner contended that the State Government does not have the power to sub-classify goods under Entry 8. The State argued that the notification is intra vires, relying on a previous Division Bench judgment of the same High Court which upheld a similar inclusion of coal in Schedule III in 2007. The State also contended that the power to notify goods under Entry 8 is a valid delegation and does not constitute excessive delegation.