M/S MODI NATURALS LTD. versus THE COMMISSIONER OF COMMERCIAL TAX UP

M/S MODI NATURALS LTD. versus THE COMMISSIONER OF COMMERCIAL TAX UP

Where purchased goods are used in manufacture of taxable goods and an exempt good is produced only as a by-product or waste product, Explanation (iii) to Section 13 of the UP VAT Act deems the purchased goods to have been used in manufacture of taxable goods and therefore the registered dealer is entitled to claim full input tax credit; the UP statutory scheme (including Section 13(3)(b) and Explanation (iii)) differs from the Karnataka scheme considered in M.K. Agro Tech, which is therefore inapplicable to deny full ITC in this case.

Parties
Appellant / Assessee: M/S MODI NATURALS LTD.; Respondent / Revenue: The Commissioner of Commercial Tax, Uttar Pradesh
Jurisdiction
India
Judgment Date
06 November 2023
Procedural Posture
Civil Appeal / Appeal Against Judgment of the High Court of Judicature at Allahabad (commercial Tax Revisions Nos. 315 of 2017 and 148 of 2018)
Outcome
Appeals allowed
Legal Topics
Input Tax Credit, Value Added Tax, By Product and Exempt Goods, Deeming Fiction Under Statute, Interpretation of Taxing Statutes
Taxation Commercial Tax Statutory Interpretation Input Tax Credit Value Added Tax By Product and Exempt Goods Deeming Fiction Under Statute Interpretation of Taxing Statutes

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Parties

M/S MODI NATURALS LTD.

Appellant / Assessee

The Commissioner of Commercial Tax, Uttar Pradesh

Respondent / Revenue

Procedural Posture

Civil Appeal / Appeal Against Judgment of the High Court of Judicature at Allahabad (commercial Tax Revisions Nos. 315 of 2017 and 148 of 2018)

Legal Issues

  1. 1 Whether the assessee is entitled to claim full input tax credit (ITC) on tax paid for purchase of raw rice bran under Section 13(1)(a) read with S. No. 2(ii) of the Table and Section 13(3)(b) read with Explanation (iii) of the UP VAT Act, 2008
  2. 2 Whether the scope of the word 'goods' in Section 13(1)(f) of the UP VAT Act should be limited to only 'taxable goods'
  3. 3 Whether the Supreme Court's decision in State of Karnataka v. M.K. Agro Tech Private Limited applies to the facts of this case

Ratio Decidendi

Where purchased goods are used in manufacture of taxable goods and an exempt good is produced only as a by-product or waste product, Explanation (iii) to Section 13 of the UP VAT Act deems the purchased goods to have been used in manufacture of taxable goods and therefore the registered dealer is entitled to claim full input tax credit; the UP statutory scheme (including Section 13(3)(b) and Explanation (iii)) differs from the Karnataka scheme considered in M.K. Agro Tech, which is therefore inapplicable to deny full ITC in this case.

Court Disposition

Appeals allowed

Orders

  • Impugned common judgment and order of the High Court dated 03.05.2019 set aside
  • Orders of the Commercial Tax Tribunal dated 04.05.2016 and 05.07.2017 restored