By C. B. Thakar Advocate G. G. Goyal Jana K Vaghani Chartered Accountants
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Value Added Tax- Set-off- Raw Material- Coal Used as Raw Material by Manufacturer of Sponge Iron- Not Used as Fuel- Full Set-Off to Be Granted, Provision To Disallow Set-Off on Purchase of Motor Spirit Except In Certain Cases Mentioned in Rule- Dealer Not Entitled to Claim Set-Off-On Purchase of High Speed Diesel- Used As Fuel, Rs. 52(1)(a), 53, 54(b) of The Maharashtra Value Added Tax Rules, 2005.
Facts
The respondent company is a manufacturer of sponge iron and used iron ore, coal and dolomite as raw materials. The respondent company claimed full set-off of tax paid on purchase of coal used as raw material and also claimed set-off of tax paid on purchase of High Speed Diesel used as fuel. The assessing authority treated use of coal partially as raw material and partially as fuel and accordingly disallowed 50% set-off of tax paid on of purchase of coal treated used as fuel. Further, it disallowed set-off of tax paid on purchase of High Speed Diesel used as fuel. The first appellate authority confirmed the action of the assessing authority. The Tribunal allowed the appeal and granted full set-off of tax paid on purchase of coal by treating it used as raw material and granted partial set-off of tax paid on purchase of High Speed Diesel used as fuel. The department filed appeal before the Bombay High Court against the judgment of Tribunal.
Held
The High Court considering chemical report held that chemical qualities of non-coking coal to generate heat were used to manufacture sponge iron. Merely because heat is generated in the process it cannot be a ground to hold that non-coking coal was used as fuel. On facts the High Court held that the coal was used as raw material and not used as fuel. Accordingly, the High Court dismissed the appeal filed by the department and confirmed the judgment of Tribunal to grant full set-off of tax paid on purchase of coal by treating it used as raw material.
As regards another issue for disallowance of set-off of tax paid on purchase of High Speed Diesel used as fuel, the High Court held that rule 54(b) creates an embargo as regards claiming set-off except cases mentioned in it, which prohibits grant of set-off on purchase of motor spirit. On account of this specific provision, the provision of rules 52 and 53 cannot be applied in favour of the respondent company. Accordingly, the High Court allowed appeal filed by the department and disallowed set-off tax paid on purchase of High Speed Diesel used as fuel.
