March 2015
M/S. National Aluminum Company Ltd. vs. Deputy Commissioner of Commercial Taxes, Bhubaneswar III, Circle, Khurda, [2012] 56 VST 68 (Orissa)
By C. B. Thakar Advocate; G. G. Goya, Janak Vaghani Chartered Accountants
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VAT- Input Tax Credit- Purchase of Coal, Alum,
Caustic Soda etc.- Used in Generation of Power- Used for Manufacturing
of Goods- Are Input- Eligible for Input Tax Credit, sections 2(25),(26),
(27), 17,20(8)(k),42 and 43(2) of The Orissa Value Added Tax Act, 2004
Facts
The
petitioner a Central Government public sector undertaking filed VAT
returns under the Orissa Vat Act and claimed input tax credit in respect
of tax paid on purchase of coal, alum, caustic soda, consumables used
on its captive power plant for generation of electricity which in turn
is used in continuous process of aluminum. The vat department in
assessment disallowed the input tax credit claimed by the company on
purchase of such goods that are used for generation of electricity,
which itself is a final product and exempt from payment of tax, and as
such no input tax credit is available under the act. The Company filed
writ petition before the Orissa High Court against such assessment
order.
Held
U/s. 17 of the act sale of goods
specified in Schedule A is exempt from payment of tax. Sale of
electricity appearing in item no. 13 of Schedule A is exempted from
payment of vat under the act. Consequently, no input tax credit is
allowed on purchases of input used in producing or manufacturing of
electrical energy in terms of section 20(k) of the act. Admittedly, the
company is not selling electrical energy but has used it in
manufacturing aluminum which is taxable under the act. Under the Act,
input tax credit is available on purchase of inputs either for resale or
for use in execution of works contract, or for manufacture and
processing against the output tax payable on sale of any taxable goods.
Power/energy is one of the primary and essential commodities which has a
direct relation in the manufacturing process. The purchase of inputs
used in generation of electrical energy which in turn is used for
manufacturing of aluminum taxable are “input” as defined in section
2(25) of the act and tax paid on purchases thereof is eligible for input
tax credit against output tax payable on sale of aluminum etc.
Accordingly,
the High Court allowed the writ petition filed by the company and
quashed the assessment order disallowing input tax credit on purchase of
such inputs.
