M/S Commercial Engineers And Body ... vs The State Of Madhya Pradesh on 5 August, 2015

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Madhya Pradesh High Court

M/S Commercial Engineers And Body ... vs The State Of Madhya Pradesh on 5 August, 2015

Challenge in this petition under Article 226 and 227 of the Constitution is made to an order dated 28.2.2015 passed by the Divisional Deputy Commissioner, Commercial Tax, Jabalpur, imposing tax liability on the petitioner's establishment in accordance to the provisions of Madhya Pradesh Value Added Tax (hereinafter referred to as Ã¢ÂÂthe VATÃ¢ÂÂ). The legal question canvassed by the petitioner in this petition is as to whether the petitioner is entitled to Input tax credit while determining their liability under the VAT Act ? And as to what is the exact meaning of certain provisions contained in Section 14 of the M.P. VAT Act providing for Input tax credit? The issue is as to whether the petitioner is entitled to Input Tax credit in respect of tax paid Input purchased from a registered dealer used by the assessee in manufacturing of the final product ?

2. Petitioner has its manufacturing units in various places as are indicated in para 5.1 of the writ petition and its principal commercial place of business is situated in Napier Town, Jabalpur. They carry out manufacturing of the bodies for motor vehicles, their components, railway components and E.S.P. Components like filters to be used in power plants etc. Apart from manufacturing and sale of these articles job work on behalf of the railway administration is also carried out in the business premises of the petitioner.

3. It is a case of the petitioner that for the purpose of manufacturing bodies of motor vehicle, petitioner had purchased certain components for a total amount of Rs.97,99,69,327/- from a registered dealer M/s Vijay Steel Yard. The components so purchased are ultimately used in the manufacturing of the final product. Infact, the components purchased was used for fabricating plant and machinery which is then used for manufacturing of the final manufacturing product i.e. the motor vehicle body. It is a case of the petitioner that the material purchased from M/s Vijay Steel Yard were tax paid and are converted into components which is used for creating the final product, therefore, the benefit of rebate on input tax as provided under Section 14 of the VAT Act is to be granted to the petitioner. However, as the revenue has held in the impugned assessment order that the material so purchased from M/s Vijay Steel Yard are consumed by the petitioner and not sold, the benefit of Section 14 or rebate on the input tax cannot be granted.

4. Shri S. Ganesh, learned Senior Advocate invited our attention to the provisions of Section 2(o) of the VAT Act, i.e. the definition of Ã¢ÂÂInput TaxÃ¢ÂÂ as detailed herein under :-

Ã¢ÂÂ2(o) Ã¢ÂÂinput taxÃ¢ÂÂ means an amount paid or payable by way of tax under Section 9 by a registered dealer in respect of the purchase of any goods specified in Schedule II, to a selling registered dealer and who is liable to pay tax under the said section on the sale of such goodsÃ¢ÂÂ.

And argued that the aforesaid definition of Ã¢ÂÂinput taxÃ¢ÂÂ means all and such Schedule II tax paid goods which are purchased by one registered dealer from another registered dealer after payment of tax by the selling registered dealer. It is said that material purchased from M/s Vijay Steel Yard, a registered dealer, was subjected to payment of tax and accordingly, the concept of Ã¢ÂÂinput taxÃ¢ÂÂ is applicable on such a sale. He thereafter referred to Section 14 of the VAT Act which contemplates a provision for rebate on income tax rebate on input tax, the said provision reads as under :-

Ã¢ÂÂSec.14. Rebate of Input tax

1. Subject to the provisions of sub-section (5) and such restrictions and conditions as may be prescribed, a rebate of input tax as provided in this section shall be claimed by or be allowed to a registered dealer in the circumstances specified below-

(a) Where a registered dealer purchases any goods specified in Schedule II other than those specified in Part III of the said Schedule within the State of Madhya Pradesh from another such dealer after payment to him input tax for Ã¢ÂÂ (1) Ã¢ÂÂ¦.....

(2) consumption or use for/in the manufacture or processing or mining of goods specified in Schedule II for sale within the State of Madhya Pradesh or in the course of inter-state trade or commerce or in the course of export out of the territory of India; or (3) Ã¢ÂÂ¦.....

(4) use as plant, machinery, equipment and parts thereof in respect of goods specified in Schedule II; or Ã¢ÂÂ¦.......Ã¢ÂÂ (Emphasis Supplied) According to Shri Ganesh, learned Senior Counsel, a bare perusal of Section 14(1)(a)(2) and (4) clearly indicates that rebate shall be permissible when the good purchased are utilized for consumption or use for / in the manufacturing or processing of mining of goods.

Further Section 14(1)(a)(4) provides for rebate in case the purchased goods are used for plants, machinery, equipment and parts thereof in respect of goods specified in Schedule II. According to Shri Ganesh, goods purchased by the petitioner from another dealer are used for fabrication into plant and machinery for manufacturing of the finished product. Therefore, in the present case as the interpretation of Section 14 of the VAT Act is called in question, it is a pure question of law. This petition under Article 226 of the Constitution is maintainable as it is only this Court which can interpretate and decide such a complicated question of law. It is said that even though similar provision are contained in the Central Excise Act and rules framed therein with regard to grant of Input tax credit known as Ã¢ÂÂMODVATÃ¢ÂÂ and subsequently now known as Ã¢ÂÂCENVATÃ¢ÂÂ have been interpreted in various judgments but as the benefit of input tax on similar analogy under Section 14 of the VAT Act is yet to be decided, it is argued that petitioner is entitled to file the writ petition before this Court without resorting to the statutory remedy of appeal provided in the VAT Act. He argues that the following substantial questions are involved in the matter and therefore, petition should be entertained :-

1. Can the benefit of Section 14 be denied on input steel materials, where VAT has already been paid on purchase from another dealer and the materials so purchased are used to fabricate plant and machinery which is then used for the manufacture of the end products sold by the petitioner ?

2. Whether benefit of Section 14 can be extended to goods purchased for fabrication of plant and machinery in order to produce the finished product ?

3. Whether denial of benefit under Section 14 to purchases used for fabricating plant and machinery, which will ultimately be used for manufacturing the finished product, would amount to double taxation thereby defeating the very purpose and object of VAT Act ?

5. Shri Ganesh, learned Senior Counsel took us through the impugned th assessment order dated 28 February 2015, he produced an authentic translation of the order and submitted that the only reason given in the impugned order for rejecting the benefit i.e. rebate of input tax to the petitioner is that the component purchased from M/s Vijay Steels Yard, Jabalpur, has been capitalized into plant and machinery and used by the petitioner. It is held that the material purchased from the aforesaid selling dealer has been consumed and the final component which was made have been produced from the machinery of the petitioner itself and thereafter sold. The department according to Shri Ganesh feels that the components purchased from the M/s Vijay Steels Yard, Jabalpur has been consumed by the petitioner in its plant and machinery which is then used for making of the final product and therefore, Section 14 is not applicable. Shri Ganesh argues that this approach of the department is totally incorrect and unsustainable. He says that even though there are no decided cases under VAT Act on such an issue but under the provisions of the Central Excise Act and the rules framed thereunder, in the matter of granting MODVAT credit now named as Ã¢ÂÂCENVATÃ¢ÂÂ, similar provisions akin to Section 14 are available in Rule 57(A) and 57(C) of the Central Excise Rules, 1944 and he invites our attention to the said provision which reads as under :-

Ã¢ÂÂ 57A. Applicability.- (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the "final products", as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the "special duty") paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referred to as the "inputs") and for utilizing the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the notification:

Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted.

Explanation.- For the purposes of this rule, "inputs" includes-

(a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products,

(b) paints and packaging materials, and

(c) inputs used as fuel, but does not include ---

Rule 57C. Credit of duty not to be allowed if final products are exempt - No credit of the specified duty paid on the inputs used [in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export- Oriented Unit)] shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty.

Rule 57F. (1) : The inputs in respect of which a credit of duty has been allowed under rule 57A -

(i) may be used in, or in relation to, the manufacture of final products for which such inputs have been brought into the factory; or

(ii) shall be removed, after intimating the Assistant Commissioner of Central Excise having jurisdiction over factory and obtaining a dated acknowledgment of the same from the factory for home consumption or for export under bond.

Provided that where the inputs are removed from the factory for homes consumption on payment of duty of excise, such duty excise shall be the amount of credit that has been availed in respect of such inputs under rule 57AÃ¢ÂÂ (Emphasis Supplied) He submits that if the aforesaid provision is read it would be seen that it is pari materia with the provisions of Section 14(1)(a), (2) and (4) and therefore, by relying upon certain judgment of the Supreme Court while interpreting Rule 57(A), (C) and (F) to draw an analogy and apply it in the present case. Shri Ganesh, learned Senior Counsel invites our attention to the judgments of the Supreme Court in the case of Collector of Central Excise, Pune & Others Vs. Dai Ichi Karkaria Ltd. And others Ã¢ÂÂ (1999)7 SCC 448 and took us through the provisions of Section 57(A) the observations of the Supreme Court in para 18 thereof in support of his contention. Para 18 of the said judgment reads as under :-

Ã¢ÂÂ18. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co- relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. Ã¢ÂÂ (Emphasis Supplied) Thereafter, he took us through another judgment of the Supreme Court in the case of Escorts Ltd. Vs. Commissioner of Central Excise, Delhi Ã¢ÂÂ (2004)7 SCC 214 and argued that in this case the assessee was a manufacturer of tractor and the final product that came out was the tractor. The intermediate product were the part which were manufactured, and then were used in producing final product of tractor. It was said that the intermediate product which was used for manufacturing the Tractor would not be the final product. In this case also benefit of MODVAT credit was granted. He invited our attention to the principles laid down in para 9 in support of his contention, so also para 10 where other judgments of the Supreme Court have been considered. Para 9 and 10 of the judgment in this case reads as under

:-

Ã¢ÂÂ9. In cases of manufacturers like the appellants, the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus, Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the appellants to another factory of the appellants would not disentitle the appellants from claiming benefit of Notification No.217/86-CE dated 2.4.1986. As stated above, the notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer.

10. Mr. Lakshmikumaran relied upon the decision of this Court in the case of CCE Vs. Hindustan Sanitaryware & Industries wherein, in respect of this very notification, this Court has held that so long as duty is paid on the final product, the mere fact that duty was not paid on the intermediate product would not disentitle the manufacturer from the benefit of Notification No.217/86-CE dated 2.4.1986. In that case, the input was plaster of Paris, the intermediate product was moulds made out of the plaster of Paris, the final product was sanitaryware. In our view, the facts of that case are identical to the facts of the present case. The ratio laid down therein fully applies to this case.Ã¢ÂÂ (Emphasis Supplied)

6. Thereafter, he referred to the judgment of Central Excise Tribunal of Delhi, Mumbai in support of his contentions and the judgments are reported in 2005(187) ELT 49 (Tri.Del.) - Commr. Of Central Excise, Lucknow Vs. Seksaria Biswan Sugar Factory Ltd.;

2005(191) ELT 383 (Tri. Mumbai) Ã¢ÂÂ Vidyut Metallics Pvt. Ltd. Vs. Commissioner of Central Excise, Mumbai-VI and 1998 (99) ELT 54 (Tribunal) Ã¢ÂÂ SIEL Sugar Vs. Commissioner of Central Excise, Meerut in support of his contention. Shri Ganesh accordingly argued that merely because the inputs purchased by the petitioner from M/s Vijay Steels was not directly used for manufacturing of the final product but as it was converted into a material (plant and machinery) which was ultimately used for manufacturing of final product, it is said that contention of the respondent cannot be accepted. It is argued that if such a contention is accepted, the benefit available to an assessee under Section 14 would be negated and this could never be the intention of the legislature.

7. As far as objection raised by the respondents, with regard to maintainability of the writ petition in view of the fact that a statutory remedy of appeal under the M.P. VAT Act is available, Shri Ganesh argues that this is not an efficacious remedy. Important questions of law with regard to interpretation of statutory provision are involved and when such a question is involved, a Writ Court can always interfere in such matters and for the said purpose relegating the petitioner to take recourse to the alternate remedy available is not necessary. In support of the aforesaid contention, he invites our attention to the judgment of the Supreme Court in the case of Paradip Port Trust Vs. Sales Tax Officer and others Ã¢ÂÂ (1998)4 SCC 90; a judgment of the Delhi High Court in W.P.(C) 10726/2006 Ã¢ÂÂ Glaxo Smithkline Asia P.Ltd. Vs. Assessing Authority, th Special Zone Trade and Tax Department & Anr. decided on 24 May, 2007; another judgment of the Supreme Court in the case of Bharat Sanchar Nigam Ltd. And another Vs. Union of India and others Ã¢ÂÂ (2006)3 SCC Pg.1 to say that even if such an alternate remedy is available, if a substantial legal question for interpretation is involved, the Writ Court or the Supreme Court under Article 32 of the Constitution, can directly interfere, as such Courts are more competent or equipped to decide questions of law rather than quasi judicial authorities discharging statutory functions.

8. Shri Samdarshi Tiwari, learned counsel for the respondents submits that once the remedy of appeal under the statute i.e. Section 46(1) of the VAT Act is available and when the statutory authority are functioning, interference directly by this Court is not called for. In support of his contention he invites our attention to the judgment in the case of Zunaid Enterprises Vs. State of M.P. And others Ã¢ÂÂ 2012(20) STJ 411 SC, a judgment of this Court in W.P. No.7872/2012 Ã¢ÂÂ SVIL Mines Vs. Commissioner, Commercial Tax and another judgment of this Court dated 3.2.2014 in W.P. No.2622/2013 Ã¢ÂÂ Michigan Rubber (India) Ltd. Vs. State, and argues that as mixed questions of law and fact are involved in this case and as there are serious disputed questions of fact, a Writ Court should not exercise its jurisdiction directly. Shri Samdarshi Tiwari took us through certain parts of the order passed by the Assessing Authority to emphasis that the question involved is not a pure question of law, it is mixed question of both law and fact and therefore, jurisdiction should not be exercised directly, that apart he argued that the interpretation of the department is correct and the benefit of input tax credit cannot be availed of by the petitioner for the simple reason that the material purchased after payment of tax is not directly used for manufacturing of the final product but is consumed by the petitioner. He submits that the interpretation advanced by Shri Ganesh is not correct.

9. We have heard learned counsel for the parties at length and we have also considered the rival contentions. Before adverting to consider the question of law, we may take note of the preliminary objection raised by Shri Samdarshi Tiwari, learned Dy. Advocate General, with regard to availability of a statutory remedy of appeal under Section 46(1) of the VAT Act. Normally when a statutory right of appeal is available to a party, discretionary jurisdiction under Article 226 of the Constitution are not exercised, particularly if questions of facts which are in dispute are also required to be scrutinized while deciding the matter. However, there are exceptions to this normal rule and there are large number of cases where bypassing the remedy of statutory appeal available, jurisdiction is exercised by the High Court under Article 226 of the Constitution. Even though Shri Samdarshi Tiwari tried to emphasize that there are disputed questions of facts involved in the matter, we are of the considered view that as far as the question of grant of benefit of rebate of input tax to the petitioner is concerned, it is a question to be decided on admitted facts for which no dispute or enquiry into factual aspects of the matter is called for. It is an admitted position that the assessee purchased certain material from M/s Vijay Steels amounting to Rs.97,99,69,327/-, (VAT paid) and claimed the rebate on input tax under Section 14. This material purchased, was used for creating the plant and machinery which is ultimately used for making the final product and the duty was paid on the final product. According to the Revenue, because the material purchased from M/s Vijay Steels was consumed by the assessee in its plant and machinery to be used for making the final components and as this component (i.e. plant and machinery) which was created from the material purchased was not sold, they are not entitled for benefit of rebate on input tax. These are the simple and admitted facts and as its application for the purpose of granting benefit under Section 14 of the VAT Act is only required to be adjudicated by us, we see no disputed facts involved in the petition. That apart, the Supreme Court in the case of Paradip Port Trust (supra) has considered certain similar situation and has held that in such a situation the High Court should entertain the writ petition and consider such questions which involves interpretation of statutory provision instead of living it to the Taxing Authorities to interpret such a provision. In the case of Bharat Sanchar Nigam Ltd. (supra) the Hon'ble Supreme Court while exercising its jurisdiction under Article 32 of the Constitution had rejected similar objection with regard to availability of alternate remedy when competency of the State to levy Sales Tax in telecommunication service was questioned. In the case of Glaxo Smithkline Asia P.Ltd. (supra), the Delhi High Court has taken somewhat similar view and in a matter pertaining to interpretation of words Ã¢ÂÂtransfer of right to use any goodsÃ¢ÂÂ which occur in Delhi Sales Tax Act has held that when question involved are of some importance and when they involve interpretation of certain provision or meaning of technical statute, the interpretation must be decided by the High Court and cannot be left exclusively to be dealt with by the statutory authorities. Analyzing the principles as laid down in the aforesaid case and taking note of the jurisdiction to be exercised by us in this petition, we are of the considered view that leaving it to the revenue to decide such a question may not be proper. Instead, it would be more appropriate if we deal with such questions and decide it in this petition under Article 226 of the Constitution as it is a question with regard to interpretation of statutory provision and no disputed question of fact as canvassed by Shri Samdarshi Tiwari are available. The judgments relied upon by Shri Samdarshi Tiwari are all cases where disputed questions of fact and law were involved and it was under those circumstances that this Court refused to interfere, whereas, in the present case such is not the position.

10. Accordingly, rejecting the objection raised by Shri Samdarshi Tiwari with regard to maintainability of this writ petition, we proceed to decide the matter on merits.

10. A comparison of the provision of Section 14 of the VAT Act with the provisions of Rule 57A explanation thereto along with Rule 57C and 57F indicates that both the provisions are infact paramateria with each other. Except for some difference in the words used if the provisions of Rule 57(A)(1)(a) of the Excise Rules is taken note of, it speaks about applicability of the provision to such finished excise goods (i.e. the final product) as may be specified in the notification, duty paid goods used in relation to the manufacture of the said final product. The words are Ã¢ÂÂused in relation to the manufacture of the final productÃ¢ÂÂ. Similarly in the Explanation (a) the word Ã¢ÂÂinputÃ¢ÂÂ has been explained to include Ã¢ÂÂinputs which are manufactured and used within the factory of production, Ã¢ÂÂin or in relation to, the manufacture of final productsÃ¢ÂÂ. Here again, the words are Ã¢ÂÂuse or in manufacture of final productÃ¢ÂÂ. Likewise is Rule 57(F)(1)(i) also the words used are Ã¢ÂÂin relation to the manufacture of final productsÃ¢ÂÂ. Similarly, if the said provisions are compared with Section 14, we find that the words used in Section 14(1)(a) and (4) are Ã¢ÂÂused as plant, machinery, equipments and parts thereof, in respect of goods,Ã¢ÂÂ instead of using the word Ã¢ÂÂin relation toÃ¢ÂÂ as contained in the Excise Act, the words used here i.e. in VAT Act are Ã¢ÂÂin respect of goodsÃ¢ÂÂ. Therefore, as per both these provisions, if inputs or goods purchased are used in relation to manufacture of final product and even if its use may be as a plant or machinery or equipments or part thereof, in respect of the goods, specified as the final product, the benefit of MODVAT, CENVAT or Ã¢ÂÂinput tax rebateÃ¢ÂÂ can be claimed. Meaning thereby, it is not necessary that the goods purchased from the registered dealer which is known as Ã¢ÂÂinputÃ¢ÂÂ should be used directly for manufacture of the final product. It is sufficient if the input is used in respect of or in relation to a plant or machinery or a equipment which is ultimately used for manufacturing the final product. That in fact, should be the interpretation of the provisions of the Section.

11. In fact, Section 14 of the VAT Act contemplates a provision for rebate of Input tax. Under Section 2(o) of the VAT Act, Ã¢ÂÂinput taxÃ¢ÂÂ it is an amount paid or payable by way of tax under section 9 by a registered dealer in respect of the purchase of any goods specified in Schedule II , to a selling registered dealer and who is liable to pay tax under the said section on the sale of such goods. Admittedly, the goods purchased by the present petitioner from M/s Vijay Steels, a registered dealer, is after payment of tax under the VAT Act i.e. as required under Section 9 of the VAT Act. Under Section 14(1)(a) and sub section (2) and (4) thereof, rebates are available on input tax which is permissible to be allowed to a registered dealer, when he purchases the goods from another such dealer after payment of input tax (as has happened in this case) and consumes or uses it for/ in the manufacture or processing or mining of goods or uses it as plant, machinery, equipment and parts thereof, in respect of case specified in Schedule II. Admittedly, in this case petitioner has purchased the goods from a registered dealer which was tax paid and the goods so purchased has been used by the petitioner as plant and machinery, which in turn has been put to use for making the final product as is specified in Schedule II i.e. the motor vehicle body which is sold and duty is paid. From the order of the assessment it is seen that the Assessing Authority holds that if the components produced after manufacturing and processing of the material purchased from M/s Vijay Steels, is sold by the petitioner, they are entitled to rebate on input tax under Section 14 but because they have consumed it for use as a plant and machinery, they are not entitled to this benefit. This according to us cannot be the correct interpretation of Section 14(1)(a) sub rule (2) and (4) in view of the reasons and interpretation given by us in the preceding para.

12. That apart, in somewhat similar situation in the case of Escorts (supra) also the appellant therein where manufactures of Tractors they purchased duty paid inputs and used then for bringing out the final product i.e. Tractor. Here also the final product was the tractor and the intermediate product was infact the part which was manufactured in the first factory for being used for making the final product i.e. tractor. While considering this question the Supreme Court held after interpreting the provisions of Rule 57A and C that the intermediate product which was ultimately used for manufacturing product which was input for manufacturing the final product Ã¢ÂÂ tractor, was liable to be granted the benefit of MODVAT. In the case of Escorts Ltd.(supra) another judgment of Supreme Court in the case of CCE Vs. Hindustan Sanitaryware & Industries Ã¢ÂÂ (2002)7 SCC 515 has been considered. In the case of Hindustan Sanitaryware (supra) the inputs were plaster of Paris. Out of this Plaster of Paris the intermediate product i.e. moulds were made out and these moulds were used for making final product i.e. sanitary ware. The Plaster of Paris was purchased after payment of duty and therefore, it was held that the assessee is entitled for benefit of MODVAT/ CENVAT. If the case of the present petitioner assessee is analyzed in the backdrop of judgment of Supreme Court in the case of Escorts Ltd. (supra) and Hindustan Sanitaryware (supra), we find that the material purchased from M/s Vijay Steels was used by the assessee petitioner herein for converting it into plant and machinery. The plant and machinery was thereafter used for making the final product. Therefore, as the material purchased from M/s Vijay Steels after payment of VAT was used for making a plant and machinery which was ultimately used for manufacturing the final product, therefore, in the light of principles laid down in the case of Escorts Ltd. (supra) and Hindustan Sanitaryware (supra), we see no reason for rejecting the preposition putforth by Shri Ganesh. Similar is the position with regard to manufacturing of sugar and various other products, considered and decided in similar manner by various Excise Tribunals in the judgment relied upon by Shri Ganesh.

13. The intention of the legislature in providing a provision for grant of rebate of input tax as contained in the VAT Act is akin to the provisions of MODVAT credit and CENVAT Credit applicable in Excise Law and when sub section 2 and 4 of Section 14(1)(a) indicates that the goods purchased by a registered dealer from another registered dealer after payment of duty is used by the purchasing registered dealer or is consumed in the manufacturing or processing of something or used as a plant, machinery, equipment and parts in respect of goods i.e. the final product is entitled for input rebate. If that be the intention of the legislature in giving input rebate to a dealer then it would be beyond the legislative purpose if the intention of the legislature is interpreted as done by the department by holding that the material used or consumed should be sold and should not be further used in respect of anything for the making of a final product which is ultimately sold. This could never be the intention of the legislature.

14. We need not dwell into this aspect of the matter any further for the simple reason that if the process for manufacturing of tractor which was considered by the Supreme Court in the case of Escorts Ltd. (supra) and Hindustan Sanitaryware (supra), as detailed in the case of Hindustan Sanitaryware (supra) is analyzed and if benefit of MODVAT and CENVAT could be granted in the said case and when we find that purpose of introducing Section 14 is akin to the provisions of MODVAT credit and CENVAT credit, there is no reason for us in not accepting the interpretation, as canvassed by Shri Ganesh and holding that in the present case also the petitioner is entitled to the benefit of rebate on input tax under Section 14.

15. Accordingly, we allow this petition and direct the Assessing Officer to reconsider the matter in the light of the interpretation given by us and grant input rebate to the petitioner in the matter of purchases made as detailed herein above.

16. With the aforesaid, this petition stands allowed and disposed of. HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT JABALPUR W.P. No. 7628/2015 M/s Commercial Engineers & Body Building Company Ltd.

Vs. Divisional Dy. Commissioner, Commercial Tax Office & another Present: HonÃ¢ÂÂble Shri Rajendra Menon, J. & Hon'ble Shri Sushil Kumar Gupta, J.

__________________________________________________________ Shri S. Ganesh, Sr. Advocate with Shri Akshay Sapre, for the petitioner.

Shri Samdarshi Tiwari, learned Additional Advocate General for the respondents State.

_____________________________________________________ ORDER (5/8/2015) Per: Shri Rajendra Menon, J.

4. Shri S. Ganesh, learned Senior Advocate invited our attention to the provisions of Section 2(o) of the VAT Act, i.e. the definition of Ã¢ÂÂInput TaxÃ¢ÂÂ as detailed herein under :-

Ã¢ÂÂ2(o) Ã¢ÂÂinput taxÃ¢ÂÂ means an amount paid or payable by way of tax under Section 9 by a registered dealer in respect of the purchase of any goods specified in Schedule II, to a selling registered dealer and who is liable to pay tax under the said section on the sale of such goodsÃ¢ÂÂ.

And argued that the aforesaid definition of Ã¢ÂÂinput taxÃ¢ÂÂ means all and such Schedule II tax paid goods which are purchased by one registered dealer from another registered dealer after payment of tax by the selling registered dealer. It is said that material purchased from M/s Vijay Steel Yard, a registered dealer, was subjected to payment of tax and accordingly, the concept of Ã¢ÂÂinput taxÃ¢ÂÂ is applicable on such a sale. He thereafter referred to Section 14 of the VAT Act which contemplates a provision for rebate on income tax rebate on input tax, the said provision reads as under :-

Ã¢ÂÂSec.14. Rebate of Input tax

1. Subject to the provisions of sub-section (5) and such restrictions and conditions as may be prescribed, a rebate of input tax as provided in this section shall be claimed by or be allowed to a registered dealer in the circumstances specified below-

(a) Where a registered dealer purchases any goods specified in Schedule II other than those specified in Part III of the said Schedule within the State of Madhya Pradesh from another such dealer after payment to him input tax for Ã¢ÂÂ (1) Ã¢ÂÂ¦.....

(2) consumption or use for/in the manufacture or processing or mining of goods specified in Schedule II for sale within the State of Madhya Pradesh or in the course of inter-state trade or commerce or in the course of export out of the territory of India; or (3) Ã¢ÂÂ¦.....

(4) use as plant, machinery, equipment and parts thereof in respect of goods specified in Schedule II; or Ã¢ÂÂ¦.......Ã¢ÂÂ (Emphasis Supplied) According to Shri Ganesh, learned Senior Counsel, a bare perusal of Section 14(1)(a)(2) and (4) clearly indicates that rebate shall be permissible when the good purchased are utilized for consumption or use for / in the manufacturing or processing of mining of goods. Further Section 14(1)(a)(4) provides for rebate in case the purchased goods are used for plants, machinery, equipment and parts thereof in respect of goods specified in Schedule II. According to Shri Ganesh, goods purchased by the petitioner from another dealer are used for fabrication into plant and machinery for manufacturing of the finished product. Therefore, in the present case as the interpretation of Section 14 of the VAT Act is called in question, it is a pure question of law. This petition under Article 226 of the Constitution is maintainable as it is only this Court which can interpretate and decide such a complicated question of law. It is said that even though similar provision are contained in the Central Excise Act and rules framed therein with regard to grant of Input tax credit known as Ã¢ÂÂMODVATÃ¢ÂÂ and subsequently now known as Ã¢ÂÂCENVATÃ¢ÂÂ have been interpreted in various judgments but as the benefit of input tax on similar analogy under Section 14 of the VAT Act is yet to be decided, it is argued that petitioner is entitled to file the writ petition before this Court without resorting to the statutory remedy of appeal provided in the VAT Act. He argues that the following substantial questions are involved in the matter and therefore, petition should be entertained :-

1. Can the benefit of Section 14 be denied on input steel materials, where VAT has already been paid on purchase from another dealer and the materials so purchased are used to fabricate plant and machinery which is then used for the manufacture of the end products sold by the petitioner ?

2. Whether benefit of Section 14 can be extended to goods purchased for fabrication of plant and machinery in order to produce the finished product ?

3. Whether denial of benefit under Section 14 to purchases used for fabricating plant and machinery, which will ultimately be used for manufacturing the finished product, would amount to double taxation thereby defeating the very purpose and object of VAT Act ?

5. Shri Ganesh, learned Senior Counsel took us through the impugned th assessment order dated 28 February 2015, he produced an authentic translation of the order and submitted that the only reason given in the impugned order for rejecting the benefit i.e. rebate of input tax to the petitioner is that the component purchased from M/s Vijay Steels Yard, Jabalpur, has been capitalized into plant and machinery and used by the petitioner. It is held that the material purchased from the aforesaid selling dealer has been consumed and the final component which was made have been produced from the machinery of the petitioner itself and thereafter sold. The department according to Shri Ganesh feels that the components purchased from the M/s Vijay Steels Yard, Jabalpur has been consumed by the petitioner in its plant and machinery which is then used for making of the final product and therefore, Section 14 is not applicable. Shri Ganesh argues that this approach of the department is totally incorrect and unsustainable. He says that even though there are no decided cases under VAT Act on such an issue but under the provisions of the Central Excise Act and the rules framed thereunder, in the matter of granting MODVAT credit now named as Ã¢ÂÂCENVATÃ¢ÂÂ, similar provisions akin to Section 14 are available in Rule 57(A) and 57(C) of the Central Excise Rules, 1944 and he invites our attention to the said provision which reads as under :-

Ã¢ÂÂ 57A. Applicability.- (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the "final products", as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereinafter referred to as the "special duty") paid on the goods used in or in relation to the manufacture of the said final products (hereinafter referred to as the "inputs") and for utilizing the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this section and the conditions and restrictions that may be specified in the notification:

Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted.

Explanation.- For the purposes of this rule, "inputs" includes-

(a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products,

(b) paints and packaging materials, and

(c) inputs used as fuel, but does not include ---

Rule 57F. (1) : The inputs in respect of which a credit of duty has been allowed under rule 57A -

(i) may be used in, or in relation to, the manufacture of final products for which such inputs have been brought into the factory; or

(ii) shall be removed, after intimating the Assistant Commissioner of Central Excise having jurisdiction over factory and obtaining a dated acknowledgment of the same from the factory for home consumption or for export under bond.

Ã¢ÂÂ18. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co- relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available. Ã¢ÂÂ (Emphasis Supplied) Thereafter, he took us through another judgment of the Supreme Court in the case of Escorts Ltd. Vs. Commissioner of Central Excise, Delhi Ã¢ÂÂ (2004)7 SCC 214 and argued that in this case the assessee was a manufacturer of tractor and the final product that came out was the tractor. The intermediate product were the part which were manufactured, and then were used in producing final product of tractor. It was said that the intermediate product which was used for manufacturing the Tractor would not be the final product. In this case also benefit of MODVAT credit was granted. He invited our attention to the principles laid down in para 9 in support of his contention, so also para 10 where other judgments of the Supreme Court have been considered. Para 9 and 10 of the judgment in this case reads as under

:-

Ã¢ÂÂ9. In cases of manufacturers like the appellants, the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus, Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the appellants to another factory of the appellants would not disentitle the appellants from claiming benefit of Notification No.217/86-CE dated 2.4.1986. As stated above, the notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer.

10. Mr. Lakshmikumaran relied upon the decision of this Court in the case of CCE Vs. Hindustan Sanitaryware & Industries wherein, in respect of this very notification, this Court has held that so long as duty is paid on the final product, the mere fact that duty was not paid on the intermediate product would not disentitle the manufacturer from the benefit of Notification No.217/86-CE dated 2.4.1986. In that case, the input was plaster of Paris, the intermediate product was moulds made out of the plaster of Paris, the final product was sanitaryware. In our view, the facts of that case are identical to the facts of the present case. The ratio laid down therein fully applies to this case.Ã¢ÂÂ (Emphasis Supplied)

6. Thereafter, he referred to the judgment of Central Excise Tribunal of Delhi, Mumbai in support of his contentions and the judgments are reported in 2005(187) ELT 49 (Tri.Del.) - Commr. Of Central Excise, Lucknow Vs. Seksaria Biswan Sugar Factory Ltd.;

10. Accordingly, rejecting the objection raised by Shri Samdarshi Tiwari with regard to maintainability of this writ petition, we proceed to decide the matter on merits.

16. With the aforesaid, this petition stands allowed and disposed of.

(RAJENDRA MENON)                              (SUSHIL KUMAR GUPTA)
      JUDGE                                           JUDGE

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