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Showing contexts for: kvat act in M/S J K Cement Works vs The State Of Karnataka on 23 March, 2017Matching Fragments
4. The learned counsels for the petitioner assessee Mr.V.R.Desai and Mr.Atul K.Alur urged before us that the cement in question purchased by the petitioner assessee, which itself commenced the commercial production of cement later on, would constitute the part of cost of "plant" itself and therefore, it should be construed as "plant" and thus, falling within the definition of "capital goods" as defined in Section 2(7) of the KVAT Act read with Section 11(a)(2) and Section 12 of the KVAT Act, as such, the petitioner assessee would be entitled to claim the input tax credit in respect of tax paid by it on purchase of such cement against the output tax later on payable by it on the sale of cement manufactured by it, as the Date of Order: 23.03.2017 STRP Nos.100001, 100002, 100003 of 2017 M/s.J.K. Cement Works, Bagalkot Vs. The State of Karnataka authorities below, including the Tribunal, have failed to appreciate the correct position of law in this regard and the provisions of the Act and therefore, the question of law deserves to be answered in favour of the petitioner assessee and the orders by the authority below deserve to be quashed and set aside to this extent. They relied upon several case laws in support of their this principal contention which would also be briefly discussed hereinafter.
9. Chapter II dealing with "the incidence and levy of tax" under KVAT Act, comprising of Sections 3 to 21 deals with the provisions regarding levy of tax, liability of tax and rates thereof, exemption of tax, etc. While Section 10 of the KVAT Act provides the mode of computing output tax, input tax and net tax payable by the assessee, Section 11 of the KVAT Act, reproduced above, provides for input tax restrictions, while Section 12 of the KVAT Act deals with the Deduction of input tax in respect of Capital Goods. Under Section 11(a)(2) of the KVAT Act, whereto a reference to Fifth Schedule is given, has its own exception. Section 11(a)(2) of Date of Order: 23.03.2017 STRP Nos.100001, 100002, 100003 of 2017 M/s.J.K. Cement Works, Bagalkot Vs. The State of Karnataka the KVAT Act, while it provides for input tax restrictions stipulates that tax paid on goods as specified in the Fifth Schedule, shall not be deducted in calculating the net tax payable if such Fifth Schedule goods are purchased and put to use for the purpose other than for (i) resale; (ii) manufacture or any other process of other goods for sale. Therefore, if the Fifth Schedule goods are purchased and put to use for manufacturing of other goods, restriction of claiming input tax credit in respect of such Fifth Schedule goods will not apply to the assessee and the assessee would be entitled to claim input tax credit even in respect of Fifth Schedule goods against the output tax payable by him.
12. Once the Court comes to the conclusion that the cement, used for erection and setting up of the Plant and machinery, would constitute a "Plant" and therefore, is Capital Goods, as defined under Section 2(7) of the KVAT Act, the recourse can also be made to Section 12 of the KVAT Act quoted above and the input tax in respect of the purchase of capital goods, including the cost of "Plant and machinery" and cost of cement for erection thereof, would constitute jointly capital goods, which are used for manufacture and sale of the cement ultimately produced with such plant and machinery.
[2009] 9 SCC 193, held that installation of electrical and electronic goods which have nexus to the manufacturing process like the Speeder System used in that case to provide backup electricity in the manufacturing process, the Court allowed the input tax credit in respect of the tax paid on such Speeder System under the provisions of KVAT Act dealing with Section 11(a)(2) and Fifth Schedule of the KVAT Act in the following manner:
" If the goods specified in the Fifth Schedule to the Act are purchased and put to use for the purpose of resale or for manufacture or for the process of other goods for sale, the input-tax credit would be available. Once the goods are purchased in furtherance to or for aiding the manufacturing process, the same will have a direct nexus to the manufacturing activity and there is no reason why they could be treated as an independent capital goods disentitling the benefit. They cannot be Date of Order: 23.03.2017 STRP Nos.100001, 100002, 100003 of 2017 M/s.J.K. Cement Works, Bagalkot Vs. The State of Karnataka segregated just on a mere ground that they are capital goods."