M/s. Jindal Aluminium Ltd. vs State of Karnataka

In these petitions since common questions arise for consideration, they are being considered simultaneously.

The petitioner-assessee has preferred these petitions by raising various questions of law, but, considering the facts and circumstances, we find that the only question that arises for consideration is:-

"Whether the partial rebate scheme under Section 17 read with Rule 131 of Karnataka Value Added Tax Act, 2003 (for short "KVAT Act") can be made applicable to the case of the petitioner or not?"

We have heard Mr. E.R. Indrakumar, learned Senior Counsel with Mrs. Vani. H., learned counsel for petitioner and Mr. T.K. Vedamurthy, learned Additional Government Advocate appearing for the respondent.

The contention raised on behalf of the petitioner was that for applicability of Section 17 of KVAT Act for partial rebate two conditions should be satisfied, one is that there should be sales of taxable goods and the second is that the dealer should also be making sales of exempted goods under Section 5 of the KVAT Act. It was submitted, even if sub-clause (2) of Section 17 is read with sub-clause (1) of Section 17, both the conditions must be satisfied and in the absence thereof Section 17 cannot be made applicable. As per the petitioner they are not dealing in sales of any exempted goods covered by Section 5 and therefore, Section 17 is wrongly made applicable by the Tribunal.

Learned counsel further submitted that the intention of the Legislature for requirement to be satisfied of the above conditions are apparent in view of language of Rule 131 of Karnataka Value Added Rules, 2005 (for short "KVAT Rules"). As per the learned counsel for the petitioner sub-rule (3) provides for consideration of input tax on sale of taxable goods and exempted goods and hence, if there is no exempted goods Section 17(2) would not apply and therefore, the contention is that the Tribunal has committed an error in considering the said question of law and hence, this Court may consider in the present petitions.

Whereas, learned Additional Government Advocate appearing for the respondent-Department has supported the order passed by the Tribunal and contended that no question of law arises in the petitions as canvassed. He submitted that for the purpose of calculation of facts and figures, the authority can examine if there is any factual mistake, but, it cannot be said that sub-clause (2) of Section 17 which controls rebate would be inapplicable for input tax. He therefore submitted that the petitions may be dismissed.

In order to appreciate the contention, we may for ready reference reproduce Section 17 of the KVAT Act, which reads as under:-

"17. Partial rebate

Where a registered dealer deducting input tax.-

(1) makes sales of taxable goods and goods exempt under Section 5, or

(2) in addition to [sales of taxable goods or]the sales referred to in clause (1), dispatches taxable goods or goods exempted under Section 5 outside the State not as a direct result of sale or purchase in the course of inter-State trade, or

(3) puts to use the inputs purchased in any other purpose (other than sale, manufacturing, processing, packing or storing of goods), in addition to use in the course of his business, [or]

(4) falls under any of the above clauses and also purchases any petroleum product for use as fuel in production of any goods or captive power.]

apportionment and attribution of input tax deductible between such sales and despatches of goods or such purpose, shall be made in accordance with Rules or by special methods to be approved by the Commissioner or any other authorised person and any input tax deducted in excess shall become repayable forthwith."

The aforesaid provisions of Section 17 by title itself shows that it is in order to permit partial rebate for input tax credit. Sub-clause (1) of Section 17 provides that one of the requirement is if the dealer makes sale of taxable goods and exempted goods under Section 5. Since as per the petitioner they are not dealing in sales of exempted goods, it can be said that the petitioners are not covered by the provisions of sub-clause (1). However, the language of sub-clause (2) is different. Sub-clause (2) of Section 17 can be bifurcated into two contingencies. One would be "in addition to sales of taxable goods" and another would be "the sales referred to in clause (1)". Since, on the aspects of despatches of taxable goods outside the State not as a direct result of sales or purchase in the course of interstate trade is not in dispute, we do not find that the discussion may be required on the said aspect, but, suffice it to observe that if the dealer despatches the taxable goods outside the State otherwise than by way of sale by purchase in the course of interstate trade and is meeting with any of the two conditions as observed in the first part, he would be covered by Section 17(2). As observed earlier, two contingencies are that the dealer should in addition to the sales of taxable goods be despatching taxable goods outside the State otherwise than by way of sale or the dealer should be dealing in the sales referred to in sub-clause (1) and despatches goods outside the State otherwise than by way of sale. The fact that in between aforesaid two contingencies the Legislature has used the word "or" it cannot be read as "and". Further, the reference to sub-clause (1) is for the sales referred to under sub-clause (1) and it cannot be correlated with an independent condition providing that "in addition to sales of taxable goods". Therefore, we do find that for applicability of Section 17(2) both the conditions should be satisfied namely that the dealer should be making sales of taxable goods and the exempted goods. On the contrary, if sub-clause (2) is read with sub-clause (1), sub-clause (2) provides for two situation, but, if either of it is satisfied coupled with the latter portion of sub-clause (2) of despatching of goods otherwise than by way of sale, sub-clause (2) will be attracted. In the present case, it is not in dispute that the petitioner is selling taxable goods. Therefore, when the petitioner is selling taxable goods and also despatches taxable goods outside the State otherwise than by way of sale and the Tribunal has found that Section 17(2)-partial rebate is available, no error can be said to have been committed by the Tribunal.

The attempt made by the learned counsel for the petitioner to contend that in the latter portion of Section 17, the language used is "shall be made in accordance with the Rules" would mean that Section 17 has to be applied with Rules and sub-rule (3) of Rule 131 also provides for consideration of the figure of sales of taxable goods and exempted goods, it can be said that both the conditions should be satisfied namely that the dealer sells taxable goods as well as exempted goods, in our view cannot be countenanced for three fold reasons, one is that no Rule can be permitted to march over the express provision of the Act and the second is that the Rules should be read in aid of Section itself and not to nullify the effect of the Section. The third one is that even if sub-rule (3) of Rule 131 provides for consideration of figures of input tax relating to sales of taxable goods and exempted goods, while calculating the figure, if any dealer is not selling any exempted goods, the figure will be zero for the input tax for exempted goods but thereby it cannot be said that the express two independent contingencies provided by sub-clause (2) of Section 17 would be nullified nor would be controlled by sub-rule (3) of Rule 131 of the KVAT Rules. Hence, we find that the said contention cannot be accepted.

In view of the aforesaid observations and discussions, it is not possible to accept the contention that Section 17(2) would not be applicable to a dealer who sells taxable goods and despatches goods outside the State otherwise than by way of sale. Hence, the question as observed earlier, stands answered in the following manner:-

"If any dealer sells taxable goods and even if he is not selling exempted goods, but, despatches goods outside the State otherwise than by way of sale, he could be considered as falling under Sub-clause (2) of Section 17."

In the circumstances, it cannot be said that the Tribunal has committed any error in not considering any substantial question of law more particularly for Section 17 and Rule 131 of the Rules.

On the aspects of calculation of facts and figures as provided under Rule 131, nothing is brought to our notice on the basis of which it can be said that the error has been committed. However, that would be essentially a question of fact outside the judicial scrutiny of the present petitions which are limited to question of law.

In view of the above, we find that the petitions are merit less and deserve to be dismissed. Hence, dismissed.