Petitioner-Co. held entitled to avail ITC, HC

Facts in Brief:

1. Company is engaged in the business of manufacturing Asbestos Cement Pressure Pipe and Asbestos Cement Sheets ('A.C. Pressure Pipe and A.C. Sheets'); the petitioner availed ITC on the purchase of raw material used in the manufacture of A.C. Sheets; the Assessing Authority issued notices to the petitioner for disallowing ITC on purchase of raw material used in manufacturing A.C. Sheets for the period under reference; the petitioner filed its detailed reply to the notice; however, not accepting the reply, the Assessing Authority while passing orders under Section 22 of the Act disallowed the ITC and charged interest.

2. The petitioner filed appeals before the DC (Appeals), however, the appellate authority also rejected the appeals by common judgment dated 16.04.2009.

3. Aggrieved, the petitioner filed second appeals before the Board, however, the Board after hearing the parties, while relying on the judgment of this Court in ACTO v. M/s Suncity Trade Agency : (2006) 147 STC 405, also dismissed the appeals.

On appeal HC held as under,

4. The communication dated 26.04.2008 construing the notifications dated 09.03.2007 can be used as contemporanea expositio. Hon'ble Supreme Court in Collector of Central Excise, Guntur v. Andhra Sugar Ltd., : AIR 1989 SC 625 while dealing with an exemption notification under the Central Excise and Salt Act, 1944 observed and held as under:-

"It is well settled that the meaning ascribed by the authority issuing the Notification is a good guide of a contemporaneous exposition of the position of law. Reference may be made to the observations of this Court in K.P. Varghese v. Income-tax Officer, Ernakulam, (1982) 1 SCR 629 : (AIR 1981 SC 1922). It is a well settled principle of interpretation that Courts in construing a Statute will give much weight to the interpretation put upon it at the time of its enactment and since, by those whose duty has been to construe, execute and apply the same enactment."

5. So far as the judgment of this Court in the case of Suncity Trade Agency (supra) is concerned, the said judgment dealt with a situation wherein by exemption notification stainless steel flats, ingots and billets were exempted from tax on the conditions indicated in the notification and this Court came to the conclusion that merely because the exemption is conditional or is given subject to fulfillment of certain conditions, it does not mean that such goods will fall outside the definition of exempted goods. The said judgment apparently has no application to the facts of the case. The term defined under Section 2(13) of the Act also deals with exempted goods and not with exemption of person or class of persons as indicated in Section 8(3) of the Act.

6. The intention of the legislature in incorporating Section 18 (1)(e) of the Act is also apparently clear, which takes away the exempted goods from the purview of ITC and not the person or class of persons exempt under Section 8(3) as nothing prevented the legislature from including besides exempted goods, exempted persons also under Section 18(1)(e) of the Act. The fact that goods and dealers are treated separately is also evident from provisions of Section 5 of the Act.

7. The aspect that those included in Schedule-II are entitled for ITC is also fortified from the fact that in the conditions indicated for exemption of Self Help Groups and those, who have been registered with the Khadi and Village Industries Commission or Rajasthan Khadi and Village Industries Board by the notifications S.O.376 and S.O.378 issued on the same date i.e. 09.03.2007 a specific stipulation has been made in the notifications issued under Section 8(3) of the Act as under:-

"No input tax credit shall be claimed by such dealers in respect of purchase of raw materials used for manufacture of aforesaid goods."

8. If the persons included in Schedule-II were not entitled to claim ITC, there was no reason to include the said conditions for the above noted persons. Apparently, it is the sale of goods made by person or persons included in Schedule-II, which is exempt and not the goods manufactured by them, whereas, for denying ITC, the requirement is that of 'exempted goods'.

9. In view of what has been considered above, it is apparent that in the present case in view of express language of Section 18(1)(e) of the Act, notifications S.O.371 and S.O.372 read with S.O.377, the petitioner who is manufacturer of A.C. Sheets is entitled to avail ITC and the authorities below were not justified in denying Input Tax Credit to the petitioner based on interpretation put by them to inclusion of the petitioner in Schedule-II under Section 8(3A) and notification S.O.377 dated 09.03.2007 issued under Section 8(3) of the Act.

10. Consequently, the revision petitions are allowed. The impugned judgment dated 23.11.2011 passed by the Board, the order dated 16.04.2009 passed by the DC (Appeals) and the assessment orders dated 20.05.2008 and 25.08.2008 passed by the Assessing Authority are quashed and set aside. No costs.

Case Reference - M/S A. Infrastructure Ltd vs C.T.O. Spl. Cirlce Bhilwara .