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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B.Sales Tax Revision / Reference No. 30 / 2013 M/s Lalit Hans Protein Pvt Ltd., A-316-318, Matsya Industrial Area, Alwar through its Chief accountant & Authorised Signatory Sh. Kapil Jain, son of Shri Om Prakash Jain, aged 34 years, resident of Scheme No.10A, Alwar ----Petitioner Versus The Commercial Taxes Officer, Circle B, Alwar ----Respondent _____________________________________________________ For Petitioner(s)

:

For Respondent(s) :

Mr. Alkesh Sharma Adv. Ms. Tanvi Sahai Adv. & Ms. Meenal Ghiya Adv.

_____________________________________________________ HON'BLE MR. JUSTICE JAINENDRA KUMAR RANKA Judgment Judgment Pronounced on

:

26th May, 2017

Reportable 1.

Instant petition is directed against the order dt.05.12.2012

passed by the Rajsathan Tax Board, Ajmer (in short the ‘Tax Board’). It relates to the assessment Year 2006-07. 2.

The petition was admitted on the following substantial

question of law which reads as under:“Whether under the facts and circumstances of the present case the Rajasthan Tax Board has not exceeded its jurisdiction in giving directions to the petitioners to appear before the Commissioner, Commercial Taxes, Rajasthan, Jaipur on 14.02.2013 by invoking provisions of Section 85 of the Rajasthan Value Added Tax Act, 2003”.

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3.

The Brief facts noticed are that the petitioner is carrying on

the business of manufacturing Mustard Oil and Solvent Oil and is not only effecting sales within the State but also inter-State sale in the course of business. On verification/examination of the returns for the second and third quarters of 2006-07 which was furnished in form VAT-10, it was noticed by the Assessing Officer that on purchase of Mustard seed and DOC (De Oiled cake), the assessee has claimed input tax credit after extraction of Solvent Oil Whereas u/Sec.18 of the RVAT Act, the input tax credit can be claimed on sale of taxable goods only and not on exempted goods and accordingly being not satisfied with the claim of the assessee, a show cause notice was given by the Assessing Officer as to why input tax credit be not disallowed. A detailed reply was filed on behalf of the assessee, however, the Assessing Officer being not satisfied, allowed only input tax credit at Rs.18,84,959/- and was disallowed to the extent of Rs.20,50,517/-. 4.

The assessee assailed the said order by filing an appeal

before the Dy. Commissioner (A), who however was satisfied with the explanation offered by the assessee and directed the Assessing Officer to allow the same taking into consideration the value of the goods. 5.

The revenue being not satisfied with the said finding

preferred an appeal before the Tax Board, who however, taking into consideration held that the order of the Dy. Commissioner (A) was not proper and not well reasoned in the light of the judgment rendered by this Court in the case of CTO (A-E), Sriganganagar

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Vs. M/s. Durgeshwari Food Ltd. 2012 Vol.32 Tax-Update 03 and decided the issue in favour of the revenue and against the assessee and also directed that the Commissioner, Commercial Taxes to revise order u/Sec. 85 of the RVAT Act and directed the assessee to appear before the Commissioner, who would decide the case. 6.

Counsel for the assessee vehemently contended that the

direction of allowing input tax credit on values is proper and also contended that pursuant to the order passed by the Dy. Commissioner

(A),

the

Assessing

Officer

re-calculated/re-

computed the calculation of input tax credit and once the Assessing Officer having passed the order then the appeal of the revenue became infructuous. Counsel further contended that not only the Tax Board in utter violation of the legislative intent even directed the Commissioner to take action u/Sec. 85 of the VAT Act to take appropriate action in accordance with law but also directed both the sides to appear before the Commissioner on 14.02.2013 and contended that the Board had no authority to give directions to the Commissioner u/Sec.85 of the Act. Counsel further contended that the order of the Assessing Officer was set aside pursuant to the order of the Dy. Commissioner (A) on 02.03.2009 and even during the intervening period of three years, no action was taken by the Commissioner despite the claim of the revenue that the claim was not allowable in the light of the judgment rendered by this Court in the case of M/s. Durgeshwari Food Ltd. (supra) and since the Commissioner also did not suo-moto

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or otherwise acted then at least the Board does not get the power to direct the Commissioner. Counsel relied upon the judgment of this Court in the case of Prem Agencies Vs. Commissioner of Income Tax (1988) 173 ITR 110, Commercial Taxes Officer, Special Circle-I, Jaipur Vs. Kamal and Company (1987) 67 STC 136, Sabharwal Brothers Vs. Commissioner, Sales Tax, U.P. (1990) 76 STC 41, Central Camera Co. (P) Ltd. Vs. The Government of Madras (1971) 27 STC 112, Sri Lakshmi Satyanarayana Castor Oil Mill Vs. Deputy Commissioner, Commercial Taxes, Nellore & Another (1977) 39 STC 100, Madras Rubber Factory Limited Vs. The State of Tamil Nadu (1978) 41 STC 55, P.S.N.S. Ambalavana Chettiar and Co. Private Limited Vs. Commissioner of Commercial Taxes, Board of Revenue, Madras (1963) 14 STC 760, Brihan Maharashtra Sugar Syndicate Ltd. & Another Vs. P.R. Joglekar, Dy. Commr, of Argl. Inc.-Tax and Others (1987) 165 ITR 279. However, ld. counsel for assessee conceded that judgment of this Court in M/s. Durgeshwari Food Ltd. (supra) is applicable on facts of the instant case. 7.

Per-contra, ld. counsel for the respondent vehemently

contended that the claim could not have been allowed contrary to the provisions of law and the claim of the assessee was not in accordance with law, therefore, the Assessing Officer disallowed input tax credit u/Sec.18 of the Act. Counsel further contended that even the judgment rendered by this Court in the case of M/s. Durgeshwari Food Ltd. (supra) is squarely applicable on the

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facts and circumstance of the instant case and this court has clearly held that the input tax credit could not be allowed to the extent of sale of VAT exempted goods and the judgment of this Court is binding on all the authorities and the Tax Board simply directed the Commissioner which was well justified u/Sec.85 of the Act and no wrong was done in simply directing the Commissioner to allow/disallow input tax credit in the light of the judgment

rendered

by

this

Court

in

the

case

of

M/s.

Durgeshwari Food Ltd. (supra). Ld. counsel further contended that wrong can always be corrected and even this court can direct that input tax credit can be allowed or not in view of the judgment rendered by this Court in the case of M/s. Durgeshwari Food Ltd. (supra) which is binding not only on this Court but also on all the Authorities subordinate to this Court. 8.

Counsel also contended that u/Sec.83 of the Act powers are

conferred on the Tax Board and the word used is “as it thinks fit” would cover even directing the Commissioner to take into consideration the facts and material as the Commissioner is subordinate to the Tax Board, and if wrong has been committed by the lower Officers in not correctly applying the provisions of law then even the Board could have directed to allow correct input tax credit based on the judgment rendered by this Court in the case of M/s.

Durgeshwari

Food

Ltd.

(supra)

but

directed

the

Commissioner to act taking into consideration the judgment rendered by this Court (supra) and thus, contended that the

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finding reached by the Tax Board is just and proper and is not required to be interfered with. 9.

I have considered the arguments advanced by the counsel

for the parties and have perused the material available on record including the judgment of this Court in M/s. Durgeshwari Food Ltd. (supra). It would be appropriate to quote section 18 of the RVAT Act by which the input tax credit is to be allowed to the assessee. It would also be appropriate to quote sections 83 & 85 of the RVAT Act which reads as under:“18. Input tax credit (1) Input tax credit shall be allowed, to registered dealers, other than the dealers covered by subsection (2) of section 3 or section 5, in respect of purchase of any taxable goods made within the State from a registered dealer to the extent and in such manner as may be prescribed, for the purpose of(a) sale within the State of Rajasthan; or (b) sale in the course of inter-state and commerce; or (c) sale in the course of export outside the territory of India; or (d) being used as packing material of goods, other than exempted goods, for sale; or (e) being used as raw material [except those as may be notified by the State Government] in the manufacture of goods, other than exempted goods, for sale within the State or in the course of interstate trade or commerce; or (f) [being used as packing material or goods or as raw material in manufacture of goods for sale] in the course of export outside the territory of India; or [(g) being used in the State as capital goods in manufacture of goods other then exempted good,] however, if the goods purchased are used partly for the purposes specified in this sub-section and partly as otherwise, input tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section.

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[(2) The input tax credit under sub-section (1) shall be allowed only after verification of the deposit of tax payable by the selling dealer in the manner as may be notified by the Commissioner.] (3) Notwithstanding anything contained in this Act, no input tax credit shall be allowed on the purchases(i) from a registered dealer who is liable to pay tax under sub-section (2) of section 3 or who has opted to pay tax under section 5 of this Act; or (ii) of goods made in the course of import from outside the State; or [(iia) of goods taxable at first point in the series of sales, from a registered dealer who pays tax at the first point; Explanation: For the purpose of this clause, “first point in the series of sale” means the first sale made by a registered dealer in the State’ or (iii) where the original VAT invoice or duplicate copy thereof is not available with the claimant, or these is evidence that the same has not been issued by the selling registered dealer from whom the goods are purported to have been purchased; or (iv) of goods where invoice does not show the amount of tax separately; or (v) where the purchasing dealer fails to prove the genuineness of the purchase transaction [xxx], on being asked to do so by an officer not below the rank of Assistant Commercial Taxes Officer authorized by the Commissioner. [(3A) Notwithstanding anything contained in this Act, where any goods purchased in the State are subsequently sold at subsidized price, the input tax allowable under this section in respect of such goods shall not exceed the output tax payable on such goods.] 83. Appeal to the Tax Board.— (1) An appeal shall lie to the Tax Board against— [(a) an order passed by the Commissioner under sub-section (2) of section 26 or 36 or section 85]; [(b) an order passed under the Act by the Deputy Commissioner (Administration);] (c) an order passed by an [Appellate Authority; and]

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[(d) an order of the State Level Screening Committee or the District Level Screening Committee passed under the Incentive, Exemption or Deferment Scheme notified under section 8 or under sub-section (3) of section 20 of the Act.] (2) Any person aggrieved by any order referred to in clauses (a), (b) and (c) of sub-section (1), may file an appeal before the Tax Board within ninety days of the date on which the order sought to be appealed against is communicated to him in writing. (3) Notwithstanding anything contained in subsection (2), the Commissioner or a Deputy Commissioner (Administration) authorised specially or generally by the Commissioner may, if aggrieved by any order referred to in clauses (a), (b) and (c) of sub-section (1), direct any officer or incharge of check-post or barrier to file an appeal before the Tax Board and such officer or incharge shall file such appeal under his signatures within one hundred and eighty days of the date on which the order sought to be appealed against is communicated in writing to the Commissioner or the Deputy Commissioner (Administration). (4) The respondent may, on receipt of notice that an appeal against an order referred to in sub-section (1) has been preferred by the appellant, notwithstanding that he may not have appealed against such order, within one hundred and twenty days in the case of an officer of the Commercial Taxes Department and within sixty days in the case of a dealer, of receipt of the notice, file a memorandum of cross-objections verified in the prescribed manner, against any part of the said referred order and such memorandum shall be disposed of by the Tax Board as if it were an appeal within the time specified in sub-section (2) or (3). (5) The Tax Board may admit an appeal or permit the filing of memorandum of cross-objections after the expiry of the limitation provided in sub-sections (2), (3) and (4), if it is satisfied that there was sufficient cause for not presenting the same within that limitation. (6) An appeal to the Tax Board shall be made in the prescribed form and shall be verified in the prescribed manner. (7) The Tax Board, during the pendency of an appeal before it, shall not stay any proceeding but it may, on an application in writing from the dealer, stay the recovery of the disputed amount of tax or any other sum or any part thereof on the condition

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of furnishing adequate security to the satisfaction of the assessing authority or the officer authorised by the Commissioner in this behalf, and the amount found ultimately due shall be subject to interest from the date it became first due, in accordance with the provisions of this Act. [PROVIDED that no security under this section shall be required to be furnished by a department of the Central Government or the State Government or a public sector undertaking, corporation or company owned or controlled by the Central Government or the State Government.] (8) Notwithstanding that an appeal against an order has been preferred to the Tax Board, the tax or any other sum shall be paid in accordance with the order against which appeal has been preferred, unless recovery of such tax or any other sum has been stayed by the Tax Board. (9) The Tax Board shall, with the previous sanction of the State Government, make, by notification in the Official Gazette, regulations consistent with the provisions of this Act and the rules made thereunder for regulating its own procedure and the procedure of the benches thereof in all matters arising out of the exercise of its powers or the discharge of its functions ; however, until the regulations are made, the Tax Board shall, subject to the provisions of this Act and the rules made thereunder, have power to regulate its own procedure and the procedure of the benches thereof in all matters arising out of the exercise of its powers and discharge of its functions. (10) The Tax Board shall, after giving both the parties to the appeal an opportunity of being heard, pass such order thereon as it thinks fit and send a copy thereof to the appellant, the assessing authority, the authority whose order was appealed against and the Commissioner. 85. Revision by the Commissioner.— (1) The Commissioner may suo motu or otherwise, call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by Assistant Commissioner, Commercial Taxes Officer, Assistant Commercial Taxes Officer or Junior Commercial Taxes Officer of Incharge of a check-post or barrier is either erroneous, or prejudicial to the interest of the State

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revenue, he may after having made or after having caused to be made such enquiry as he considers necessary, and after having given to the dealer a reasonable opportunity of being heard, pass such order or issue such direction as he deems proper under the circumstances of the case. (2) No order or direction under sub-section (1) shall be passed or issued by the Commissioner if a period of five years has already elapsed from the date on which the order sought to be revised was passed.”

10.

It would also be appropriate to quote the relevant para

Nos.20 & 21 of the judgment rendered by this Court in the case of M/s. Durgeshwari Food Ltd. (supra) which reads as under:“20. In the considered opinion of this Court, therefore, in view of specific provisions contained in Section 18 of the VAT Act of 2003, the ratio of the judgments relied upon by the learned counsel for the respondent-assessee would in fact support the case of the Revenue, and as a necessary corollary, it deserves to be held following these aforesaid judgments, that input tax credit in the present case, was rightly reduced and was allowed only proportionately to the extent of manufacturing and sale of taxable goods by the assessee in the present case, namely, “Aata”, “Maida” and “Suji”, manufactured out of raw material (Wheat) and such input tax credit could not be allowed to the extent of sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar), which has been assessed by the Assessing Authority to the extent of 25% of the input tax credit and reverse tax has been imposed on the respondent assessee. 21. Therefore, as far as impugned order of learned Tax Board dated 13.03.2009 to the extent of setting aside the imposition of reverse tax disallowing the proportionate input tax credit is concerned, the same cannot be sustained and deserves to be quashed by this Court, and to that extent the revision petitions filed by the petitioners-Revenue deserve to be allowed.”

11.

On perusal of the above, it postulates that this court held

that the input tax credit could not be allowed to the extent of sale of VAT exempted goods, namely, wheat bran (Chaff/Chokar),

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which had been assessed by the Assessing Authority to the extent of 25% of the input tax credit and reverse tax has been imposed on the respondent-assessee and this Court allowed the claim of the revenue in the aforesaid case. 12.

The sole issue raised in the instant petition and the question

admitted is that whether the Tax Board was justified in directing the Commissioner to take recourse of section 85 or not. 13.

Admittedly, there is a judgment of this Court in the case of

Drugeshwari Foods Limited (supra) holding that the assessee was not entitled to claim Input Tax Credit or Input Tax Credit could not be allowed to the extent of sale of VAT exempted goods namely; wheat bran (Chaff/Chokar) which had been assessed by the Assessing Authority to the extent of 25% of the Input Tax Credit and reverse tax had been imposed on the respondent-assessee. Counsel for the petitioner also accepts that the finding of this Court in the case of Durgeshwari Foods Limited (supra) is squarely applicable on the facts of the instant case. Once this is an admitted fact that the judgment is squarely applicable even the Tax Board irrespective of directing the Commissioner in my view, could have directed that in the light of the judgment in the case of Durgeshwari Foods Limited (supra), the claim was not required to be allowed and for the purposes of calculating as to how much input tax credit is to be allowed/disallowed, the matter could have been restored back to the Assessing Officer. 14.

Be that as it may, in my view, the powers of the Tax Board

are wide enough. On perusal of section 83 quoted herein before

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and sub-section (10) of section 83 states that the Tax Board after opportunity of being heard shall pass such order “as it thinks fit” which in my view, gives power to the Tax Board even to direct the Commissioner u/Sec. 85 to revise an order. In my view, even the inherent power is available with the Tax Board to pass an appropriate order “as it thinks fit” which would mean even directing the Commissioner u/Sec.85 to pass an appropriate order. Admittedly, the Commissioner is an Authority subordinate to the Tax Board and the Tax Board can certainly give directions to correct a wrong undone in the matter. 15.

Even

u/sec.85,

the

Commissioner

may

“suo-moto

or

otherwise”……, would mean that the Commissioner can on his own or on receiving certain information from any source that is even Tax Board can take recourse of invoking provisions of section 85 and

certainly,

the

Commissioner

is

duty

bound

to

grant

opportunity of being heard to the aggrieved person i.e. to the dealer/assessee and shall pass such order or issue such directions as it deems fit, just & proper under the circumstances of the case. 16.

In view of what has been stated herein before, in my view,

the directions given by the Tax Board to the Commissioner cannot be said to be contrary to the provisions of the Act and the Tax Board was within its competence to give certain directions. Once it is an admitted fact that the judgment of this Court in the case of Durgeshwari Foods Ltd (supra) governs the case, it is binding upon all the Subordinate Authorities and particularly when the matter was pending before the Tax Board and the judgment of this

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Court (supra) was available by the time when the appeal came up for hearing before the Tax Board. 17.

The judgments relied upon by the ld. counsel for the

assessee are distinguishable or inapplicable on facts, taking into consideration the plain and simple language of sections 83 & 85 and judgments of this Court in M/s. Durgeshwari Food Ltd. (supra) which is admittedly and squarely applicable on the facts and issue. 18.

Let the assessee appear before the ld. Commissioner,

Commercial Taxes Rajasthan, Jaipur through counsel or otherwise on 12th June 2017 and the ld. Commissioner pass an appropriate order within three months thereafter in accordance with law. 19.

Accordingly, the question raised in the instant petition is

answered in favour of the revenue and against the assessee. The petition stands dismissed with no order as to costs.

(JAINENDRA KUMAR RANKA)J. S.Kumawat Jr. P.A.