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Commercial Taxes Officer v. A Infrastructure Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 2806 of 2015)Decided 24 Nov 2015
Civil Appeal No. 2806 of 2015
Justice Dipak Misra · Justice Prafulla C. Pant

Background

A Rajasthan manufacturer of asbestos cement sheets claimed input tax credit (a VAT set-off for tax paid on raw materials) for 2006 to 2009. The tax authorities denied the credit on the ground that the sheets were "exempted goods", which the law bars from credit. The High Court allowed the manufacturer's revision petitions, and the State appealed.

Decision Breakdown

The Court dismissed the State's appeals, leaving the High Court's ruling in place. It accepted the distinction the High Court drew: "exempted goods" are goods that are not taxable at all, whereas an exemption granted to a particular manufacturer or sale under Section 8(3) leaves the goods themselves taxable. Because the sheets remained taxable goods, the bar on input credit for exempted goods did not apply. The Court also noted that where the State intends to deny input credit to an exempt dealer or transaction, it must say so expressly in the exemption notification, and that subsequent dealers who resell the sheets remain liable to tax.

Lesson Learnt

An exemption given to a manufacturer or a particular sale is different from the goods themselves being exempt. Whether a business can claim tax credits depends on the exact wording of the exemption notification and on whether the goods remain taxable.

Official source (sci.gov.in)View Judgment (PDF)

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