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Neha Enterprises v. Commissioner, Commercial Tax, Lucknow, UP

Civil Appeal · 2025 INSC 476Decided 9 Apr 2025
C.A. No.-006553-006553 - 2016
Justice Pankaj Mithal · Justice S.V.N. Bhatti

Background

Neha Enterprises, a registered dealer, sold goods to manufacturer-exporters under Form-E, a category exempted from tax under Section 7(c) of the UP VAT Act, and claimed input tax credit of Rs. 6,42,260 on that turnover. The assessing officer disallowed the credit, and this was upheld by the first appellate authority, the tax Tribunal, and the Allahabad High Court, all holding that Section 13(7) of the Act specifically bars input tax credit on goods whose sale is tax-exempt under Section 7(c).

Decision Breakdown

The Supreme Court held that Section 13(7) unambiguously excludes input tax credit for exactly the kind of exempted sale involved here, and that the dealer's argument, that the policy intent behind the exemption notification should override this bar, could not succeed against the plain statutory language. The Court emphasized that in interpreting taxing statutes, the express wording of the provision governs, not perceived policy intent, and since the dealer had chosen to sell under the Section 7(c) exemption, it had to accept the accompanying restriction on input tax credit. The civil appeal was dismissed, with no order as to costs.

Lesson Learnt

Tax benefits and their accompanying restrictions must be read together and applied strictly as written: a taxpayer cannot claim the advantage of a tax exemption while trying to avoid the specific statutory bar that comes attached to it.

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

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