Summary
A dealer whose sales to manufacturer-exporters were exempt from tax under Section 7(c) of the Uttar Pradesh Value Added Tax Act, 2008 (by the notifications of 24.02.2010 and 25.03.2010, against Form-E) is not entitled to input tax credit on the purchase tax paid on those goods, because Section 13(7) expressly bars input tax credit where the dealer's sale of the goods is exempt under Section 7(c). The Court declined to read the State's policy of encouraging exporters into the statute against its clear words and affirmed the reversal of the credit.
Issues
- Whether a registered dealer can claim input tax credit under Section 13(1) of the Uttar Pradesh Value Added Tax Act, 2008 on purchases of goods that it sold tax-free to manufacturer-exporters under a notification issued under Section 7(c), in view of the embargo in Section 13(7).
- Whether the policy objective behind the Section 7(c) exemption (encouraging manufacturer-exporters) can be invoked to extend input tax credit to the selling dealer despite the words of Section 13(7).
Provisions considered
- Section 7(c), Uttar Pradesh Value Added Tax Act, 2008No tax is levied on the turnover of such sales or purchases, or of such goods by such class of dealers, as the State Government specifies by notification. It was admitted that the dealer's turnover of Rs. 1,89,35,100 in sales to manufacturer-exporters against Form-E fell within Section 7(c) read with the notifications dated 24.02.2010 and 25.03.2010, so the dealer could not collect tax from the purchasers. (¶¶ 2, 9, 10)
- Section 13(1), Uttar Pradesh Value Added Tax Act, 2008Section 13(1) allows registered dealers input tax credit on taxable goods purchased within the State to the extent provided in the relevant clause, including the full amount of input tax where purchased goods are resold in the course of export out of India. The Court held the dealer's reliance on Section 13(1) was answered by the exception carved out in Section 13(7). (¶¶ 2, 9, 10)
- Section 13(7), Uttar Pradesh Value Added Tax Act, 2008Except where the goods are to be sold in the course of export out of India, no facility of input tax credit is allowed in respect of purchase of goods where the sale of such goods by the dealer is exempt under Section 7(c). The Court treated this as a statutory mandate prohibiting input tax credit to the dealer on the facts, and refused to dilute its clear expression by reference to the policy behind the exemption notifications. (¶¶ 2, 9, 10)
Held
- The scheme for availing input tax credit is determined by Section 13 of the Act. While Section 13(1) allows credit to the extent provided in the applicable clause, Section 13(7) sets out the circumstances in which the benefit cannot be allowed, including where the sale of the purchased goods by the dealer is exempt from tax under Section 7(c). The prohibition is a statutory mandate, and the authorities and the High Court were correct in reversing the input tax credit of Rs. 6,42,260 claimed on the Form-E turnover. (¶¶ 9, 10)
- The intent or policy of the State Government made known through notifications under Section 7(c), namely to encourage manufacturer-exporters, cannot override the clear words of Section 13(7); a dealer availing the Section 7(c) exemption knows the extent to which input tax credit can be claimed. (¶ 10)
Result
Civil appeal dismissed; the High Court's order dated 24.11.2014 dismissing the revision, and the orders of the assessing officer, first appellate authority and Tribunal reversing the input tax credit, stand. No order as to costs; pending applications disposed of.