LI Network
Published on: November 14, 2023 at 12:52 IST
The Supreme Court, comprising Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice J.B. Pardiwala, and Justice Manoj Misra, clarified the definition of “Goods” under the Uttar Pradesh Value Added Tax Act, 2008 (“UP VAT Act”).
The Court held that the term “Goods” under Section 2(m) and Section 13(1)(f) of the UP VAT Act includes both taxable and exempted goods. The decision arose from an appeal filed by M/s Modi Naturals Ltd.
The Court’s decision centered around the 2010 amendment to the UP VAT Act, specifically Section 13(1)(f), which was introduced to address concerns where goods, including taxable, exempt, by-products, or waste products, were sold at a price lower than the cost price.
The appellant, M/s Modi Naturals Ltd., a registered dealer under the UP VAT Act, produced Rice Bran Oil (RBO) and De-Oiled Rice Bran (DORB) as a by-product during the manufacturing process. DORB was categorized as exempted goods.
The dispute arose when the appellant claimed the full amount of tax paid on the purchased goods, relying on Section 13 of the UP VAT Act. The claim was rejected by the Deputy Commissioner, leading to further appeals.
The key issue before the Supreme Court was whether the definition of “Goods” in Section 2(m) and Section 13(1)(f) should be restricted to “taxable goods” only.
The Court noted that the legislative intent behind the 2010 amendment was not to limit the scope of “goods” in Section 13(1)(f) to only “taxable goods.” The amendment aimed to address the sale of manufactured goods at a price lower than the cost price.
The Court emphasized that the definition of “Goods” under Section 2(m) of the UP VAT Act did not differentiate between exempt and taxable goods. Additionally, the word “goods” in Section 13(1)(f) was not qualified by the term “taxable.”
The Court held that wherever the legislature intended to qualify “goods” with the term “taxable,” it explicitly did so in other sections. The absence of such qualification in Section 13(1)(f) indicated that the term “goods” encompassed both taxable and exempted goods.
The decision set aside the High Court order and affirmed the decision of the Commercial Tax Tribunal, holding that the appellant was entitled to claim the full Input Tax Credit (ITC) on the purchased goods.
Case Title: M/S Modi Naturals Ltd v The Commissioner of Commercial Tax UP
