STATE OF GUJARAT Vs. RELIANCE INDUSTRIES LIMITED

JUDGEMENT

(1.) In all these appeals, question of law that needs to be decided is identical, which was the reason for clubbing these appeals and hearing them analogously. However, for the sake of convenience, we would be taking note of facts from Civil Appeal Nos. 13047-13048 of 2017, as that would serve the purpose.

(2.) The respondent (hereinafter referred to as the 'assessee') is engaged in the business of manufacturing and selling polymers and chemicals. These goods are manufactured by the respondent in its factory situated in the State of Gujarat (hereinafter referred to as the 'appellant State'). After the manufacture of these goods, same are transferred by the assessee to its various branches located in different parts of the country from where those goods are sold. Obviously, in respect of goods transferred to places outside the appellant State, the Value Added Tax (VAT) is paid at the time of sale of those goods in those States, as per the local laws of the said States. The goods are sold in the appellant State as well and in respect of these goods VAT is paid as per the Gujarat Value Added Tax Act, 2003 (for short, the 'VAT Act'). For the purpose of manufacturing the aforesaid goods, namely, polymers and chemicals, the assessee purchases furnace oil, natural gas and light diesel oil (hereinafter referred to as the 'raw material or inputs') from its registered dealers. These fuels are used for the aforesaid manufacturing activities. On purchase of the raw material, VAT is paid at varying rates. On furnace oil, 4% VAT is payable as per the VAT Act, whereas on natural gas and light diesel oil rate of VAT prescribed and payable is 12.5%. Since these inputs are used for manufacturing of the final products, there is a provision in the VAT Act for giving credit on the VAT which is paid at the time of purchase of these inputs. The manner in which this credit is to be given is prescribed under Sec. 11 of the VAT Act. Sec. 11 reads as under:

(3.) A bird's eye view of the relevant portion of the aforesaid provision, which is the subject matter of these appeals, reveals that the tax credit which is admissible to the purchasing dealer is subject to provisions of sub-sec. (2) of Sec. 12. Sub-sec. (3)(b), with which we are primarily concerned, provides that if the goods are falling in the categories mentioned in sub-clauses (i), (ii) and (iii), the tax credit is to be reduced by the amount of tax calculated at the rate of 4% on the taxable turnover of purchases within the State. As noted above, the raw material/ inputs used in the instant goods are fuels. Sub-clause (ii) includes such goods in case the taxable goods are dispatched outside the State in the course of branch transfer. As already mentioned above, after the final product is produced, the assessee transfers these goods to its various branch offices, many of which are located outside the State and, therefore, those goods which are so transferred would be covered by this sub-clause and in respect of such goods which are transferred outside the State and are taxable under the VAT Act, the tax credit is to be reduced by 4%. Since the raw material in the instant goods is in the nature of fuels used for the manufacture of goods, it gets covered by sub-clause (iii) as well. The issue that needs to be decided is as to whether the tax credit is to be reduced at the rate of 4% under sub-clause (ii) and again at the same rate under sub-clause (iii) as well or deduction permissible is only once.