ARYA LUMBERS PVT. LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) The appellant assessee has challenged the judgement of the Value Added Tax Tribunal dated 12.12.2014 in the following background.

(2.) Facts which are not in dispute are that the assessee company purchased timber which are taxable goods, for the purpose of manufacturing and selling logs or sawn timber of specified size. On such raw material, the assessee carries on the process of sawing during which process, in addition to the main product of sawn timber, sawn dust which is used as firewood, would come into existence by way of byproduct. The assessee sales the sawn timber which is also a taxable commodity. The assessee also sales the firewood which is by virtue of entry 23(i) in the First schedule to the Gujarat Value Added Tax Act, 2003 ("VAT Act" for short), exempt from payment of tax. The proportion of firewood is about 1% of the raw material.

(3.) In this background, the question of assessee taking full tax credit on the purchase of timber came up for consideration on an application filed by the assessee to the Commissioner of Commercial Tax under section 80 of the VAT Act. The Joint Commissioner (Ahmedabad) by order dated 31.12.2013 opined that by virtue of proviso to sub section 11(3)(a) and section 11(8)(a) the VAT Act to the extent the purchased timber was used for manufacturing the firewood, the assessee would not be entitled to tax credit. Aggrieved by the said order of the Joint Commissioner, the assessee preferred appeal before the Tribunal. The Tribunal by the impugned judgement dated 12.12.2014 dismissed the appeal and confirmed the view of the Joint Commissioner. The Tribunal was of the opinion that :