HITACHI HOME AND LIFE SOLUTIONS LTD. Vs. STATE

JUDGEMENT

(1.) In these writ petitions, the issue which arises for consideration is whether the petitioner is entitled to input tax credit on the tax amount shown in the invoices issued by the sellers who have availed benefit of remission under SRO 91, dated 16-3-2006 issued under Section 79 of the Jammu and Kashmir Value Added Tax Act, 2005 (hereinafter referred to as 'the Act'). In order to answer the aforesaid issue, we set out the facts briefly, which are stated hereinunder.

(2.) The petitioner company is manufacturer of Air compressors and is registered with Department of Commercial Taxes in the State of J&K under the Act and the Central Sales Tax Act, 1956. The petitioner has set up a factory in the State, taking note of various incentives under Industrial Policy of the State Government as also the benefits available under the Act. The petitioner is entitled to benefit of input tax credit on the local purchases made by it in terms of Section 21 of the Act. The input tax credit is adjusted against the output liability as per Sections 21 and 22 of the Act. Some purchases were made by the petitioner from the units availing benefit of remission under the scheme framed vide SRO 91, dated 16-3-2006 issued by the State Government under Section 79A of the Act. The petitioner has no claim under the said remission scheme issued under Section 79A of the Act and has discharged its tax liability, as per provisions of the Act. The input tax credit of the petitioner was higher than the output liability, therefore, the petitioner carried excess input tax credit in the books.

(3.) The Commissioner of Commercial Taxes, Government of Jammu and Kashmir issued a clarification dated 10-12-2007, in view of doubt expressed by the assessing authorities with regard to the admissibility of the claim of refund of input tax credit in excess of 4% tax to the local registered dealers on the sales of goods in the course of inter-State trade and commerce which they have purchased locally from industrial units availing tax remissions. It was stated in the aforesaid clarification that in view of embargo contained in Clause (X) of sub-section (9) of Section 21 of the Act, no input tax credit shall be claimed by a registered dealer who gets benefit of tax remission and there is no scope of allowing such refund because benefit of remission also passes on from the manufacturer to the purchaser as he pays the tax notionally to the manufacturer by price adjustment. Based on the aforesaid clarification, the assessing authority in exercise of powers under Section 39(5) of the Act, disallowed the claims of the petitioner for input tax credit on the ground there is no actual payment of tax, in respect of assessment years 2005-2006 and 2006-2007 and issued demand notices which are subject matter of challenge in the instant writ petitions.