Recently we have also tried to take input vat on purchase of Diesel for Generator. But it was disallowed by the Haryana Government. Now, final decision has been done that no input vat will be allowed on purchase of diesel for Generator etc. in Punjab & Haryana High Court.
No Input Tax Credit under PVAT Act on Purchase of Diesel used for captive generation of electric power -Punjab and Haryana High court.
The Honourable Punjab and Haryana High court has held in an important decision in the case of State of Punjab & others. Vs. M/s Malwa Cotton & Spinning Mills Ltd. (decided on 24/08/2010) reversing the decision of the Punjab VAT Tribunal that no input tax credit will be available on the purchase of Diesel used in generation of electric power for captive use in the factory under clause (i) of section 13(5).
Considering the two clauses i.e. clause (b) and (i) of section 13(5), the court held as follows:
"We have heard learned counsel for the parties.
It will be appropriate to reproduce the statutory Provisions dealing with matter i.e. section 13(5) of the Act, which reads as under-:
(5) A taxable person under this Section shall not qualify for input tax credit in respect of the tax paid on purchase of
(b) Petrol, diesel, aviation turbine fuel, liquefied petroleum gas and condensed natural gas, unless the taxable person is in the business of selling such products.
(c) ………….
(d) ………………..
(e to h) …………………..
i) “Goods used in generation, distribution and transmission of electrical energy unless such generation, distribution and transmissionof electrical energy is for captive consumption in which case, it would be allowed subject to the provisions of sub Section (4) of this Section.”
A perusal of above section clearly shows that diesel is an item on which input tax credit is not available unless as provided under clause (b). In view of such express provision, resort could not be had to clause (i). It is settled principle of law that an express and special provision excludes a general provision."
Now after the above judgment no Input Tax credit will be available on purchase of diesel used for captive generation of electric power. The said Judgment is reproduced here below for ready reference:
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.
VAT Revision No.8 of 2010 (O&M)
Date of decision: 24.8.2010
State of Punjab & others. -----Petitioners. Vs. M/s Malwa Cotton & Spinning Mills Ltd. -----Respondent
CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE AJAY KUMAR MITTAL
Present:-
Mr. Piyush Kant Jain, Addl.A.G., Punjab for the petitioners.
Mr. K.L. Goyal, Sr. Advocate with Mr. Sandeep Goyal, Advocate for the respondent.
ADARSH KUMAR GOEL, J.
1. This petition has been filed under Section 68(1) of the Punjab Value Added Tax Act, 2005 (for short, “the Act”) against order dated 24.5.2006 read with order dated 23.1.2009 passed by the VAT Tribunal, Punjab, proposing to raise following substantial questions of law:-
“i) Whether the order passed by the Excise and Taxation Commissioner is sustainable in law?
ii) Whether the respondent is entitled to ITC on the purchase of diesel used in the generation of electrical energy for captive consumption especially when the word diesel has been specifically/specially mentioned in clause (b) of Section 13(5) and excluded from Section 13 (4) of the Act? VAT Revision No.8 of 2010
iii) Whether learned Tribunal has misinterpreted the provisions of Section 13 (4), 13 (5), and 13 (5) (i) of the Act?
iv) Whether the order dated 24.5.2006 passed by learned Tribunal is sustainable in law under the facts and circumstances of the case?
v) Whether the respondent is entitled to ITC on the purchase of diesel at the rate prescribed in section 13 (4) of VAT Act especially when the word “Diesel” is not mentioned in it?
2. The assessee is a registered dealer under the provisions of the Act. The assessee made application under Section 85 of the Act(which is in the nature of advance ruling), seeking determination of question whether Input Tax Credit paid on purchase of diesel used in generation of electric power for captive use in the factory of the assessee company was available under Section 13(5)(i) of the Act. The Excise and Taxation Commissioner determined the question against the respondent and held that input tax credit could not be payable in respect of tax paid on purchase of diesel used in generation of electric power for captive use in the factory of the assessee. The Commissioner after referring to above provision, held as under:-
“..........This clause is a general Clause (b) of sub Section 5 which debars availability of ITC on petrol, diesel etc. except to a person who is in the business of selling these items. Clause (i) is not a non obstantive Clause that could overrule Clause (b) of sub Section 5. Had the intention been to allow ITC of petrol, diesel etc. when used for captive generation power, these items could well have been included in sub Section (4) itself.”
3. This view has been set aside by the Tribunal. The Tribunal reversing the said view held as under:-
“The case of the Appellant Company stands fully covered by the provisions of Clause (i) of sub Section (5) of Section 13 as it is utilizing diesel in the manufacture of electricity generation which is captively used in its factory for the manufacture of taxable goods. The company is entitled to claim tax credit in respect thereof. The rate of tax credit available to the company will not be even governed by the provisions of sub Section (4) as the goods are not covered under this sub Section. The company will be entitled to the tax credit at full rate as prescribed under the law/rules. The order of the Excise and taxation Commissioner holding that the Appellant Company is not entitled to the input tax credit under Clause (i) of sub Section (5) of Section 13 of the Act, cannot be sustained and is set aside.”
4. It will be appropriate to reproduce the statutory provisions dealing with the matter i.e. Section 13(5) of the Act, which reads as under:-
“(5) A taxable person under this Section shall not qualify for input tax credit in respect of the tax paid on purchase of
(b) Petrol, diesel, aviation turbine fuel, liquefied petroleum gas and condensed natural gas, unless the taxable person is in the business of selling such products.
(c) ………….
(d) ………………..
(e to h) …………………..
i) “Goods used in generation, distribution and transmission of electrical energy unless such generation, distribution and transmissionof electrical energy is for captive consumption in which case, it would be allowed subject to the provisions of sub Section (4) of this Section.”
5. A perusal of above section clearly shows that diesel is an item on which input tax credit is not available unless as provided under clause (b). In view of such express provision, resort could not be had to clause (i). It is settled principle of law that an express and special provision excludes a general provision.
Generalia specialibus non derogant is an accepted principle with certain exceptions. In J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of U.P. and other AIR 1961 SC 1170, it was observed:-
“9...........The rule that general provisions should yield to specific provisions is not an arbitrary principle made by lawyers and judges but springs from the common understanding of men and women that when the same person gives two directions one covering a large number of matters in general and another to only some of them his intention is that these latter directions should prevail as regards these while as regards all the rest the earlier direction should have effect. In Pretty v. Solly, (1859-53 ER 1032) quoted in Craies on Statute Law at p. 206, 6th Edition) Romilly, M. R., mentioned the rule thus :- "The rule is that whenever there is a particular enactment and a general enactment in the same statute and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply."
The rule has been applied as between different provisions of the same statute in numerous cases some of which only need be mentioned : De Winton v. Brecon, 1858 28 LJ Ch 598, Churchill v. Crease, (1828) 5 Bing 177, United States v. Chase, (1889) 135 US 255, and Carroll v. Greenwich Ins. Co., (1905) 199 U. S. 401.”
6. Again in The U. P. State Electricity Board and another v. Hari Shanker Jain and others 1978(4) SCC 16, it was observed:-
“9. The reason for the rule that a general provision should yield to a specific provision in this: In passing a Special Act, Parliament devotes its entire consideration to a particular subject. When a General Act is subsequently passed, it is logical to presume that Parliament has not repealed or modified the former Special Act unless it appears that the Special Act again received consideration from Parliament. Vide London and Blackwall Railway v. Limehouse District Board of Works (1856) 26 LJ ch 164 :69 ER 1048) and Thorpe v. Adams (1871) 6 CP 125 ), In J. K. Cotton Spinning Weaving Mills Co. Ltd. v. State of Uttar Pradesh (AIR 1961 SC 1170), this Court observed (at p. 1174):
"The rule that general provisions should yield to specific provisions is not an arbitrary principle made by lawyers and judges but springs from the common understanding of men and women that when the same person gives two directions one covering a large number of matters in general and another to only some of them his intention is that these latter directions should prevail as regards these while as regards all the rest the earlier direction should have effect."
8. In view of express provision in clause (b), we are unable to accept the view taken by the Tribunal that clause (i) will apply. The questions are, thus, answered in favour of the revenue and against the assessee.
9. The petition is disposed of.
| (ADARSH KUMAR GOEL) JUDGE | (AJAY KUMAR MITTAL ) JUDGE |
