The UP VAT Act permits input tax credit for both taxable goods and by-products, emphasizing strict interpretation of tax statutes and legislative intent.

JUDGMENT :

J.B. PARDIWALA, J.

1. Since the issues raised in both the captioned appeals are the same, the parties are also the same and the challenge is also to the self-same judgment passed by the High Court, those were taken up for hearing analogously and are being disposed of by this common judgment and order.

2. For the sake of convenience, the appellant shall hereinafter be referred to as the assessee and the respondent shall hereinafter be referred to as the revenue.

3. These appeals are at the instance of an assessee, duly registered under Section 17 of the Uttar Pradesh Value Added Tax Act, 2008 (for short ‘the UP VAT Act’) and are directed against the common judgment and order dated 03.05.2019 passed by the High Court of Judicature at Allahabad in the Commercial Tax Revisions Nos. 315 of 2017 and 148 of 2018 respectively, by which the High Court allowed both the Commercial Tax Revisions filed by the revenue against the Orders dated 04.05.2016 and 05.07.2017 respectively passed by the Commercial Tax Tribunal, Bareilly Bench, Bareilly and thereby took the view that the assessee is not entitled to the full benefit of Input Tax Credit (for short ‘ITC’) claimed on the goods purchased by it for manufacturing its final product.

FACTUAL MATRIX

4. The assessee is a company engaged in the business of manufacture and sale of Rice Bran Oil (for short ‘RBO’) and Physical Refined RBO. The assessee as stated above is a registered dealer under the UP VAT Act and the RBO manufactured by the assessee falls within the ambit of “taxable goods” under the UP VAT Act. For the purpose of manufacturing RBO, the assessee procures Rice Bran (for short ‘inputs’/‘purchased goods’) and follows the Solvent Extraction Process. During the manufacturing process of RBO a byproduct in the form of “De-Oiled Rice Bran” (for short ‘DORB’) is also produced. DORB falls within the category of exempted goods under S. No. 4 of Schedule-I of the UP VAT Act.

5. The dispute between the parties relates to the assessment years 2013-14 and 2015-16 respectively.

6. The assessee by processing Rice Bran in its solvent extraction plant produced 13.77% taxable goods i.e. RBO and 83.63% by-product i.e. DORB. As stated, aforesaid by further refining the RBO, the physical refined RBO is also produced. The record reveals that for the Assessment Year 2013- 14, the assessee purchased 8,21,935.71 quintals of Rice Bran for a sum of Rs. 93,69,53,404.00 and paid tax of Rs. 4,68,47,670.00. By processing the inputs, 1,13,180.54 quintals of RBO was produced and 6,87,138.25 quintals of DORB was produced. Out of 1,13,180.54 quintals of RBO, 93,241.15 quintals of RBO was further refined to produce 76,068.37 quintals of physical refined RBO. The said quantity of physical refined RBO and the balance quantity of RBO (19,939.40 quintals) was sold within the State of Uttar Pradesh for Rs. 45,91,66,611 and Rs. 9,60,11,540 respectively aggregating to a total of Rs. 55,51,78,151/-. The assessee’s tax liability on the said sales was calculated at Rs. 2,77,58,908/-.

7. On the basis of the statutory provisions of Section 13(1)(a) read with S. No. 2(ii) of the Table appended thereto and Section 13(3)(b) read with Explanation (iii) to Section 13 of the UP VAT Act, the assessee claimed full amount of tax paid as ITC i.e. a sum of Rs. 4,68,47,670/-. The claim of the assessee came to be rejected vide the Order of the Deputy Commissioner, Tax Fixation, Division-I, Pilibhit passed in terms of Section 28(2)(i) of the UP VAT Act. It is the case of the revenue that had the assessee been permitted to avail the full ITC, it would have led to a loss of Rs. 1,90,88,763.00 to the State exchequer.

8. In connection with both the Assessment Years i.e. 2013-14 and 2015-16, respectively vide two separate orders, the Deputy Commissioner took the view that in terms of Section 13(1)(f), the assessee could have availed the ITC