COMMERCIAL TAXES OFFICER versus A INFRASTRUCTURE LTD.

Citation: [2015] 13 S.C.R. 1172 · Decided: 24-11-2015 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2015] 13 S.C.R. 1172 
COMMERCIAL TAXES OFFICER 
v. 
A INFRASTRUCTURE LTD. 
(Civil Appeal No. 2806 of 2015) 
NOVEMBER 24, 2015 
[DIPAK MISRA AND PRAFULLA C. PANT, JJ.] 
Rajasthan Value Added Tax Act, 2003 - ss. 18, 22, 
c 55(4); Notification S.0.377 dated 9.3.2007-/nput Tax Credit 
(ITC)- Disallowance of-Assessee engaged in the business 
of manufacturing Asbestos Cement (A. C.) Pressure Pipe and 
A. C. Sheets and availed ITC on the purchase of raw material 
used in the manufacture of A. C. Sheets- Revenue disallowed 
o the benefit of ITC on the ground that the final product was 
exempted- Held: As per Notification S. 0.377 dated 9. 3. 2007, 
it was the manufacturer of A. C. sheets that was exempted 
and therefore it could not be said that A. C. sheets 
manufactured by assessee were exempted goods which is 
E pre-requisite for denying ITC uls. 18 of the Act- Respondent-
assesse.e was entitled to avail ITC. 
Dismissing the appeals, the Court 
HELD: 1. On an analysis of the scheme of the Act, it 
F is manifest that there is difference between exempted 
goods, i.e., goods on which no Value Added Tax is 
payable and are, therefore, not taxable and other cases 
where a particular transaction.when it satisfies specific 
G condition is not taxable. There is no doubt that a 
distinction has to be drawn between exempted goods,· 
which rneans complete exemption for the specified 
goods, and when the goods are taxable goods, but a 
transaction or a person is granted exemption. When the 
H goods are exempt, there would be no taxable 
1172 
COMMERCIAL TAXES OFFICER v. A INFRASTRUCTURE 1173 
LTD. 
transactions or exemption to a taxable person. In other A 
cases, goods might be taxable, but exemption could be 
given in respect of a taxable event, i.e., exemption to 
specified transactions from liability of tax or exemption 
to a taxable person, though the goods are taxable. Such 
exemptions operate in circumscribed boundaries and B 
not as expansive as in the case of taxable goods. 
Exemptions with reference to taxable events or taxable 
persons would not exempt the goods as such, for a 
subsequent transaction or when the goods are sold or 
purchased by a non-specified person, the subsequent C 
transaction or the taxable person would be liable to pay 
tax. Section 4 of the Act provides for levy of tax in a 
situation where the goods, which were not exempted but 
could otherwise not be subjected to tax on account of 0 
exemption granted to a person or to a transaction. The 
goods remain taxable goods through exemption str nds 
granted to a particular individual or a specified 
transaction. That being so, all subsequent transactions 
in those goods, which are not specifically exempt and E 
not undertaken by an exempted person could be 
subjected to taxation. Therefore, the appellant though 
exempted from payment of tax, subsequent transactions 
of sale of asbestos cement sheets would be taxable. The 
transaction of sale by the manufacturer/dealer covered F 
by the exemption notifications issued .. under Section 8(3) 
of the Act would be protected or an exempted 
transaction, but the goods not being exempted goods 
would be taxable and could be taxed on the happening 
of a taxable or charging· event. It is simply because the . G 
goods are not exempt from tax or exempted goods, but 
are taxable. As a logical corollary it follows that the Value 
Added Tax would have to be paid on the taxable goods 
in a subsequent transaction by the purchasing dealer. 
[Paras 20, 26] [1188-G; 1193-F-H; 1194-A-G] 
. H 
1174 
SUPREME COURT REPORTS 
[2015] 13S.C.R. 
A 
2. As a sequitur, if the contention of the appellant is 
to be accepted, the respondent though covered by 
exemption notification under Section 8(3) of the Act could 
be at a disadvantage because finally when the 
subsequent sale is made by a non-exempted dealer or 
B tax stands paid on the non-exempted transfer, the goods, 
i.e., asbestos cement sheet, would suffer the tax on the 
entire sale consideration. This would place an exempted 
manufacturer-dealer at a disadvantageous position and 
make his products uncompetitive inspite of the 
C exemption notifications under Section 8(3) of the Act. 
[Para 27) [1194-G-H; 1195-A-B] 
3. In the context of the issue in question, the 
respondents have rightly highlighted that where the 
D appellant wanted to restrict the benefit of ITC when a 
particular dealer or transaction was exempted, it was so 
stipulated in the exemption notification issu

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