M/S MODI NATURALS LTD. versus THE COMMISSIONER OF COMMERCIAL TAX UP

Citation: [2023] 15 S.C.R. 746 · Decided: 06-11-2023 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed
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Judgment (excerpt)

[2023] 15 S.C.R. 746 : 2023 INSC 974
746
CASE DETAILS
M/S MODI NATURALS LTD.
v.
THE COMMISSIONER OF COMMERCIAL TAX UP
(Civil Appeal No (S). 5822-5823 of 2023)
NOVEMBER 06, 2023
 
[DR. DHANANJAYA Y. CHANDRACHUD, CJI, 
J. B. PARDIWALA AND MANOJ MISRA, JJ.]
HEADNOTES
Issue for consideration:  (a) Whether the assessee is entitled to claim 
full amount of tax paid towards the purchase of raw Rice Bran as ITC on the 
basis of the provisions of s.13(1)(a) r/w. S. No. 2(ii) of the Table appended 
thereto and s.13(3)(b) r/w. Explanation (iii) of s.13 of the UP VAT Act?; (b) 
Whether the scope of the word “goods” as deﬁ ned u/s. 2(m) of the UP VAT 
Act as outlined in s.13(1)(f) of the UP VAT Act should be limited to only 
“taxable goods”?; (c) Whether the decision of the Supreme Court in the case 
of M.K. Agro Tech has any application to the case on hand?
Uttar Pradesh Value Added Tax Act, 2008 – On the basis of the 
statutory provisions of s.13(1)(a) read with S.No. 2(ii) of the Table 
appended thereto and s.13(3)(b) read with Explanation (iii) to s.13 of 
the UP VAT Act, the assessee claimed full amount of tax paid as ITC 
– The High Court relying on the decision of this Court in the case of 
State of Karnataka v. M.K. Agro Tech Private Limited, took the view 
that a dealer has no vested right to seek the beneﬁ t of ITC as the same 
is just a concession by virtue of the provisions of the Act – The High 
Court held that the provisions of s.13(1)(a) read with S. No. 2(ii) of the 
Table appended thereto and s.13(3)(b) r/w. Explanation (iii) of the UP 
VAT Act are not applicable as asserted by the assesee and the case of 
the assessee stood covered by s.13(1)(f) of the UP VAT Act – Propriety:
Held: A bare perusal of the scheme u/s. 13 of the UP VAT Act [and 
speciﬁ cally u/s. 13(1)(a)] makes it abundantly clear that in cases where the 
747
purchased goods (in the present case Rice Bran) are used in the manufacture 
of taxable goods (in the present case RBO and physically reﬁ ned RBO) 
except the non-VAT goods, and where such manufactured goods are sold 
within the State or in the course of inter-state trade and commerce, the 
registered dealers (like the assessee herein) are entitled to claim input tax 
credit of the full amount – The charging section of the UP VAT Act, therefore, 
entitles the assessee to claim full amount of tax paid on the purchases as 
ITC – Furthermore, s.13(3)(b) of the UP VAT Act, introduces the concept of 
proportionality in the scheme of the enactment and by means of a deeming 
ﬁ ction provides that where during the manufacture of VAT goods, exempt 
and non-VAT goods (except as by-product or waste product) are produced, 
the amount of ITC credit may be claimed and may be allowed in proportion 
to the extent they are used or consumed in manufacture of taxable goods 
other than the non-VAT goods and exempt goods – Explanation (iii) to 
Section 13, forbids the Assessing Authority as well as the assessee from 
raising any dispute in regard to the allowability of the ITC in cases where 
exempted goods are being produced as a by-product or waste product during 
the process of manufacture – The High Court committed an error in passing 
the impugned judgment relying on the decision rendered in M.K. Agro Tech 
– The impugned common judgment and order passed by the High Court is 
set aside. [Paras 47, 48, 50]
Uttar Pradesh Value Added Tax Act, 2008 – s. 2(m) – Scope of the 
word “goods”:
Held: The deﬁ nition of “goods” under Section 2(m) of the UP VAT 
Act does not diﬀ erentiate between exempt and taxable goods and equally, 
the word “goods” under Section 13(1)(f) of the UP VAT Act has also not 
been qualiﬁ ed by the word “taxable”. [Para 29]
Interpretation of Statutes – Taxing Statute:
Held: It is well accepted that a statute must be construed in accordance 
with the intention of the Legislature and the courts should act upon the true 
intention of the Legislation while applying law and while interpreting law. 
In the litigation on hand, we have been asked to interpret the provisions of 
a taxing statute. [Para 36]
M/S MODI NATURALS LTD. v. THE COMMISSIONER OF 
COMMERCIAL TAX UP
 
SUPREME COURT REPORTS 
[2023] 15 S.C.R.
748
LIST OF CITATIONS AND OTHER REFERENCES
State of Karnataka v. M.K. Agro Tech Private Limited, [2017] 12 SCR 
1007 : (2017) 16 SCC 210 – held inapplicable.
CIT v. Kasturi and Sons Ltd. (1999) 3 SCC 346 : [1999] 1 SCR 1207; 
State of W.B. v. Kesoram Industries Ltd. (2004) 10 SCC 20 – relied on.
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