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 capitve 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 secton 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 transmission of 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 judgement no Input Tax credit will be available on purchase of diesel used for captive generation of electric power. The said Judgement is reproduced herebelow 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.”
3. We have heard learned counsel for the parties.
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 transmission of 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
August 24, 2010 ( AJAY KUMAR
MITTAL )
ashwani JUDGE
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