High Court · 2025

1. Heard Sri Bipin Kumar Pandey, learned counsel for the revisionist. Nobody is present on behalf of the opposite party.

2. Perusal of the office report dated 29.08.2024 shows that an affidavit of service of notice has been filed. Hence, the service of notice upon the opposite party is deemed sufficient.

3. By means of instant revision, the revisionist has assailed the order dated 18.12.2023 passed by the Commercial Tax Tribunal, Ghaziabad Bench-II, Ghaziabad in Second Appeal No.13/2023 for the A.Y. 2016-17.

4. This Court vide order dated 30.05.2024 has admitted the instant revision, which reads as under: "Heard Sri Bipin Kumar Pandey, learned Additional Chief Standing Counsel appearing on behalf of the revisionist. Issue notice to the opposite party. Steps be taken by R.P.A.D. in addition to normal mode of service within ten days. Admit, on the following question of law :- "1. Whether on the facts and circumstances of the case the Commercial Tax Tribunal was legally justified in allowing the benefit of ITC of Rs.1,51,770/- specifically when the sale of goods is exempted in view of notification issued u/s 7(C) of the U.P. Value Added Tax Act and Section 13(7) prescribes that if the goods have been sold in view of the notification u/s 7(C) the ITC will not be allowed ?" List this matter on August 30, 2024."

5. Learned counsel for the revisionist submits that the opposite party/dealer is carrying the business of packing material and colour chemical. In the year in dispute, the opposite party has declared the total sales of Rs.2,46,17,567.83/- in which the dealer has shown the sale of Rs.43,85,472/- against Form-E. On this turnover, the dealer has claimed the ITC of Rs.1,51,770/-. He further submits that since the sales against Form-E are exempted, neither the tax has been realized nor paid to the department, however, the ITC was to be reversed by the dealer himself which has not been done, hence the assessing authority on the basis of reasons recorded in the assessment order, has reversed the ITC of Rs. 1,51,770/-. Against the order dated 29.10.2020, the dealer has filed an appeal before the 1st appellate authority, which has been rejected vide order dated 30.09.2022. The dealer has preferred second appeal before the Tribunal, which has been allowed vide order dated 18.12.2023. Hence, the present revision.

6. Sri Pandey submits that the record itself shows that the opposite party has sold the goods to the exporter against Form- E. He further submits that a notification under Section 7 (c) of U.P. Vat Act was issued, which contemplates that if the sale is made to the exporter, then there will be no liability of tax. He next submits that if the sale is exempted by any reason, the opposite party will not entitled for any I.T.C. He further submits that Section 13 (1) (a) specifies a condition that I.T.C. can be availed on a sale of all taxable goods except non vat goods. Once the goods have been sold to the exporter to which no vat is imposed on such goods, the benefit of I.T.C. cannot be accorded to the respondent-dealer.

7. He further submits that under Section 13 (7) of the U.P. Vat Act, the input tax credit will be allowed if such goods are sold in pursuance of the notification issued under Section 7 (c) of the U.P. Vat Act. The notification, which was issued on 24.02.2010, contemplates a condition whereby the respondent is not covered by the same.

8. He further submits that the issue in hand is squarely covered by the recent judgment of the Hon'ble Apex Court passed in the case of Neha Enterprises Vs. Commissioner, Commercial Tax, Lucknow, Uttar Pradesh (Civil Appeal No.6553 of 2016). He prays for allowing the present revision.

9. After hearing the learned A.C.S.C., appearing for the revisionist, the Court has perused the record.

10. Perusal of the record shows that the tribunal while allowing the appeal of the respondent, has allowed the benefit of I.T.C. to the respondent on the premise that the order passed by this Court in the case of Neha Enterprises (supra), which has been stayed by the Hon'ble Apex Court.

11. Once the judgment passed by this Court has been confirmed by the Hon'ble Apex Court, the order impugned automatically goes. It is not in dispute that upon the goods sold to the exporter against Form 'E', no VAT is imposed upon the respondent. In the other words, the goods sold by the respondent are exempted. It is further not in dispute that a notification under Section 7 (c) was issued; whereby the goods sold directly to the exporter were exempted.

12. Admittedly, the goods have been sold directly to the exporter on which no vat was imposed. Section 13 (7) contemplates and cast responsibility upon the registered dealer if the goods are not sold as taxable goods, the benefit of I.T.C. is to be reversed.

13. In the case of Neha Enterprises (supra), the Hon'ble Apex Court in para no.10 has held as under:- "10. The argument of the dealer proceeds by falling on section 13(1) of the Act. The argument also attempts to give effect to the intention or policy of the State Government. Plainly interpreting and applying section 7(c) provides that no tax under the Act shall be levied and paid on the turnover of sale or purchase of such goods by such class of dealers as may be specified in the notification. The said exemption applies to the goods and also to the class of dealers who satisfy the conditions and fall within the notification issued under section 7(c) of the Act. The controversy is not over the exemption from levy and collection of tax between the dealer and the department, since the subject turnover falls admittedly under section 7(c) of the Act, read with notifications dated 24.02.2010 and 25.03.2010. The said admitted position takes us to the entitlement or eligibility of the dealer for the input tax credit. It is axiomatic, particularly in tax jurisprudence, that distinct concepts, such as taxable persons, taxable goods and taxable events, are established for levying and collecting the tax. Similarly, the scheme of availing input tax credit is determined by section 13 of the Act. Section 13(1) provides for allowing credit of an amount as input tax credit to the extent provided by or under the relevant clause to which the applicable condition is attracted. If the purchased goods are resold in the course of exporting the goods out of India, then the full amount of input tax credit can be claimed. Section 13(7) outlines the circumstances under which such a benefit cannot be allowed. Section 13(7) also sets out that no facility for input tax credit shall be allowed to a dealer with respect to the purchase of any goods where the sale of such goods by the dealer is exempt from tax under Section 7(c) of the Act. The prohibition from allowing input tax credit is a statutory mandate, and the view taken by the orders impugned, in the facts and circumstances of this case, is available and correct. In the teeth of clear expression in section 13(7) of the Act, we find it difficult to give effect to the intent or policy made known through notifications to grant input tax credit. The dealer availing section 7(c) of the Act knows the extent to which the input tax credit could be claimed. Hence, the Civil Appeal fails, and is accordingly dismissed. There shall be no order as to costs. Pending applications, if any, shall stand disposed of. "

14. In view of the above facts and circumstances of the case as stated above as well as in view of the judgment cited above, this Court is of the opinion that the issue in hand is squarely covered by the judgment of Neha Enterprises (supra).

15. In the result, the impugned order cannot be sustained in the eyes of law and the same is hereby quashed.

16. Accordingly, the revision is allowed.

17. The question of law so framed in the instant revision is answered in favor of the revisionist and is against the respondent. Order Date :- 7.5.2025 Pravesh Mishra PRAVESH KUMAR MISHRA High Court of Judicature at Allahabad

1. Heard Sri Bipin Kumar Pandey, learned counsel for the revisionist. Nobody is present on behalf of the opposite party.

2. Perusal of the office report dated 29.08.2024 shows that an affidavit of service of notice has been filed. Hence, the service of notice upon the opposite party is deemed sufficient.

3. By means of instant revision, the revisionist has assailed the order dated 18.12.2023 passed by the Commercial Tax Tribunal, Ghaziabad Bench-II, Ghaziabad in Second Appeal No.13/2023 for the A.Y. 2016-17.

4. This Court vide order dated 30.05.2024 has admitted the instant revision, which reads as under: "Heard Sri Bipin Kumar Pandey, learned Additional Chief Standing Counsel appearing on behalf of the revisionist. Issue notice to the opposite party. Steps be taken by R.P.A.D. in addition to normal mode of service within ten days. Admit, on the following question of law :- "1. Whether on the facts and circumstances of the case the Commercial Tax Tribunal was legally justified in allowing the benefit of ITC of Rs.1,51,770/- specifically when the sale of goods is exempted in view of notification issued u/s 7(C) of the U.P. Value Added Tax Act and Section 13(7) prescribes that if the goods have been sold in view of the notification u/s 7(C) the ITC will not be allowed ?" List this matter on August 30, 2024."

5. Learned counsel for the revisionist submits that the opposite party/dealer is carrying the business of packing material and colour chemical. In the year in dispute, the opposite party has declared the total sales of Rs.2,46,17,567.83/- in which the dealer has shown the sale of Rs.43,85,472/- against Form-E. On this turnover, the dealer has claimed the ITC of Rs.1,51,770/-. He further submits that since the sales against Form-E are exempted, neither the tax has been realized nor paid to the department, however, the ITC was to be reversed by the dealer himself which has not been done, hence the assessing authority on the basis of reasons recorded in the assessment order, has reversed the ITC of Rs. 1,51,770/-. Against the order dated 29.10.2020, the dealer has filed an appeal before the 1st appellate authority, which has been rejected vide order dated 30.09.2022. The dealer has preferred second appeal before the Tribunal, which has been allowed vide order dated 18.12.2023. Hence, the present revision.

6. Sri Pandey submits that the record itself shows that the opposite party has sold the goods to the exporter against Form- E. He further submits that a notification under Section 7 (c) of U.P. Vat Act was issued, which contemplates that if the sale is made to the exporter, then there will be no liability of tax. He next submits that if the sale is exempted by any reason, the opposite party will not entitled for any I.T.C. He further submits that Section 13 (1) (a) specifies a condition that I.T.C. can be availed on a sale of all taxable goods except non vat goods. Once the goods have been sold to the exporter to which no vat is imposed on such goods, the benefit of I.T.C. cannot be accorded to the respondent-dealer.

7. He further submits that under Section 13 (7) of the U.P. Vat Act, the input tax credit will be allowed if such goods are sold in pursuance of the notification issued under Section 7 (c) of the U.P. Vat Act. The notification, which was issued on 24.02.2010, contemplates a condition whereby the respondent is not covered by the same.

8. He further submits that the issue in hand is squarely covered by the recent judgment of the Hon'ble Apex Court passed in the case of Neha Enterprises Vs. Commissioner, Commercial Tax, Lucknow, Uttar Pradesh (Civil Appeal No.6553 of 2016). He prays for allowing the present revision.

9. After hearing the learned A.C.S.C., appearing for the revisionist, the Court has perused the record.

10. Perusal of the record shows that the tribunal while allowing the appeal of the respondent, has allowed the benefit of I.T.C. to the respondent on the premise that the order passed by this Court in the case of Neha Enterprises (supra), which has been stayed by the Hon'ble Apex Court.

11. Once the judgment passed by this Court has been confirmed by the Hon'ble Apex Court, the order impugned automatically goes. It is not in dispute that upon the goods sold to the exporter against Form 'E', no VAT is imposed upon the respondent. In the other words, the goods sold by the respondent are exempted. It is further not in dispute that a notification under Section 7 (c) was issued; whereby the goods sold directly to the exporter were exempted.

12. Admittedly, the goods have been sold directly to the exporter on which no vat was imposed. Section 13 (7) contemplates and cast responsibility upon the registered dealer if the goods are not sold as taxable goods, the benefit of I.T.C. is to be reversed.

13. In the case of Neha Enterprises (supra), the Hon'ble Apex Court in para no.10 has held as under:- "10. The argument of the dealer proceeds by falling on section 13(1) of the Act. The argument also attempts to give effect to the intention or policy of the State Government. Plainly interpreting and applying section 7(c) provides that no tax under the Act shall be levied and paid on the turnover of sale or purchase of such goods by such class of dealers as may be specified in the notification. The said exemption applies to the goods and also to the class of dealers who satisfy the conditions and fall within the notification issued under section 7(c) of the Act. The controversy is not over the exemption from levy and collection of tax between the dealer and the department, since the subject turnover falls admittedly under section 7(c) of the Act, read with notifications dated 24.02.2010 and 25.03.2010. The said admitted position takes us to the entitlement or eligibility of the dealer for the input tax credit. It is axiomatic, particularly in tax jurisprudence, that distinct concepts, such as taxable persons, taxable goods and taxable events, are established for levying and collecting the tax. Similarly, the scheme of availing input tax credit is determined by section 13 of the Act. Section 13(1) provides for allowing credit of an amount as input tax credit to the extent provided by or under the relevant clause to which the applicable condition is attracted. If the purchased goods are resold in the course of exporting the goods out of India, then the full amount of input tax credit can be claimed. Section 13(7) outlines the circumstances under which such a benefit cannot be allowed. Section 13(7) also sets out that no facility for input tax credit shall be allowed to a dealer with respect to the purchase of any goods where the sale of such goods by the dealer is exempt from tax under Section 7(c) of the Act. The prohibition from allowing input tax credit is a statutory mandate, and the view taken by the orders impugned, in the facts and circumstances of this case, is available and correct. In the teeth of clear expression in section 13(7) of the Act, we find it difficult to give effect to the intent or policy made known through notifications to grant input tax credit. The dealer availing section 7(c) of the Act knows the extent to which the input tax credit could be claimed. Hence, the Civil Appeal fails, and is accordingly dismissed. There shall be no order as to costs. Pending applications, if any, shall stand disposed of. "

14. In view of the above facts and circumstances of the case as stated above as well as in view of the judgment cited above, this Court is of the opinion that the issue in hand is squarely covered by the judgment of Neha Enterprises (supra).

15. In the result, the impugned order cannot be sustained in the eyes of law and the same is hereby quashed.

16. Accordingly, the revision is allowed.

17. The question of law so framed in the instant revision is answered in favor of the revisionist and is against the respondent. Order Date :- 7.5.2025 Pravesh Mishra PRAVESH KUMAR MISHRA High Court of Judicature at Allahabad