Case Law Details
R. K. Ganapathy Chettiar Vs Assistant Commissioner (ST) (Madras High Court)
In that case, a certain amount of input had been utilised by the assessee, whereas the input in the finished product was marginally less. VAT department proceeded to reverse the cenvat credit on the difference between the original quantity of input and the input in the finished product.
The Bench, noticing at paragraph 13 that some amount of consumption of the input was inevitable in the manufacturing process, held that cenvat credit should be granted on the original amount of input used notwithstanding that the entire amount of input would not figure in the finished product. They state at paragraph 13 as follows:
13. To say that what is contained in finished product is only a quantity of all the inputs of the same weight as that of the finished product would presuppose that all manufacturing processes would never have an inherent loss in the process of manufacture. The expression ‘inputs of such finished product’, ‘contained in finished products’ cannot be looked at theoretically with its semantics. It has to be understood in the context of what a manufacturing process is. If there is no dispute about the fact that every manufacturing process would automatically result in some kind of a loss such as evaporation, creation of by-products, etc., the total quantity of inputs that went into the making of the finished product represents the inputs of such products in entirety.’
In the light of the discussion as above, I am of the view that the reversal of ITC involving Section 17(5)(h) of of the Tamil Nadu Value Added Tax Act, 2006 by the revenue, in cases of loss by consumption of input which is inherent to manufacturing loss is misconceived, as such loss is not contemplated or covered by the situations adumbrated under Section 17(5)(h).
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