Credit can be claimed when exempted by-products are obtained while producing taxable goods under UP VAT Act

Modi Naturals Ltd Vs Commissioner Of Commercial Tax Up (Supreme Court of India)

The Hon’ble Supreme Court in the case of M/s. Modi Naturals Ltd. v. The Commissioner of Commercial Tax UP [Civil Appels No. 5822-5823 of 2023 dated November 6, 2023] allowed the appeal filed and held that, the Assessee can claim the full amount of Input Tax Credit (“ITC”) on Rice Bran procured for manufacturing of Rice Bran Oil and exempted products under the provisions of the Uttar Pradesh Value Added Tax Act, 2008 (“the UP VAT Act”), thereby holding that Explanation (iii) to Section 13 of the UP VAT Act, forbids the Assessing Authority from raising any dispute with respect to allowing ITC in cases where the exempted goods are produced as by-product or waste product during the process of manufacturing.

Facts:

M/s Modi Naturals Ltd. (“the Appellant”) is engaged in the business of manufacture and sale of Rice Bran Oil (“RBO”) and Physical Refined RBO, and is a registered dealer under the UP VAT Act and the Rice Bran Oil manufactured by the Appellant falls within the purview of ‘taxable goods’ under the UP VAT Act. The Appellant for manufacturing Rice Bran Oil, the Appellant procures Rice Bran and follows the Solvent Extraction Process during which the by- product in the form of De-Oiled Rice Bran is also produced, which falls within the category of
exempted goods under S. No. 4 of Schedule – I of the UP VAT Act.

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