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DVAT: Input tax credit on capital goods purchase used in process of sale of goods from storage

Whether the applicant dealer is entitled to input tax credit on the purchase of capital goods used in the process of sale of goods from its storage facility at Bijwasan (Delhi)-provisions of section.

Whether the applicant dealer is entitled to input tax credit on the purchase of capital goods used in the process of sale of goods from its storage facility at Bijwasan (Delhi)-provisions of section.

IN THE OFFICE OF THE COMMISSIONER,VAT
DEPARTMENT OF TRADE AND TAXES
GOVERNMENT OF NCT OF DELHI
VYAPAR BHAVAN, I.P.ESTATE, NEW DELHI

No.F.407/CDVAT/2017/503                                                                                                                                                 Dated: 29-05-2017

ORDER

Name of the firm                                   :   M/s Indian Oil Corporation

Present for the applicant Limited : Sh. Ashok K Bhardwaj, Advocate

Present for the Department            :  Sh. M.K. Aggarwal, Department Representative

The applicant dealer has filed a determination application dated 10.01.2017 under Section 84 of Delhi Value Added Tax Act, 2004 (hereinafter referred to as the “said act”) and the question put up for determination under the aforesaid provision of law is as under :-

“Whether the applicant dealer is entitled to input tax credit on the purchase of capital goods used in the process of sale of goods from its storage facility at Bijwasan (Delhi)- provisions of section 9(7)(c) of DVAT Act being not applicable to the applicant. “

1. The application has been filed in prescribed Format DVAT-42 and the requisite fee Rs. 1000/- paid in Form DVAT-20 vide dated 30-12-2016 in HDFC Bank.

2. The applicant is registered dealer having TIN 07400024897.

3. Sh. Ashok K. Bhardwaj, Advocate appeared on behalf of the firm and reiterated the facts and grounds of the case. The brief facts of the case, as explained by the counsel on behalf of the applicant are as under :

i) That, the applicant is a Public Sector Undertaking and engaged at Delhi in the business of selling petroleum products viz – motor spirits/ Diesel/ Aviation fuel and other petroleum products.

ii) That, the applicant maintains a depot/ terminal at Bijwasan (Delhi) where petrol and diesel stock transferred from the refineries at Panipat & Mathura are stored in tanks.

iii) That, the said products are sold to the applicant’s retail outlet dealers (both local & CST) and applicable VAT/CST collected, is paid to DVAT Department.

iv) That, no manufacturing and processing activities are taking place at Bijwasan terminal.

v) That, the company, since its operation at Bijwasan terminal, is purchasing plant & equipments for use at the terminal.

vi) That, the equipment in question is used for the automation of the storage process of the petroleum products, stored in the tanks before their sale from Delhi.

vii) That, some of these equipment are supplied to the applicant on local sale basis and sometimes on CST basis. In case of interstate purchase, the applicant is not issuing C Form since any manufacturing and processing activities are not taking place at Bijwasan. For local purchase of these assets, the suppliers issue a tax invoice to IOCL, Delhi.

viii) That, the tax credit of the goods purchased within the State of Delhi is allowed or restricted under the provisions of Section 9 of the DVAT Act.

ix) That, on going through the provisions relating to the claim of input tax under DVAT Act, the applicant intends to take credit on the tax paid on such purchases made locally.

4. With these averments, counsel submitted that the issue arising in the present application is the wordings of section 9(7)(c) of the Act. Whether Clause (c) of Section 9(7) does not allow the credit of input tax credit if the purchaser of capital goods is not in the business of manufacturing of goods for sale.

5. The DR appearing on behalf of the department stated that the dealer is not engaged in any manufacturing activity in Delhi and the equipment under consideration are used by the dealer in the storage process of the Petroleum products.

Section 9 of the DVAT Act deals with the conditions, restrictions and limitations under which a dealer can claim input tax credit. Section 9(7)(c) of the Act reads as:

(7) For the removal of doubt, no tax credit shall be allowed for –

(c) Any purchase of consumables or of capital goods where the dealer is exclusively engaged in doing job work or labor work and is not engaged in the business of manufacturing of goods for sale by him and incidental to the business of job work or labor work, obtains any waste or scrap goods which are sold by him.

It is clear from this clause that if the dealer is not engaged in the business of manufacturing of goods then he is not entitled for the claim of input tax on the capital goods purchased by him.

6. I have heard both the sides and gone through the documents available on record and the relevant section of the act as pointed out by the counsel. The applicant dealer has asked to determine whether the provisions of section 9(7)(c) are applicable on him or not. A reading of the section show that it is only meant for the dealers exclusively engaged in doing job work or labor work and is not engaged in the business of manufacturing of goods for sale by him. Hence the provisions of section 9(7)(c ) are not applicable on the applicant.

7. Held accordingly.

(H. Rajesh Prasad)

Commissioner, VAT

M/s Indian Oil Corporation Limited,

World Trade Center,

Babar Road, New Delhi- 110001

No.F. 407/CDVAT/2016/503                                                                                                                                                     Date: 29.05.2017

Copy for information and necessary action to :

  1. Commissioner (Law & Judicial)
  2. Commissioner (System).
  3. All Joint/Addl/ Spl. Commissioner
  4. Programmer (EDP) for uploading this order on web.
  5. Assistant Commissioner (Policy)
  6. Assistant Commissioner, Ward-207
  7. President, Sales Tax Bar Association(Regd.)
  8. Guard file.

(H. Rajesh Prasad)

Commissioner, VAT

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