M.K. AGRO TECH (PRIVATE) LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The assessee has preferred this revision petition against the order passed by the Karnataka Appellate Tribunal holding that the assessee is not entitled to full input tax credit, as the residue Sunflower De-oiled Cake is not liable for tax.

(2.) The assessee is a private limited company, which is engaged in extraction and sale of refined Sunflower Oil from Sunflower Oil Cake by employing solvent extraction process. It is also engaged in trading in edible oils to some extent. It has three units namely solvent extraction processing unit, refining unit and trading unit. It is registered as a dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as the 'KVAT Act') and also under the provisions of the Central Sales Tax Act, 1956 ( hereinafter referred to as 'CST Act') and is borne on the files of the LVO-190, Mysore. The petitioner filed returns of turnover in Form VAT-100 in respect of all the 21 tax periods commencing from July 2005 to March 2006 and April 2006 to March 2007, and has paid taxes as admitted therein. On scrutiny of the returns, the Deputy Commissioner of Commercial Taxes was of the view that the assessee manufactured/extracted sunflower oil and also obtained de-oiled sunflower oil cake. While sunflower oil was liable to tax, de-oiled sunflower oil cake was exempted from tax under Government Notification No.FD 197 CSL 2005 (1) dated 30.04.2005. The assessee was therefore eligible only for partial input tax rebate as per Section 17 r/w. Rule 131(3) of the KVAT Act and Rules. Therefore, the Assessing Authority after issue of proposition notice, considering the objections filed by the assessee, rejected the same and proceeded to pass the order dated 23.04.2009. Aggrieved by the said order, the assessee filed appeal before the Joint Commissioner of Commercial Taxes (Appeals), Mysore, who dismissed the same by his order dated 12.01.2011. Aggrieved by the said order, the assessee preferred second appeal to the Karnataka Appellate Tribunal. The Tribunal by a considered order, held that, as the assessee has failed to maintain evidence to segregate non-deductible input tax relating to exempt transactions it has failed to establish the claim of deductible input tax on direct method as explained to segregate non-deductible input tax. The Tribunal held that the First Appellate Authority was justified in invoking Section 17 of the Act and denying partially the benefit of deduction of input tax. Aggrieved by the said order, the assessee is before this court.

(3.) Learned counsel for the assessee assailing the impugned order contends that the assessee is engaged in the manufacture of Sunflower Oil from the Sunflower Oil Cake. The Sunflower Oil is taxable goods. Incidentally, the de-oiled cake comes as a by-product which is sold by it which is an exempted goods. But that should not be the reason to deny the benefit of deduction of input tax relying on Section 11(a)(1) of the Act. The authorities have not properly appreciated the case of assessee and committed error in denying the said benefit.