1.Whether purchase tax can be levied on purchase of paddy which goes into production of rice meant for export and domestically sold by products such as broken rice, husk etc.
As per Article section 5(3), section 15(ca) of Central Sales Tax Act and section 84 of Punjab Vat Act no tax can be collected on purchase of paddy for the purpose of export of rice.
As per decision of Punjab and Haryana High court on 14-01-2011 reported in 16 STM 727 in case of KRBL" It can not be held that irrespective of legislative competence of the legislature, tax could be recovered leaving the remedy of refund being sought, Tax can be levied only by authority of law and the State legislature can recover tax only if it is with in its legislative competence. In case tax is evaded in any manner, the authorities can act according to statutory provisions dealing with evasion of tax".
Hence no purchase tax can be levied on purchase of paddy which goes into production of rice meant for export
However as per Rule 21(2A) inserted w.e.f. 08-11-2010, if goods manufactured are sold at price lower than cost price, the ITC shall be reversed on excess of cost price over sale price. Since price of paddy is more than sale price of by products, the department might invoke Rule 21(2A).
However as per High Court of Allahabad decision in case of KRBL rendered on 18-01-2010 ITA 1666 of 2010 ".......Learned Counsel for the assessee is justified in saying that no raw material was ever purchased for the manufacture of any waste product or any bye product. The assessee has established its unit for the manufacture of rice and used its entire raw material for the manufacture of rice........."
Therefore Rule 21(2A) can not be invoked.
Hence no purchase tax can be levied on purchase of paddy which goes into production domestically sold by products such as broken rice, husk etc.
2.Whether purchase tax is required to be reversed on rice manufactured from paddy and sold in course of interstate trade or commerce as per section 19(5) of Punjab Vat Act 2005
As per section 19(5)
"Input Tax credit on the goods specified in Schedule H or the products manufactured therefrom, when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956"
If we substitute the words " paddy " and rice it goes as under:
Input Tax credit on paddy when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956
Input Tax credit on rice manufactured from paddy, when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956.
Further as per section 15(c) of CST where tax on purchase of paddy is levied under state law then tax leviable on rice procured out of such paddy shall be reduced by amount of tax levied on paddy.
Section 15(c) doen not talk about any partial adjustment.
Hence no ITC should be reversed on rice manufactured from paddy and sold in course of interstate trade or commerce.
3. Whether purchase tax can be levied on closing stock at the end of financial year
Taxable event under Punjab Vat Act is sale or purchase of goods hence no tax can be levied on closing stock.
Further in case of exporters the stock of paddy gets exported , hence no purchase tax can be levied on paddy meant for procurement of rice for export.
As per Article section 5(3), section 15(ca) of Central Sales Tax Act and section 84 of Punjab Vat Act no tax can be collected on purchase of paddy for the purpose of export of rice.
As per decision of Punjab and Haryana High court on 14-01-2011 reported in 16 STM 727 in case of KRBL" It can not be held that irrespective of legislative competence of the legislature, tax could be recovered leaving the remedy of refund being sought, Tax can be levied only by authority of law and the State legislature can recover tax only if it is with in its legislative competence. In case tax is evaded in any manner, the authorities can act according to statutory provisions dealing with evasion of tax".
Hence no purchase tax can be levied on purchase of paddy which goes into production of rice meant for export
However as per Rule 21(2A) inserted w.e.f. 08-11-2010, if goods manufactured are sold at price lower than cost price, the ITC shall be reversed on excess of cost price over sale price. Since price of paddy is more than sale price of by products, the department might invoke Rule 21(2A).
However as per High Court of Allahabad decision in case of KRBL rendered on 18-01-2010 ITA 1666 of 2010 ".......Learned Counsel for the assessee is justified in saying that no raw material was ever purchased for the manufacture of any waste product or any bye product. The assessee has established its unit for the manufacture of rice and used its entire raw material for the manufacture of rice........."
Therefore Rule 21(2A) can not be invoked.
Hence no purchase tax can be levied on purchase of paddy which goes into production domestically sold by products such as broken rice, husk etc.
2.Whether purchase tax is required to be reversed on rice manufactured from paddy and sold in course of interstate trade or commerce as per section 19(5) of Punjab Vat Act 2005
As per section 19(5)
"Input Tax credit on the goods specified in Schedule H or the products manufactured therefrom, when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956"
If we substitute the words " paddy " and rice it goes as under:
Input Tax credit on paddy when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956
Input Tax credit on rice manufactured from paddy, when sold in the course of inter state trade or commerce shall be available only to the extent of Central Sales Tax chargeable under Central Sales Tax Act 1956.
Further as per section 15(c) of CST where tax on purchase of paddy is levied under state law then tax leviable on rice procured out of such paddy shall be reduced by amount of tax levied on paddy.
Section 15(c) doen not talk about any partial adjustment.
Hence no ITC should be reversed on rice manufactured from paddy and sold in course of interstate trade or commerce.
3. Whether purchase tax can be levied on closing stock at the end of financial year
Taxable event under Punjab Vat Act is sale or purchase of goods hence no tax can be levied on closing stock.
Further in case of exporters the stock of paddy gets exported , hence no purchase tax can be levied on paddy meant for procurement of rice for export.
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