No Input Tax Credit on Goods not Resold within a Period of 6 Months: Bombay HC [Read Judgment]

The Bombay High Court in the case of Axis Mutual Fund v. State of Maharashtra, held that no input tax credit can be claimed on goods not resold within a period of 6 months as is stipulated by the legislation.

The petitioner in the present case has sought quashing and setting aside the orders adjudicating against the petitioner. As per terms of the Scheme Information Document, the investment objective of the Gold ETF Scheme launched by the petitioner is to generate returns that are in line with the performance of gold. In the A.Y. 2012-13, the petitioner purchased gold worth Rs.522,48,59,036/- from a registered dealer located in the State of Maharashtra. On purchase of the gold, the petitioner has claimed set-off of the tax amount of Rs.5,17,31,276/- under the provisions of section 48 of the MVAT Act read with Rule 52 of the MVAT Rules. The petitioner duly adjusted the set-off claimed of Rs.3,10,79,343/- against its output VAT liabilities in accordance with the provisions of Rule 55 of the MVAT Rules. Consequently, the petitioner applied for refund of excess input tax credit amounting to Rs.2,06,51,993/-. During the course of assessment, the assessing authority has alleged that the petitioner is not eligible to claim any input tax credit as the goods purchased by the petitioner on which input tax credit is claimed are not resold within a period of six months from the date of purchase. The petitioner was levied with interest and penalty and hence has preferred the present appeal.

The petitioner has contended that Deed of Trust were created as and when floated. Further, the petitioner submits that the Axis AMC purchases gold based on requests received from the investors for creation of a unit against cash. Such purchases are made in the name of the petitioner. This purchased gold is stored with an independent custodian. Based on requests received from the unit holder/investor for redemption, this underlying gold is sold by the petitioner after levying appropriate VAT on the same.

The division bench comprising of Justice S.C. Dharmadhikari and Justice Anuja Prabhudessai after having an elaborate discussion of the provisions involved, the nature of receipts, number of trusts, etc. specifically dealt with the judgments cited by the petitioners and came to the conclusion that “To our mind, therefore, none of the authorities were in any error nor their view can be termed as perverse while granting partial relief to the petitioner. We do not see how the view taken by the first appellate authority in the facts and circumstances peculiar to the petitioner’s case is perverse. We are of the view that the conclusion reached by the first appellate authority is imminently possible. It is evident from the same that the petitioner obtained registration under the MVAT Act. It invested in the gold and disposed it of, may be on behalf of the customers. However, it paid VAT on it and was held liable to pay interest if the payment of VAT is delayed. Hence, the first appellate authority has rightly concluded that the tax amount, together with interest is payable.”