Chokad Is Not An Industrial Input: Orissa High Court Quashes Order Imposing 4% VAT

The Orissa High Court has quashed the order imposing a 4% value-added tax (VAT) on the wheat bran (chokad) as it is not an industrial input.

The division bench of Chief Justice S. Muralidhar and Justice M. S. Raman has observed that it was necessary for the Department to show that there was a notification issued by the State Government identifying ‘Chokad’ as an ‘industrial input'. In the absence of such notification, no inference could have been drawn that the "chokad" sold to NALCO was in fact an "industrial input’.

The petitioner-dealer carries on business in cattle feed, poultry feed, salt, rice, and broken rice and affects purchases both inside and outside the state of Odisha. As per the audit visit report, the petitioner affected the sale of 8463.30 quintals of wheat bran worth Rs. 50,53,137 during 2005-06 to M/s. NALCO Ltd., Damanjodi. The assessee had claimed exemption by referring to Entry ‘3’ of Schedule ‘A’ of the OVAT Act. The STO made the inference that since NALCO was an industrial organization, the "chokad" sold to it has been used as industrial input, which is subject to 4% VAT with effect from July 1, 2005.

The gross turnover and taxable turnover were recomputed, and a demand for the tax was raised along with a penalty under Section 42(5) of the OVAT Act.

The petitioner contended that there is no conditionality attached to the exemption granted from VAT on the sale of ‘Chokad’.

The department contended that the very nature of the goods in Entry 3 reflects the legislative intent of exempting them from VAT only where they are used "as such" and not as "inputs" in the manufacture of some other commodity.

The court has held that the notification has not been issued by the state government stating that ‘Chokad’ is an industrial input for the purposes of Entry 74 of Schedule "B." Without noticing this requirement in Entry 74, both the STO and the JCST fell into error in drawing the ‘inference’ that "chokad" sold to NALCO must ‘naturally’ have been used as an industrial input.

Case Title: M/s. Kamadhenu Cattle & Poultry Feed Unit versus The State of Odisha

Case No: STREV No.33 of 2014

Citation: 2023 LiveLaw (Ori) 37

Date: 02.03.2023

Counsel For Petitioner: R.P. Kar

Counsel For Respondent: Sunil Mishra

Click Here To Read The Order