M/s Mangalore Refinery and Petrochémicals Ltd. Mangalore AR.CLR.CR.4/2013-14 PROCEEDINGS* OF THE AUTHORITY FOR CLARIFICATION AND ADVANCE RULINGS UNDER SECTION 60 OF THE KARNATAKA VALUE ADDED. TAX ACT, 2003 READ WITH RULES 163 TO 165 OF THE ARNATAKA. VALUE ADDED TAX RULES, 2005 PRESENT : (1) M.DJain Z Additional Commissioner of Commercial Taxes (Head Quarters-I), Bangalore and Chairman. (2) H.D.Arunkumar, Additional Commissioner of Commercial Taxes (Policy & Law), Bangalore and Member. (3) R.Jagadeesh Prasad, Additional Commissioner of Commercial Taxes (Goods and Service Tax), Bangalore and Member NAME AND ADDRESS _: M/s.Mangalore Refinery and Petrochemicals OF THE APPLICANT Limited, Kuthethoor P.O, Via Katipalla, Mangalore - 575 030 TIN : 29960081934 JURISDICTIONAL . ASSESSING AUTHORITY; ACCT, LVO-260, Mangalore _ REPRESENTED BY : Sri G.Nandagopal Shenoy, Chartered Accountant and duly authorized representative. ORDER NO.AR.CLR.CR.4/2013-14. DATED | .2013 1. M/s.Mangalore Refinery and Petrochemicals Limited, Mangalore (‘the applicant’ for short) is a dealer registered with TIN-29960081934 under the KVAT Act, 2008 and is also a dealer registered with RC No.30115863 under the KST Act, 1957 since products such as petrol, diesél and aviation turbine fuel are dealt by the applicant. 2. The applicant has sought clarification on the following: (a) Whether input tax deduction under Sections 20(1)(a) and'10(2) of the KVAT Act, 2003' attributable to sale of exempted goods under Section 5 which are sold in the course of export out of the territory of India. (b}¥Wthether goods sold in the course of export out of the territory of India form part of ‘sales of exempt goods’ or ‘non-taxable transaction’, for calculation of hon-deductible input tax under rule 131(3) for arriving at input tax deductible under Section 10(2) of the Act read with Sections 17(1), 17(2), 20(1)(a) and. 11(a)(1) of the KVAT Act, 2003. 1M/s Mangalore Refinery and Petrochemicals Ltd. Mangalore AR.CLR.CR.4/2013-14 3. As submitted in the application, the applicant is carrying on the business of refining crude oil into various petroleum products and the commercial production of the said product was started in 1996. Since the applicant deals in petrol, diesel and aviation turbine fuel, it is also registered under the KST Act, 1957 with KST RC Number 30115863 and is filing monthly returns separately under the KVAT and KST Acts for each tax period, in respect of the products covered under the said Acts. It is further stated in the application that the applicant is effecting local, inter-State and direct export sale of taxable goods Urider Section 4 of the KVAT Act and is also effecting local, inter-State and direct export sale of goods exempted under Section 5 of the KVAT Act, but goods liable to tax under KST Act. The applicant in addition is effecting transfer or despatch of the above goods to places outside the State otherwisé than by way of sale. 4. The understanding of the applicant is that tax paid on inputs attributable to sale in the course of export out of the territory’ of India of exempted goods undet the KVAT Act, 2003 is eligible for deduction under Section 10(3) from the amount of output tax payable in that period. 5. The Joint Commissioner of Commercial Taxes (Administration), VAT Division, Mangalore, whose opinion was-called for on the clarification sought by the applicant, has concurred with the opinion of thé Assistant Commissioner of Commercial Taxes, Local VAT Office-260, Mangalore, who has opined that as per Section 11(a)(1) and-20(1)(a) of the KVAT Act, 2003, the turnover excluding the direct export turnover would be the exempted turnover. 6. The Applicant’s authorised representative Sri 1G. Nandagopal Shenoy, Chartered Accountant appeared before this Authority and was heard. He has reiterated the submissions'made in the application. .M/s Mangalore Refinery and Petrochemicals Ltd. Mangalore AR.CLR.CR.4/2013-14 7. the matter is examined. (1) The short issue raised for clarification is whether when under section 11(a)(1) of thé Karnataka Value Added Tax Act, 2003 input tax deduction is allowed in respect of goods exempted under the Act but sold in the course of export out of the territory of India, the amount of such export sales should be taken as sale of exempt goods or not in the formula -prescribéd under Rule 131(3) of the Karnataka Value Added Tax Rules,2005 to calculate the non-deductible input tax in respect of exempt goods and non-taxable transactions. (2) The formula prescribed under Rule 131(3) is as follows: "(Sales of exempt goods +'non-taxable transactions) x total input tex Non-deductible input tax F Total sales (including non-taxable transaction)] (3) When the provisions of section 10(2} read with section 11(a)(1) clearly: provide for deduction of input tax in respect of goods exempted under the Act but sold in the course of export out of the territory of India, such sales cannot be takeh as sales of exempt goods for the purpose of Rule 131(3). Without such a harmonious reading the intention of the State: Legislature would be defeated. 8. In the circumstances, this Authority clarifies that for the purpose of calculation of input deduction relating to exempt goods sold in the course of export out of the territory of India, their corresponding sale shall not be taken as sale of exempt goods for the purpose of Rule 131 aba Wo Rwers een a : (R.gacap! PRASAD) (H.D.ARUNKUMAR) (M.D-JAIN) _Mentlember Chaiyman,, Authority Clatifleation & Auyaamwe Ruling Authoriglarificaliog & Ac 9 Ganuhimgot, Bangelor 9 Gananin (1) The Applicant (2) The ACCT, LVO-260, Mangalore. (3) Submitted to the Commissioner of Commercial Taxes (Karnataka), Bangalore