The Andhra Pradesh High Court has held that the soft drinks manufacturers under the brand name of Pepsi are eligible for Input Tax Credit (ITC) on refrigerators, coolers, and freezers.
The bench of Justice Ninala Jayasurya and Justice Tarlada Rajasekhar Rao has observed that an Input Tax Credit can be claimed when a manufacturer buys a raw material and pays a certain amount of tax on those purchases. They can deduct that tax amount from the tax they need to pay when selling their finished products. Where in the case on hand the petitioner / assessee who purchased glass bottles for not to use for manufacture to produce some other product by using the product purchased and petitioner is not the manufacturer of the bottles. The assessee has purchased the bottles for storing of the liquid which does not fall under the manufacturing of another product.
The revision petitioner, M/s. Pearl Beverages Limited is a manufacturer of soft drinks under the brand name of Pepsi. In furtherance of business, the appellant regularly purchases glass bottles and coolers.
In view of transitional provision facilitating the change from one statutory regime to another’ and under transition from the AP General Sales Tax Act, 1957, to the Value Added Tax system under section 13 (2) of VAT Act, the petitioner made a claim to Input Tax Credit equivalent to the APGST paid on the value of the opening stock as on 01.04.2005 relating to the purchases of the Glass bottles, Coolers, stores and spares during the year 2004-05.
The request of the petitioner for the tax paid under APGST for a claim of relief of Rs.12,65,333 on purchase of coolers and amount of Rs.1,98,224 on Stores, spares, and Rs.9,75,085 on glass bottles is disallowed on the ground that the coolers are not for resale purpose and the claim of glass bottles purchased for Rs.2,43,77,122 is verified and noticed that during this year, the breakages are estimated to be Rs.1 crore, hence, the claim of Rs.4,00,000 is disallowed and the other claim of Rs.1,98,224 being taxes paid on stores, spares, etc., is also disallowed, as there is no provision in the Act.
The Input Tax Credit from the glass bottles was also rejected on the ground that they had opening stock of Rs.17.31 crores and then they have purchased Rs.2.30 crores worth of bottles during 2004-05 and out of this total stock of Rs.19.61 crores worth of bottles, there was a breakage of bottles worth of Rs.1.02 crores and further observed that the FIFO principle should be followed and in that case, the breakages are from stocks purchased prior to 31.03.2004 only is eligible and it is further observed that a new bottle may be broken on the day of purchase/receipt, nobody can given guarantee or say that the bottle is not over and hence it cannot be broken.
The c petitioner / assessee contended that FIFO (First in First out) method would be applicable. FIFO method is generally used to determine the value of any item moving out of a stock account and those remaining in stock at any point of time. When applied to an account holding dematerialised stock, it implies that, out of the existing holdings, the item that first entered into the account is deemed to be the first to be sold out. There is no evidence the product moved of stock those remaining in stock and they are invoiced.
The court held that the amount paid by the revision petitioner is refundable to the extent of input tax credit on the coolers and refrigerators. The revision petitioner is entitled to the input tax credit for the coolers and refrigerators, while the rest of the claim is rejected.
Case Details
Case Title: M/s. Pearl Beverages Ltd., Versus The State Of Andhra Pradesh
Case No.: TAX REVISION CASE No. 10 of 2024
Date: 07/05/2025
Counsel For Petitioner: A SARVESWAR RAO
Counsel For Respondent: GP FOR COMMERCIAL TAX
