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

Facts of the Case

The high court of Orissa passed a judgment on 8 March 2023, by quashing the order imposing a 4% value-added tax (VAT) on the wheat bran (chokad) as it is not an industrial input in case of M/s. Kamadhenu Cattle & Poultry Feed Unit versus The State of Odisha (STREV No.33 of 2014), which was passed by the division bench of Chief Justice S. Muralidhar and Justice M.S. Raman.

The assessee had cited Entry “3” of Schedule “A” of the OVAT Act in support of their exemption claim. Given that NALCO was an industrial organization, the STO inferred that the “chokad” that was sold to it had been used as an industrial input, which is liable to 4% VAT as of July 1, 2005. According to Section 42(5) of the OVAT Act, a demand for the tax and a penalty were raised after recalculating the gross turnover and taxable turnover. The petitioner argued that the exemption from VAT provided for the sale of “Chokad” is unconditional. The department argued that the very nature of the items listed in Entry 3 demonstrates the legislative aim to solely exclude them from VAT when used “as such” and not as “inputs” in the production of another good.


The state government’s notification that “Chokad” is an industrial input for the purposes of Entry 74 of Schedule “B” has not been issued, the court has ruled. The STO and the JCST made a mistake by assuming that the “chokad” sold to NALCO must have “naturally” been employed as an industrial input without detecting this condition in Entry 74.

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