TMI Blog2010 (8) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... y used in respect of manufacture of finished product is clearly contrary to the legislative mandate. - W.P. (C) Nos. 9782,10957,11212,11673, 11674, 12414, 12628,12649,13048, 13049,13114,13637,13904 - - - Dated:- 12-8-2010 - GOPALA GOWDA V. C. AND INDRAJIT MAHANTY, JJ. V. GOPALA GOWDA C.J. In these matters hearing was closed on August 12, 2010 and the following order was passed: We are of the considered view that the impugned notification SRO No. 34 of 2009 dated January 27, 2009 in all the writ petitions declaring coal and furnace oil as goods is illegal and therefore the impugned notification is liable to be quashed to the aforesaid extent and is accordingly quashed. Reasons to follow. Accordingly, we note the reasons in support of the aforesaid order as hereunder: The petitioners herein have filed the present batch of writ petitions seeking to challenge the legality and validity of Notification S.R.O. No. 34 of 2009 dated January 27, 2009 issued by the State of Orissa in the Finance Department published in the Orissa Gazette dated January 27, 2009 in terms of which the petitioners, who are registered dealers under the Orissa Value Added Tax Act, 2004 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinery and equipments including accessories and component parts thereof purchased for use in mining. 8. Machinery and equipments including accessories and component parts thereof purchased for use in construction activities such as mixer, road roller, paver, vibrator, etc. [No. 4762/CTA-63/08-F] By order of the Governo P.K. Rout Under-Secretary to Government. Mr. A.K. Ganguly, learned senior advocate appearing for the petitionerM/s Tata Refractories Limited, submitted that the impugned notification purportedly issued by taking recourse to section 20(8)(m) is ultra vires section 20(3)(b) read with section 2(25) of the OVAT Act. It was submitted that while the OVAT Act declares that input-tax credit should be allowed on purchases made within the State from a registered dealer holding a valid registration certificate in respect of goods intended for the purpose of use as input which includes (consumables directly used) in respect of manufacture of finished products. The impugned notification is clearly contrary to the said legislative mandate since it purports to declare that, no inputtax credit is to be allowed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of such situation resulted in a circumstance when there was no question of any accretion or additional VAT payable/collectable in the circumstances contemplated therein. The impugned notification and the denial of claim of input-tax credit for specific items such as coal and furnace oil in the circumstances that the petitioners are in, i.e., manufacture, the manufactured product itself was in the present circumstances subject to levy of VAT and therefore, there was no situation in which such raw material on which input tax credit is sought for escaping from VAT, since the final product produced by the petitioners, i.e., sponge iron would be also liable for VAT. In other words, learned counsel submitted that the notification issued by the Finance Department purportedly in exercise of its power under clause (m) of sub-section (8) of section 20 of the VAT Act is clearly beyond the authority and/or competence of the executive, i.e., Finance Department. The learned counsel further submitted that in the present case the impugned notification is clearly an attempt by the executive to overreach the legislative mandate contained in the OVAT Act which specifically permits a registered dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of the statute and the definition of the term input under section 2(25) of the OVAT Act ought not to be read independent of the context in which it appears. The learned Advocate-General submitted that no absolute right to award input-tax credit can flow from an independent reading of section 2(25) of the OVAT Act and also placed reliance on the judgment of the honourable Supreme Court in the case of Special Officer Competent Authority, Urban Land Ceiling, Hyderabad v. P.S. Rao AIR 2000 SC 843 as well as in the case of Vanguard Fire and General Insurance Co. Limited v. Fraser Ross AIR 1960 SC 971. In order to canvass the State s contention that, it is well-settled law that, when the application of the definition to a term in a provision makes it unworkable and otiose, it can be said that the definition is not applicable to that provision because of the context being contrary to the main statutory provision. Accordingly, he submitted that section 2(25) of the OVAT Act cannot form the fountain head of an absolute right being claimed for by a petitioner for availing of input-tax credit. It was further submitted that notwithstanding the provisions of subsection (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt with section 2(25), the said case has no applicability to a case under section 2(27) of the OVAT Act and that two definitions are mutually exclusive. In the light of contentions advanced by the learned counsel for the rival parties as noted hereinabove it becomes imperative at this stage to take note of various relevant provisions in sub-sections 2(25), 2(26), 2(27) and 2(28) and sections 12 and 20 of the OVAT Act, 2004 and rule 11 of the OVAT Rules, 2005. Those are quoted below: 2. Definitions. In this Act, unless the context otherwise requires, (1) to (24) . . . (25) input means any goods purchased by a dealer in the course of his business for resale or for use in the execution of works contract, in processing or manufacturing, where, such goods directly goes into composition of finished products or packing of goods for sale, and includes consumables directly used in such processing or manufacturing; (26) input tax in relation to any registered dealer means the tax collected and payable under this Act in respect of sale to him of any taxable goods for use in the course of his business, but does not include tax collected on the sale of goods made to a commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled under sub-section (1) shall be the amount of tax paid by the registered dealer to the seller on his turnover of purchase of goods during the tax period, calculated, subject to the provisions contained in subsections (3), (4) and (5), in such manner as may be prescribed. (3) Input tax credit shall be allowed for purchases made within the State from a registered dealer holding a valid certificate of registration in respect of goods intended for the purpose of, (a) sale or resale by him in the State; (b) use as inputs or as capital goods in the manufacturing or processing of goods, other than those specified in Schedule A and Schedule C and Schedule D for sale; (c) sale of goods subject to levy of tax at zero rate under section 18; (d) for use as containers for packing of goods, other than those exempt from tax under this Act, for sale or resale; or (e) transfer of stock of taxable goods other than by way of sale, to any place outside the State: Provided that, (a) the input tax credit on purchases intended for the purpose of clause (e) shall only be allowed in respect of the amount of tax paid or payable in excess of tax at the rate of four per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of determining the amount of input tax credit, maintain accounts and such other records as may be prescribed in respect of the purchases and sales made by him and stock in trade held. (8) No input tax credit be claimed by or be allowed to a registered dealer, (a) in respect of any taxable goods purchased by him from another registered dealer for resale but given away by way of free sample or gift; (b) who makes payment of turnover tax as provided in section 16; (c) in respect of capital goods used for the purposes and in the circumstances as specified in Schedule D; (d) in respect of goods brought from outside the State against the tax paid in any other State; (e) in respect of stock of goods remaining unsold at the time of closure of business; (f) in respect of goods purchased on payment of tax, if such goods are not sold because of any theft, damage and destruction; (g) where the tax invoice is not available with the dealer or there is evidence that the same has not been issued by the selling registered dealer from whom the goods are purported to have been purchased; (h) in respect of goods purchased from a dealer whose certificate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod during which such input tax credit accrued. (b) the input tax credit, admissible under clause (a), where there is sale of both taxable and tax exempt finished products, shall be determined on application of the principles as provided under sub-rule (1) in respect of each tax period. Explanation. For the purpose of this sub-rule, the expression total input tax referred to in sub-rule (1) shall be the input tax as apportioned in respect of a tax period: Provided that for the purpose of calculating input tax credit under this sub-rule, if the value of the capital goods is within rupees one lakh in a tax period, the input tax credit claimed on such amount shall be allowed in one instalment. It is clear from the pleadings of the parties that this court had the occasion to deal with the definition of input in section 2(25) of the OVAT Act, 2004 in the case of Reliance Industries Ltd. [2008] 15 VST 228 and came to a conclusion that the definition of the term input in section 2(25) of the OVAT Act was an inclusive definition by which Legislature clearly covered the following: (i) goods purchased by a dealer in course of his business for resale; (ii) for use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under section 14 of the OVAT Act. At this juncture it becomes important to note herein that in term of section 20(1), there is no dispute in the present case that the petitioners are entitled thereunder to claim input-tax credit since neither coal nor furnace oil has been specified neither in Schedule C nor Schedule D of the Act. In terms of sub-section (2) of section 20 the input-tax credit is to be limited to the amount of tax paid by the petitioner-dealer on the purchase of the input as stipulated under sub-section (2) and most importantly under section 20(3) the legislative mandate is that input-tax credit shall be allowed when purchase is made within the State from a registered dealer holding a valid certificate of registration in respect of goods intended for the purpose stipulated in terms thereof. It is also an admitted fact that although power is vested in the State Government under sub-section (4) of section 20 of the OVAT Act to prescribe condition and restriction where input-tax credit may be allowed partially or in a phased manner in respect of such goods for such classes of dealer as may be prescribed, admittedly no such rule under sub-section (4) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer has stock of goods remaining unsold at the time of closure of his business, clearly thereby since the event of further sale has not taken place, no question of input-tax credit can arise. So far as clause (f) is concerned, if goods are purchased by a registered dealer and the same is stolen, damaged or destroyed, obviously such goods are not more available for resale and in absence of such goods no claim of input-tax credit could be permissible. In so far as clause (g) is concerned, where a registered dealer is not in a position to provide the tax invoice, no question of grant of input-tax credit is also permissible. So far as clause (h) is concerned, a registered dealer, who may have purchased goods from a registered dealer, but if such selling dealer registration certificate has been suspended the purchasing dealer can have no right to claim input-tax credit. In so far as clauses (i) and (j) are concerned, the goods which we are presently concerned, i.e., coal and furnace oil are admittedly not specified in Schedule A or C. In so far clause (k) is concerned, where the finished products of the registered dealer are exempted from tax either in whole or in part under the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paragraph 8 of the judgment of the honourable Supreme Court in the case of State of Karnataka v. Kempaiah [1998] 6 SCC 103 reads as follows: 8. The definition of the word action in section 2(1) reads as under: 2. (1) action means administrative action taken by way of decision, recommendation or finding or in any other manner and includes wilful failure or omission to act and all other expressions (relating to) such action shall be construed accordingly. A perusal of the definition indicates that it encompasses administrative action taken in any form whether by way of recommendation or finding or in any other manner , e.g., granting licences or privileges, awarding contract, distributing Government land under statutory rules or otherwise or withholding decision on any matter, etc. The expression in any other manner takes in its fold the last-mentioned categories of administrative actions. Mr. Nagaraja has argued that the expression in any other manner will have to be given a wider meaning so as to include other actions of the public servants such as the action of the respondent in amassing wealth, otherwise the very purpose of the Act will be frustrated. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess, including tentering, would be understood. Thus understood, a process akin to stentering/tentering would fall within the meaning of the proviso and, consequently, the benefit of the notification cannot be availed by the respondent. In view of the aforesaid law laid down by the honourable Supreme Court we apply the principle of ejusdem generis to clause (m) of subsection (8) of section 20 and are of the considered view that the present notification impugned hereinabove cannot stand the test of application of the principle of ejusdem generis. Accordingly, we are of the considered view that the impugned notification vide S.R.O. No. 34 of 2009 dated January 27, 2009, limited to declaring coal and furnace oil as goods at serial 1 and 2 thereof is illegal and therefore declare that the said notification would not have any application and will stand quashed to the aforesaid extent, since the impugned notification is ultra virus section 20(3)(b) read with section 2(25) and 2(27) of the OVAT Act, 2004 and consequently purchase made by the petitioner-manufacturers of the aforesaid item, i.e., coal and furnace oil within the State from a registered dealer holding a valid registr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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