TaxTMI 
TaxTMI 
2010 (8) TMI 843
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.... 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 have been disallowed from claiming any "input-tax credit" in respect of VAT paid by them on their purchase of "coal" and "furnace oil", on the basis of the impugned notification issued under section 20(8), clause (m) of the Orissa Value Added Tax Act, 2004 (hereinafter referred to as, "the OVAT Act") on the ground that the OVAT Act does not vest in the Finance Department of the Government of Orissa with the necessary authority in law for issue of such a notification and a further prayer has been made seeking a writ declaring clause (m) of subsection (8) of the section 20 of the OVAT Act as ultra virus the Constitution of India as it suffers from the vice of excessive delegation. For the purpose of convenience the impugned notification is extracted herein, which runs thus: "The Orissa Gazette Extraordinary Published by authority Finance Department Notification No. 96, Cuttack, Tuesday, January 27, 2009/Magha 7, 1930 S.R.O. No. 34 of 2009.-In exercise of the powers conferred by clause (m) of sub-section (8) ....
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....s. It is further submitted on behalf of the petitioner that the impugned notification is also ultra virus of clause (m) of sub-section (8) of section 20 as the same exceeds the limits of the power conferred on the State Government to specify only a circumstance or eventuality similar to those spelt out in clauses (a) to (l) of sub-section (8) of section 20 and purports to altogether deny input-tax credit for the raw materials/consumables like coal and furnace oil and that too, without specifying any circumstance/eventuality similar to those contained in section 20(8)(a-l) of the OVAT Act, under which such credit could be denied. The petitioners further submits that the impugned notification is a "colourable device" since in effect it seeks to nullify the judgments rendered by this court in the case of Reliance Industries Ltd. v. Asst. Commissioner of Sales Tax reported in [2008] 15 VST 228 (Orissa). By way of an alternative arguments it was further submitted by the petitioners that, if the impugned notification is held to be within the ambit of clause (m) of sub-section (8) of section 20 of the OVAT Act, then the said provision, i.e., section 20(8)(m) of the OVAT Act would be li....
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....o the scope of clause (m) of sub-section (8) of section 20 and, therefore, submitted that it is well established principle that where general terms have been used following particular expression, the said general term would take that colour and meaning as that of preceding expression and in support of the aforesaid proposition he placed reliance on a judgment of the honourable Supreme Court in the case of Collector of Central Excise, Bombay v. Maharashtra Fur Fabric Ltd. reported in [2002] 7 SCC 444. Reliance is also placed on the principle of ejusdem generis on a judgment of the honourable Supreme Court in the case of State of Karnataka v. Kempaiah reported in [1998] 6 SCC 103, wherein the expression "in any other manner" takes in its fold the lastmentioned categories of administrative actions. In the said judgment it was held that the expression "in any other manner" contained general words which construed literally, should receive their full and natural meaning but when they follow the specific and particular words of the same genus, it will be presumed that the Legislature has used the general words in a limited sense to convey the meaning implied by the specific and particular....
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....on 20. Since clause (m) of sub-section (8) of section 20 of the OVAT Act empowers the State Government to issue necessary notifications disallowing input-tax credit in certain cases, such power is a "plenary power" and cannot be limited to the type of circumstances similar to the other spelt out in clauses (a) to (l) of sub-section (8) of section 20. It was urged on behalf of the State Government that the impugned notification was issued by exercise of power under section 20(8)(m) of the OVAT Act and since there was no element of sale in respect of these commodities when the registered dealer uses the same coal and furnace oil as input for manufacturing finished product, the Government of Orissa in Finance Department after a thorough deliberation has thought it fit to place restriction by "disallowing input-tax credit" in such circumstances. It was further submitted that in the matter of taxation it is the prerogative of the State, to pick and choose objects, persons, methods and rates for taxation and that the petitioners are not entitled to challenge the notification, since it is based on rational consideration and it was decided to disallow input-tax credit in respect of "coal" ....
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....ereof under section 20 against the output tax, by a registered dealer other than a registered dealer paying turnover tax under section 16. (28) 'Manufacture' means any activity that brings out a change in an article or articles as result of some process, treatment, labour and result in transformation into a new and different article so understood in commercial parlance having a distinct name, character and use, but does not include such activity of manufacture as may be notified. . . . 12. Levy of tax on purchase.-Every dealer who, in the course of his business, purchases or receives any goods,- (i) from a registered dealer, in the circumstances in which no tax under section 11 is payable by that registered dealer on such goods, or (ii) from any person other than a registered dealer, shall be liable to pay tax on the purchase price or prevailing market price of such goods, if after such purchase or, as the case may be, receipt, the goods are not sold within the State or in the course of inter-State trade or commerce or in the course of export out of the territory of India, but are,- (a) sold or disposed of otherwise; or (b) consumed or used in the manufacture o....
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....y are used for such purposes; and (c) where a registered dealer sells or dispatches goods, both taxable and exempt under this Act, the input tax credit shall be allowed proportionately only in relation to the goods which are not so exempt. (4) Notwithstanding anything contained in this section or elsewhere in this Act, and subject to such conditions and restrictions and in such manner, as may be prescribed, input tax credit may be allowed partially or in phased manner, in respect of such goods or such class of dealers or in such cases, as may be prescribed. (5)(a) Input tax credit on capital goods shall be allowed from the date of first sale of taxable goods produced or manufactured after the commencement of such production and shall be adjusted against the output tax over a period not exceeding three years: Provided that no input tax credit shall be allowed on such capital goods used for the purposes and in the circumstances as specified in Schedule D. (b) Input tax credit under clause (a) of this sub-section shall be allowed in lump sum provided the value of such capital goods is rupees one lakh or less. (c) Input tax credit on capital goods shall be allo....
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.... (k) in respect of raw materials used in manufacture or processing of goods, where the finished products are exempt from tax; and (l) executing works contract, in relation to works contracts exe- cuted by him, where he has exercised option under sub-section (3) of section 11 to pay tax by way of composition; and (m) in any other case as the Government may, by notification, specify. Rule 11. Calculation of input tax credit.-(1) Where a dealer effects sales of goods both, subject to tax and exempt from tax, under the Act, the following calculation for claiming input tax credit shall apply,- (a) where all the sales effected by a dealer in a tax period are subject to tax under the Act, the whole of the input tax may be claimed as credit. (b) where all the sales effected by the dealer for a tax period are exempt from tax under the Act, no input tax may be claimed as credit. (c) Where a part of the sales effected by a dealer in a tax period are subject to tax and the remaining part of the sale are exempt from tax under the Act, the amount that can be claimed as input tax credit shall be calculated from the following formula: P x Q -------- ....
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.... finished products or packing of goods for sale; and (iv) includes consumable directly used in such processing or manufacturing. Accordingly, the court came to a conclusion in terms of the "input" definition that, the only requirement is that the consumables are directly used in such processing and/or manufacturing and the term of "consumable" was not limited to those goods which directly go in composition of the finished products alone. The term "consumable" postulates that such articles may be destroyed or completely used in course of the processing or manufacturing of such goods and for such reason since the term "consumable" was used by the Legislature, the said definition was held to be an "inclusive definition". Therefore, after referring to various judgments in the said case, the court came to a conclusion that input comprises of two types of commodities, i.e., (i) those commodities which directly go into the composition of finished product and (ii) the consumables used in the manufacturing process for production of finished product and concluded that for "consumable" to qualify as an "input" it is not at all necessary that in order for consumable to qualify as "input"....
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....n (8) of section 20 and clauses (a) to (l) thereof are attracted in the present case. Therefore, the State having relied on clause (m) of subsection (8) of section 20 to issue the impugned notification, the only remaining issue that arises for our consideration is as to whether the State Government was competent to issue notification of a nature impugned herein in terms of the said provision. The scope of our enquiry and determination herein revolves round the question of adjudicating as to the scope and power vested in State Government under clause (m) of sub-section (8) of section 20 of the OVAT Act. In terms thereof it is clear that the Government is authorized to notify "any other case" as may be deemed appropriate in terms of sub-section (8) of section 20 of the OVAT Act. At the outset on an analysis of the circumstances contained in subsection (8) of section 20 it is clear that whereas clause (a) deals with the situation where the taxable goods purchased by the registered dealers are not re-sold in course of his business but given away as a free sample or gift. In other words the case in which there is no further resale of the purchased goods consequently there is no....
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....ilable in view of the exemption of tax of the final products either whole or in part. In so far as clause (l) is concerned, if a registered dealer executes works contract and has exercised his option under sub-section (3) of section 11 to pay tax by way of composition as prescribed under section 11(c) in view of exercise of such option no question of availing of input-tax credit would arise. We now come to clause (m) of sub-section (8) which contemplates and vests power in Government to make notification specifying any other goods, this is the power which the State has resorted to in passing the impugned notification. In the case at hand, we are clearly of the considered view that both the judgments cited by the petitioners in the case of Collector of Central Excise, Bombay v. Maharashtra Fur Fabric Ltd. [2002] 7 SCC 444 as well as in the case of State of Karnataka v. Kempaiah [1998] 6 SCC 103 clearly cover the field. The principle of ejusdem generis shall apply to the scope and ambit of clause (m) of sub-section (8) of section 20 of the OVAT Act, 2004. Clearly clauses (a) to (l) of sub-section (8) of section 20 are circumstances specified by the Legislature under whic....
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....uction of statutes but will also be repugnant to the object of the Act, pointed out above. The expression 'in any other manner' contains general words which construed literally, should receive their full and natural meaning but when they follow specific and particular words of the same genus, it will be presumed that the Legislature has used the general words in a limited sense to convey the meaning implied by specific and particular words. This follows from application of the rule of ejusdem generis. That rule which is an exception to the rule of construction that general words should be given their full and natural meaning, was enunciated by Lord Campbell in R. v. Edmundson [1859] 28 LJMC 213; [1859] 2 E&E 77 '. . . where there are general words following particular and specific words, the general words must be confined to things of the same kind as those specified'. (Craies on Statute Law, Sixth Edition, page 179.) These rules of interpretation are so well-settled that they hardly need any authority to support our conclusion. Now in the definition of action, the expression 'in any other manner' follows 'decision', 'recomendation' or 'finding'. So it connotes other categories of ....