THE HIGH COURT OF ORISSA: CUTTACK W.P.(C) Nos. 15602, 9782, 13049, 14664, 15601, 15603, 15889, 17673, 17674, 20195, 17772, 15009, 11674, 11673, 13904, 15448, 18253, 19018, 19013, 17598, 10957, 15233, 15234, 15796, 19123, 11212, 15842, 15841, 18626, 18624, 13114, 12628, 12414, 12649, 20267, 18843, 16106, 15235, 18623, 18625, 18622, 18258, 13048, 13637 of 2009 & W.P. (C) Nos. 102, 447, 449, 3013, 4692, 5931, 5932, 10037, 9307, 6055, 9439, 8737, 10564, 7141, 4495, 4496, 9201, 7142, 448 & 5019 of 2010 ________________________________________________________ In the matter of applications under Articles 226 and 227 of the Constitution of India. -------------- (In W.P(C) Nos.15602, 15601, 15603, 19018, 10957, 15796 of 2009) M/s Visa Steel Ltd. ... (In WPC No.15602/2009) M/s Rana Spong Ltd. … (In WPC No.15601/2009) M/s SMC Power Generation … (In WPC No.15603/2009) M/s Deepak Steel … (In WPC No.19018/2009) M/s Bhusan Power … (In WPC No.10957/2009) M/s Vedanta Aluminium … (In WPC No.15796/2009) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : Mr. N.Venkatraman, Sr. Adv. M/s. Satyajit Mohanty Satyajit Mohanty, R.P.Swain & S.Patnaik, R.P.Kar & D.K.Mohanty. For Opp. Parties : Advocate General (In W.P(C) Nos.9782, 13637 & 15841 of 2009) M/s Tata Refractories ... (In WPC No.9782/2009) M/s Bhusan Steel Ltd. … (In WPC No.13637/2009) M/s Arati Steel Ltd. … (In WPC No.15841/2009) ……. Petitioners -Versus- State of Orissa & others ……. Opp. parties For Petitioners : Mr. A.K.Ganguly, Sr. Adv. M/s. A.K.Parija, B.C.Mohanty, P.P.Mohanty, D.K.Das, R.K.Dash, A.Patnaik, B.P.Das & S.P.Patnaik. For Opp. Parties : Advocate General (In W.P(C) Nos.13049, 13048 of 2009) M/s Viraja Steel. ... (In WPC No.13049/2009) M/s Surya Spong Iron … (In WPC No.13048/2009) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. M.R.Mohanty-2 & G.K.Nayak. For Opp. Parties : Advocate General (In W.P(C) Nos.14664, 15889, 20195, 13904, 17598, 18843 of 2009) M/s Sreehari Spong Iron Ltd. ... (In WPC No.14664/2009) M/s Shiva Cement Ltd. … (In WPC No.15889/2009) M/s Maa Samaleswari … (In WPC No.20195/2009) M/s Jai Iron & Steel … (In WPC No.13904/2009) M/s Kusal Ferro Metals … (In WPC No.17598/2009) M/s Mahaveer Ferro Alloys … (In WPC No.18843/2009) ……. Petitioners -Versus- State of Orissa & others ……. Opp. parties For Petitioners : M/s. M.L.Agarwal & M.Agarwal For Opp. Parties : Advocate General (In W.P(C) Nos. 17673, 17674, 15448, 15233, 15234, 18626, 18624, 15235, 18623, 18625, 18622, 18258 of 2009 and 447, 449, 5019, 3013, 9307, 448 of 2010) _______________________________________________________________________ M/s Jaijagannath Steel .... (In WPC No.17673/2009) M/s Vikram Pvt. Ltd.. … (In WPC No.17674/2009) M/s Pawanjai Spong Iron … (In WPC No.15448/2009) M/s Sun Steel Ltd. … (In WPC No.15223/2009) M/s Maa Vaishnavi Spong … (In WPC No.15234/2009) M/s Balaji Metalics … (In WPC No.18626/2009) 2 M/s B.R. Spong & Power .... (In WPC No.18624/2009) M/s Reliable Sponge .… (In WPC No.15235/2009) M/s Bhaskar Steel & Ferro .… (In WPC No.18623/2009) M/s Maa Shakumbari Sponge .… (In WPC No.18625/2009) M/s Swastik Ispat Pvt. Ltd. .… (In WPC No.18622/2009) M/s Shiv Metalic Pvt. Ltd. .… (In WPC No.18258/2009) M/s Time Steel & Power .... (In WPC No.447/2010) M/s Meta Sponge Pvt. Ltd. .… (In WPC No.449/2010) M/s Prabhu Sponge Pvt. Ltd. …. (In WPC No.5019/2010) M/s Mahakali Ispat Pvt. Ltd. …. (In WPC No.3013/2010) M/s Vinayak Agro Industry .… (In WPC No.9307/2010) M/s Radhakrishna Ispat .… (In WPC No.448/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. D.Pati, S.K.Mishra, P.Panigrahi, S.N.Sharma & A.S.K.Agarwal. For Opp. Parties : Advocate General (In W.P(C) Nos. 19123 of 2009 and 102 of 2010) M/s ACC Ltd. .... (In WPC No.19123/2009) M/s Rexon Strips Ltd.. …. (In WPC No.102/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Sidharth Ray, S.Dey & S.C.Rath. For Opp. Parties : Advocate General (In W.P(C) Nos. 20267 of 2009 and 4692 of 2010) M/s MSP Sponge Iron Ltd. .... (In WPC No.20267/2009) M/s MSP Metalics Ltd. .… (In WPC No.4692/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : Mr. Deepak Kumar Dey For Opp. Parties : Advocate General 3 (In W.P(C) Nos. 5931, 5932, 6055 of 2010) M/s Shri Mahavir Ferro .... (In WPC No.5931/2010) M/s Perfect Steel Corpn. …. (In WPC No.5932/2010) M/s Bajrang Steel. …. (In WPC No.6055/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Biplab Mohanty, T.K.Pattnaik, S.Pattnaik, A.Pattnaik, R.P.Ray, B.S.Rajguru, M.S.Rizvi. For Opp. Parties : Advocate General (In W.P(C) No.17772 of 2009) M/s Shri Ganesh Metalic .... (In WPC No.17772/2009) ………. Petitioner -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Jagabandhu Sahoo, P.Mohapatra, N.K.Rout & P.K.Pattnaik. For Opp. Parties : Advocate General (In W.P(C) Nos. 15009, 19013 of 2009 and 9439 of 2010) M/s Agrasen Sponge P. Ltd. .... (In WPC No.15009/2009) M/s Suraj Products Ltd... .… (In WPC No.19013/2009) M/s J.K.Paper Ltd. .… (In WPC No.9439/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Prasant Kumar Jena, D.P.Mohapatra. For Opp. Parties : Advocate General (In W.P(C) Nos. 11674, 11673, 11212 of 2009 and 8737 of 2010) M/s K.J.Ispat Ltd. .... (In WPC No.11674/2009) 4 M/s Maithan Ispat Ltd. …. (In WPC No.11673/2009) M/s Imami Paper Mills …. (In WPC No.11212/2009) M/s Beekay Steels & Power .… (In WPC No.8737/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Subash Ch. Lal, Sumit Lal & Sujit Lal. For Opp. Parties : Advocate General (In W.P.(C) No10037 of 2010) M/s Shyam Metalics & Energy .... (In WPC No.10037/2010) ………. Petitioner -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Bhupesh Ch. Mohanty, A.Kanungo, A.Patnaik. For Opp. Parties : Advocate General (In W.P(C) No. 18253 of 2009) M/s Crackers India (Alloy). .... (In WPC No.18253/2009) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. U.C.Pattnaik, A.J.Mohanty, S.D.Mishra & S.Pati. For Opp. Parties : Advocate General (In W.P(C) No. 10564 of 2010) M/s Bindal Songe Ltd. .... (In WPC No.10564/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Ashok Ku. Mohanty & B.Mohapatra. 5 For Opp. Parties : Advocate General (In W.P(C) Nos. 15842, 13114, 12628, 12414, 16106 of 2009) M/s Indian Farmers .... (In WPC No.15842/2009) M/s OCL India Ltd. …. (In WPC No.13114/2009) M/s Balasore Alloyes Ltd. …. (In WPC No.12628/2009) M/s Tata Sponge Iron Ltd. …. (In WPC No.12414/2009) M/s Ganesh Sponge Pvt. Ltd. …. (In WPC No.16106/2009) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Sarada Pr. Sarangi, P.P.Mohanty, D.K.Dash, P.K.Dash, A.Patnaik & A.K.Parija For Opp. Parties : Advocate General (In W.P(C) Nos. 7141, 4495, 4496, 9201, 7142 of 2010) M/s Surendra Mining Industries .... (In WPC No.7141/2010) M/s. Govindam Projects .… (In WPC No.4495/2010) M/s Maa Tarini Industries. .… (In WPC No.4496/2010) M/s Samaleswari Ferro M. .… (In WPC No.9201/2010) M/s Vishal Metalics . .… (In WPC No.7142/2010) ………. Petitioners -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Kartik Kurmy, N.K.Rout, S.B.Sharma & A.Jaluka. For Opp. Parties : Advocate General (In W.P(C) Nos. 12649 of 2009) M/s Bhagawati Steels .... (In WPC No.12649/2009) ………. Petitioner -Versus- State of Orissa & others ………. Opp. parties For Petitioners : M/s. Nachiketa Mohapatra, Ashok Parija & R.P.Kar. For Opp. Parties : Advocate General 6 P R E S E N T : THE HON’BLE CHIEF JUSTICE SHRI V.GOPALA GOWDA & THE HON’BLE SHRI JUSTICE INDRAJIT MAHANTY. __________________________________________________________________ Decided on: 12.8.2010 __________________________________________________________________ V.Gopala Gowda, C.J. In these matters hearing was closed on 12.8.2010 and the following order was passed:- “We are of the considered view that the impugned notification SRO No.34/2009 dated 27.1.2009 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.” 2. Accordingly, we note the reasons in support of the aforesaid order as hereunder: 3. The petitioners herein have filed the present batch of writ petitions seeking to challenge the legality and validity of the Notification S.R.O. No.34/2009 dated 27.1.2009 issued by the State of Orissa in the Finance Department published in the Orissa Gazette dated 27.1.2009 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 ( here-in- after referred to as “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 sub-Section 8 7 of the Section 20 of the OVAT Act as ultra virus the Constitution of India as it suffers from the vice of excessive delegation. 4. For the purpose of convenience the impugned notification is extracted herein, which runs thus:- “The Orissa Gazette EXTRAORDINARY PUBLISHED BY AUTHORITY No. 96, CUTTACK, TUESDAY, JANUARY 27, 2009/ MAGHA 7, 1930 FINANCE DEPARTMENT NOTIFICATION The 27th January 2009 S.R.O. No.34/2009-In exercise of the powers conferred by clause (m) of sub-section (8) of section 20 of the Orissa Value Added Tax Act, 2004 (Orissa Act 4 of 2005), the State Government, having been satisfied that it is necessary so to do, hereby specify that no input tax credit shall be allowed to the registered dealers in respect of the goods description of which is given in the Schedule below. SCHEDULE Sl. Description of goods No. (1) (2) 1. Coal except when purchased for resale 2. Furnace oil except when purchased for resale 3. Kerosene except when purchased for resale 4. All automobiles including commercial vehicle/two wheelers/three wheelers required to be registered under the Motor Vehicles Act 1988 and including tyres and tubes, spare parts and accessories for the repair and maintenance thereof; except when purchased for resale. 5. Air conditioning units other than those used in plant and laboratory except when purchased for resale 6. Earth moving equipment such as dozers, loaders and excavators; and poclain, dumpers and tippers etc. except when purchased for resale. 7. Machinery 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] 8 By order of the Governor P.K.ROUT Under-Secretary to Government” 5. Mr. A. K.Ganguly, learned Senior Advocate appearing for the petitioner-M/s Tata Refractories Limited submitted that the impugned notification purportedly issued by taking recourse to Section 20(8)(m) is ultra virus 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 input tax credit is to be allowed on ‘coal’ and ‘furnace oil’, even though they are either raw materials or consumables directly used in the processing and manufacturing of finished goods, i.e., refractory bricks. 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. 6. The petitioners further submits that the impugned notification is a ‘colorable device’ since in effect it seeks to nullify the judgments rendered by this Court in the case of M/s Reliance Industries Limited v. Assistant Commissioner of Sales Tax and others, reported in (2008) 015 VST 0228 (Orissa). By way of an alternative arguments it was further submitted by the petitioners that, if the impugned notification is held to be 9 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 liable to be quashed and declared unconstitutional for suffering from the vice of excessive delegation of legislative power. 7. Mr. N.Venkat Raman, Senior Advocate appearing for the petitioner-M/s Visa Steel Limited submitted that his client was essentially in the business of manufacture of Sponge iron. It is further submitted by him that in the process of manufacture of sponge iron, ‘coal’ is a raw material since sponge iron cannot be manufactured without use of coal in the process of its manufacture. While adopting the arguments addressed by Mr. A.K. Ganguly, Senior Advocate as noted hereinabove, learned counsel submitted that, the legislative mandate of Section 20(8) of the OVAT Act there are various circumstances or situations in which a register ed dealer could not claim or would not be allowed input tax credit in each of the situations/circumstances narrated in clauses- (a) to (l) contained therein. If an analysis is made of all the circumstances covered under Section 20(8), it would be clear that each 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. Learned counsel further submitted that in the present case the impugned 10 notification is clearly an attempt by the executive to overreach the legislative mandate contained in the OVAT Act which specifically permits a registered dealer under Section 20(3) to claim for input tax credit in terms thereof. 7.1 Learned counsel further submitted that the principle of ejusdem generis rule has to be applied to 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 Hon’ble 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 Hon’ble Supreme Court in the case of State of Karnataka and others –V- Kempaiah, reported in (1998) 6 SCC 103, wherein the expression “in any other manner” takes in it fold the last-mentioned 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 words used. 8. Mr. A.K. Mohanty, learned Advocate General appearing for the State relied upon the averments made on behalf of opposite party as contained in the counter affidavit filed through Mr.Sudhansu Mohan Das, Assistant Commissioner of Commercial Taxes (Law). Learned Advocate General submitted that the power under Section 20 (8) (m) of the OVAT Act, 2004 is neither conditional upon framing of rules nor is there any excessive delegation of power to the Government which can be either be termed as 11 wide unchanelised or unguided. It is further submitted that the allegation that the opposite party was trying to overcome the judgment in the case of M/s Reliance Industries Ltd. versus Assistant Commissioner of Sales Tax in which it was held that “furnace oil” is an “input” under Section 20 of the OVAT Act is totally misconceived and in-appropriate in the present circumstances. It was contended that the words and phrases contained in the definition clauses of the OVAT Act cannot override the provisions 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. 8.1 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 Hon’ble Supreme Court in the case of Special Officer and Competent Authority Urban land Ceiling Hyderabad -Vs- 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 input tax credit. 9. It was further submitted that notwithstanding the provision of sub-section (3) of Section 20 which allow a registered dealer to avail input credit on the goods used as input, the same was subject to the rider contained in sub-section (8) of Section 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 12 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’ and ‘furnace oil’ and other items covered in the notification to the registered dealer, who use and consume the same for manufacturing of finished products and such input tax credit was allowable only when such items, i.e. coal and furnace oil were resold. It was also submitted that the contention raised by the petitioners that the impugned notification dated 27.1.2009 of the Finance Department seeks to over reach and nullify the judgment of this Court in the case of M/s Reliance Industries Limited (supra) in which it was held that furnace oil was an input under Section 2(25) of the OVAT Act is incorrect. It was submitted that the same was misconceived since the definition of ‘input’ given under Section 2(25) of the OVAT Act is altogether different from the definition of ‘input tax credit’ under Section 2(27) of the Act and in terms of said sub-section, the same was subject to Section 20 of the OVAT Act. Therefore, since this Court in the case of M/s Reliance Industries dealt 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. 10. In the light of contentions advanced by the learned counsel for the rival parties as noted herein above it becomes imperative at this stage 13 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) xx xx xx xx xx (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 commission agent purchasing such goods on behalf of such dealer. (27) “input tax credit” in relation to any tax period means the setting off of the amount of input tax or part thereof 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, purchase 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 14 inter-State trade or commerce or in the course of expert out of the territory of India, but are- (a) sold or disposed of otherwise; or (b) consumed or used in the manufacture of goods declared to be exempted from tax under this Act; or (c) after their use or consumption in the manufacture of goods, such manufactured goods are disposed of otherwise than by way of sale in