Reckitt Benckiser (India) Private Limited vs State of Uttarakhand

K.M. Joseph, C.J. (Oral)—The appeals are four in number. Appellant in all these cases filed writ petitions, which stand dismissed. The prayers sought in the writ petitions are as follows:

"i. Issue any writ, order or direction setting aside the Impugned Order dated November 30, 2015 passed by the Respondent No. 2 for the assessment period January 1, 2015 to March 31, 2015 rejecting ITC claim of Rs. 98,50,636;

ii. Issue any writ, order or direction setting aside the Impugned Circular bearing No. 4411 dated 23.01.2013, issued by the Respondent No. 1;

iii. Issue any writ, order or direction holding that Section 6(3)(d) of the UKVAT Act, does not restrict/deny ITC claim on packaging material, containers etc. purchased locally, used in the manufacture of goods in Uttarakhand and sent outside the State otherwise than by way of "sale"

iv. Alternate to prayer (iii) above and in the event this Hon�be Court is to hold that Section 6(3)(d) of the UKVAT Act denies ITC on packaging material etc. in case of transactions other than by way of sale; issue any writ, order or direction striking down Section 6(3) (d) of the UKVAT Act as being ultra vires of Articles 301 and 304 of the Constitution of India;

v. Issue any writ, order or direction in the nature of mandamus directing the Respondent No. 2 to continue to issue Form XVI as provided under Rule 26(3) of Uttarakhand VAT Rules which are required by the Petitioner for import of raw material as well as finished products;

vi. Issue any writ, order or direction declaring that the Respondent No. 2 has no authority in law to stop issuance of Form XVI as provided under Rule 26(3) of Uttarakhand VAT Rules;"

As far as the first prayer is concerned, the learned Single Judge has stated that the appellant can avail statutory remedy available to it, and did not think it fit to entertain the writ petition in regard to the same. As far as Prayer Nos. 2 to 6 are concerned, the learned Single Judge thought it fit to follow the decision of the Division Bench of this Court in the writ petitions filed by the Hindustan Unilever Limited, wherein similar questions were dealt with by this Court and answered against the writ petitioner therein. Special leave petitions filed against the decision of the Division Bench of this Court stood dismissed on 07.12.2015. It is on the basis of the same, the learned Single Judge did not find it fit to entertain the writ petitions and the writ petitions were dismissed at the admission stage. Feeling aggrieved, the appellant is before us.

We heard learned counsel for the appellant Sri Siddharth Bawa along with Sri Ramji Srivastava and learned Additional Chief Standing Counsel Sri Anil Kumar Joshi.

Sri Siddharth Bawa, learned counsel for the appellant would point out that the Hon�ble Apex Court has only rejected the special leave petitions in limine, but he points out that it must be noted that no reasons were given. He, therefore, submits that there is no merger and it cannot, therefore, be taken that the Hon�ble Apex Court has laid down the law in terms of the judgment of the Division Bench of this Court.

Learned counsel for the appellant would point out that this Court had, while discussing the issues, not considered the effect of the use of word "or" in Section 6(3)(d) of the Uttarakhand Value Added Tax Act (hereinafter referred to as the Uttarakhand VAT Act). We would extract Section 6(3)(d) of the Uttarakhand VAT Act along with the relevant proviso for appreciation of the contentions of the learned counsel for the appellant as follows:

"Section 6 : Input Tax Credit.-

(3) Input tax credit shall be allowed for the goods purchased within the State of Uttarakhand, from a registered dealer holding a valid certificate of registration under Section 15 or Section 16, for the purpose of-

(a) �

(b) �

(c) �

(d) use as [raw material and consumables] in manufacturing or processing of goods (other than those specified in Schedule I or Schedule III) and containers or other packing materials used for packing of such manufactured goods, for sale or resale within the State or in the course of inter-State trade or commerce;

(e) �

Provided that with reference to clause (d) above, in case such finished products are dispatched outside the state other than by way of sale, a partial amount of input tax credit shall be allowed in respect of tax paid [in excess of 2 per cent] on the raw materials used directly in the manufacture of such finished products;"

He would point out that the legislature has chosen to use the word "or" in between the words "for sale or resale within the State" and the words "in the course of Inter-State trade or commerce". He would emphasise that ordinarily when the word "or" is used, it is meant to be disjunctive. He fairly submits that it can in appropriate cases be used as "and". He would further seek to emphasise that the proviso, which refers to Clause (d) is not to be treated as a substantive provision in itself, which is what this Court did in the writ petitions filed by Hindustan Unilever Limited. In this context, he drew our attention to the judgment of the Hon�ble Apex Court in the case of Satya Pal Singh v. State of M.P. and others reported in 2015(10) Scale 444. There, the Hon�ble Apex Court was dealing with the question as to whether, a person, who is a victim within the meaning of Section 2 (wa) of the Code of Criminal Procedure, and would, therefore, come under the proviso to Section 372 of the Code, could maintain an Appeal without obtaining leave under Section 378 of the Code. In the context of the said question, the Court disagreed with the views of the Full Bench of the High Court of Delhi and took the view that Section 372 is the main enactment and the proviso clothes a victim with the right to file an Appeal. The right to file the Appeal would be conditioned by the other provisions of the Code for the reason that Section 372 provides that no Appeal will lie from any judgment or order of a criminal court, except as provided for by the Code of Criminal Procedure or by any other law for the time being in force, which would necessarily oblige even a victim falling under the proviso to obtain leave under Section 378. In the course of the said judgment, the Hon�ble Apex Court has referred to the judgment of the Hon�ble Apex Court in the case of Dwarka Prasad v. Dwarka Das Saraf reported in (1976) 1 SCC 128, which reads as follows, besides other case law:

�A proviso must be limited to the subject-matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. "Words are dependent on the principal enacting words to which they are tacked as a proviso. They cannot be read as divorced from their context" (Thompson v. Dibdin 1912 AC 533). If the rule of construction is that prima facie a proviso should be limited in its operation to the subject matter of the enacting clause, the stand we have taken is sound. To expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction."

We may notice that in the judgment of this Court, against which, the special leave petitions filed, proved unsuccessful, we had noted the aforesaid proposition of law, but this Court had found that the proviso involved in this case is an independent provision. This finding of the Court is to be appreciated in the context of the statute in question and the provisions read as a whole. Section 6(3)(d) of the Uttarakhand VAT Act is specifically intended to cover cases of raw materials and packing materials used in the production, inter alia, of the finished goods, when the said finished goods are either sold or resold within the State of Uttarakhand or it is sold in the course of inter-State trade or commerce. This is the view, which was taken by this Court. We would think that the use of the word "or", in the context of this case, is intended to convey the meaning that the sale may be within the State, an intra-State transaction in Uttarakhand, or the sale may be in the course of inter-State trade or commerce. We are fortified in this view of ours on a reference to the plain wording of the proviso. The proviso clearly provides with reference to Clause (d) that where the finished goods, mentioned in Clause (d), are dispatched outside the State other than by way of sale, the consequences provided therein will follow. This would clearly mean that the legislature intended to cover the cases of sale in the course of inter-State trade or commerce in Section 6(3)(d) of the Uttarakhand VAT Act. Any other view would render the words in the proviso meaningless. In other words, when goods are sent by way of stock transfer in the course of inter-State trade, the case would not be covered by Section 6(3)(d) of the Uttarakhand VAT Act. The intention of the legislature was to provide limited relief of providing input tax credit, but confined to raw materials, which are used in the manufacture or processing of finished goods, which are sent by way of stock transfer as a case of stock transfer cannot be treated as a case of sale. In such circumstances, we would think that the proviso would appear to be an independent provision and the concept of sale would apply to both an intra-State sale, as also, inter-State trade and commerce within the meaning of Section 6(3)(d) of the Uttarakhand VAT Act. In other words, the case of stock transfer would not fall within the ambit of Section 6(3)(d) of the Uttarakhand VAT Act. The case of stock transfer is squarely covered by the proviso. No input tax credit is vouchsafed in respect of packing materials used in connection with finished products, which are stock transferred outside the State in course of inter-State trade or commerce.

The learned counsel for the appellant would submit that he adopts the other contentions raised in other litigation filed by the Hindustan Unilever Limited, but he was not able to persuade us to take a different view.

The upshot of the above discussion is that there is no merit in the Appeals. Consequently the Appeals will stand dismissed. No order as to costs.