WPMS/3263/2015 of Reckitt Benckiser India Private Limited Vs State Of Uttarakhand AND ANOTHER

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL

Writ Petition No. 3263 of 2015 (M/S)

Reckitt Benckiser (India) Pvt. Ltd. ……. Petitioner versus State of Uttarakhand and another ……. Respondents with Writ Petition No. 3264 of 2015 (M/S)Reckitt Benckiser (India) Pvt. Ltd. ……. Petitioner versus State of Uttarakhand and another ……. Respondents with

Writ Petition No. 3265 of 2015 (M/S)

Reckitt Benckiser (India) Pvt. Ltd. ……. Petitioner versus State of Uttarakhand and another ……. Respondents with

Writ Petition No. 3270 of 2015 (M/S)

Reckitt Benckiser (India) Pvt. Ltd. ……. Petitioner

versus State of Uttarakhand and another ……. Respondents

Mr. R. Jawahar Lal and Mr. Ramji Srivastava, Advocates for the petitioners.

Mr. A.K. Joshi, Addl. C.S.C. for the State / respondents.

U.C. Dhyani, J.(Oral)

Since identical issue of law is involved in the aforementioned four writ petitions, therefore, they

are being decided together by this common judgment and order for the sake of brevity and convenience, with the consent of learned counsel for the parties.

2) Writ petition no. 3263 (M/S) of 2015 shall be the leading case.

3) By means of present writ petition, the petitioner seeks following reliefs, among others:

By means of present writ petition, the

i) Issue any writ, order or direction setting aside the impugned order dated November 30, 2015, passed by respondent no. 2 for the assessment period October 1, 2014 to December 31, 2014, rejecting ITC claim of Rs.91,48,305/-. impugned order dated November 30, 2015, passed by respondent no. 2 for the assessment period October 1, 2014 to December 31, 2014, rejecting ITC claim of Rs.91,48,305/-.

ii) Issue any writ, order or direction setting aside the impugned Circular bearing no. 4411 dated 23.01.2013, issued by respondent no. 1. impugned Circular bearing no. 4411 dated 23.01.2013, issued by 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”.

Alternate to prayer (iii) above and in the event this Hon’ble Count 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 or Article 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. 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.

4) The facts in the background of present writ petition are that this Court in Hindustan Unilever Ltd. (HUL) judgment had upheld the validity of the impugned Circular as well as the validity of Section 6(3)(d) of the Uttarakhand Value Added Tax Act (UKVAT Act), insofar as it seeks to deny ITC in respect of packaging material, containers etc., when finished goods are removed by way of branch transfer. This Court has upheld the validity of Section 6(3)(d) of the UKVAT Act, on the ground that by the usage of the words “…or in the course of inter-State trade or commerce”, the legislature had contemplated “sale” and both terms have the same meaning. However, it is submitted that while the legislature had consciously used “sale or resale” in case of export, sale within the State etc., no such qualification is used prior to thestring of words “in the course of inter-State trade or commerce”. The same is in conformity with the Industrial Policy of the State of Uttarakhand and contrary meaning assigned to the usage in Section 6(3)(d) of the UKVAT Act, would render the initiative and policy of the State, meaningless. It is submitted that the alternate interpretation urged by the petitioner in the present writ petition was not urged in Hindustan Unilever Limited case (HUL case) and was not considered by this Court. Hence, it is submitted that the previous judgment rendered in HUL’s case does not come in the way of consideration of the present writ petition.

5) The impugned Assessment Order issued by respondent no. 2 denying ITC in respect of packaging material is enclosed as Annexure no. 1. copy of the impugned Circular dated 23.01.2013 issued by respondent no. 1 is enclosed as Annexure no. 2. copy of the judgment of learned Single Judge as well as Hon’ble Division Bench of this Court, is enclosed as Annexure no. 3 and Annexure no. 4, respectively. Further, the SLP filed by Hindustan Unilever Limited was dismissed by the Hon’ble Supreme Court by its order dated December 7, 2015. copy of the same is enclosed as Annexure no. 5. It is settled law that summary dismissal of SLP does not constitute binding precedent [Kunhayammed vs State of Kerala, 2000 (6) SC 359]. The petitioner was served with show cause

notice dated 26.10.2015 by the respondent no. 2 and the same is enclosed as Annexure no. 6. The petitioner replied to the show cause notice vide its response dated 19.11.2015 which is enclosed as Annexure no. 7. The petitioner submitted an additional response dated 20.11.2015 in addition to its response dated 19.11.2015 which is enclosed as Annexure no. 8.

6) By the impugned order, the respondent no. 2 while passing the Assessment Order in respect of the Assessment Period had rejected:

(a) ITC on local sales (covered under Section 6(3)(d) of the UKVAT Act); 6(3)(d) of the UKVAT Act);

(b) ITC on export sales (covered under Section 6(3)(b) of the UKVAT Act); 6(3)(b) of the UKVAT Act);

(c) ITC on raw material utilized, in the production of manufactured / finished goods, which are sent out of the State on branch transfer basis, even beyond 2% (covered under proviso to Section 6(3)(d) of the UKVAT Act); production of manufactured / finished goods, which are sent out of the State on branch transfer basis, even beyond 2% (covered under proviso to Section 6(3)(d) of the UKVAT Act);

(d) ITC on packaging material, containers etc., which are purchased locally, utilized in the production of manufactured/finished goods and sent outside the State on branch transfer (covered under Section 6(3)(d) of the UKVAT Act). which are purchased locally, utilized in the production of manufactured/finished goods and sent outside the State on branch transfer (covered under Section 6(3)(d) of the UKVAT Act).

The details of the ITC rejected by the respondent no. 2 in the impugned order are given in the following table, for ease of reference:

In addition, it is submitted that after passing the impugned order dated 30.11.2015, the respondent no. 2 in order to coerce the petitioner to pay the amounts towards ITC has stopped certification/issue of Form XVI issued under Rule 26(3) of the Uttarakhand VAT Rules for import of the raw material by the petitioner as well as the finished product, thereby jeopardizing the activities of the petitioner in relation to manufacture and sale of their goods to grinding halt. It is submitted by learned counsel for the petitioner that the certification/issue of the said Forms is routine function of the respondent no. 2, however in order to coerce the petitioner to pay the entire demand made in the impugned order dated 30.11.2015, the respondent no. 2 has suspended issue of Forms, due to which the petitioner is suffering irreparable loss and injury as it requires around 30 Forms in day.7) It is further submitted that insofar as the items listed in paragraph 4(a), (b) and (c) above, there is no basis for the respondent no. 2 to reject and such decision is completely contrary to the provisions of the UKVAT Act and exercise of jurisdiction in rejecting the same, is contrary to the powers vested on the respondent no. 2 under the UKVAT Act.

8) Insofar as paragraph 4(d) above is concerned, the petitioner had purchased packaging material in Uttarakhand and the same was utilized in manufacture of diverse range of products in its plant at Sitarganj, Uttarakhand and the manufactured/finished goods are subsequently sent out of Uttarakhand, other than by way of sale i.e. on branch transfer. The respondent no. 2 had rejected ITC on packaging material etc., on an erroneous interpretation to Section 6(3)(d) to the UKVAT Act. The same is based upon impugned Circular whereby the respondent no. 1 has misinterpreted the relevant provisions of UKVAT Act, i.e., Section 6(3)(d) to the UKVAT Act. Also, the respondent no. 2 has based the impugned order, on the judgment of Division Bench of this Court in HUL case.

9) It is also submitted by learned counsel for the petitioner that in view of the fact that the impugned order was passed by respondent no. 2 based on the impugned Circular (which is binding on him as well as

the Appellate Commissioner) as well as in view of the judgments passed by learned Single Judge confirmed by Hon’ble Division Bench of this Court in HUL’s case, it is submitted that the statutory Appeal under Section 51 of the UKVAT Act is not an efficacious alternate remedy. In addition, it is submitted that the petitioner has challenged the impugned circular issued by respondent no. 1 as well as challenged the vires of Section 6(3)(d) to the UKVAT Act. The challenge to the same cannot be agitated by the petitioner by way of statutory appeal under Section 51 of the UKVAT Act. Hence, it is submitted that the petitioner has no alternate remedy, except to approach this Court by way of the present writ petition.

10) Learned counsel for the petitioner also referred to Clause (d) of Sub-Section (3) to Section 6 of the Uttarakhand VAT Act, 2006 and the proviso contained therein, which read as follows:

“6(3)(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;

Provided that with reference to clause (d) above, in case such finished products are dispatched

outside the state other than by way of sale, partial amount of input tax credit shall be allowed in respect of tax paid [in excess of 2 percent] on the raw materials used directly in the manufacture of such finished products;

11) Learned counsel for the petitioner drew attention of this Court to decision rendered by Hon’ble Supreme Court in Satya Pal Singh vs State of M.P. and others, 2015 (3) UC 1981. Relevant paragraphs of said judgment are reproduced here-in-under:

11. The Full Bench of the High Court of Delhi after examining the relevant provisions under Section 2(wa) and proviso to Section 372 of Code of Criminal Procedure, in the light of their legislative history has held that the right to prefer an appeal conferred upon the victim or relatives of the victim by virtue of proviso to Section 372 is an independent statutory right. Therefore, it has held that there is no need for the victim in terms of definition under Section 2 (wa) of Code of Criminal Procedure to seek the leave of the High Court as required under Sub-Section (3) of Section 378 of Code of Criminal Procedure to prefer an appeal under proviso to Section 372 of Code of Criminal Procedure. The said view of the High Court is not legally correct for the reason that the substantive provision of Section 372 of Code of Criminal Procedure clearly provides that no appeal shall lie from any judgment and order of Criminal Court except as provided for by Code of Criminal Procedure. Further, Sub-Section (3) of Section 378 of Code of Criminal Procedure provides that for preferring an appeal to the High Court against an order of acquittal it is necessary to obtain its leave. We have to refer to the rules of interpretation of statutes to find out what is the effect of the proviso to Section 372 of Code of Criminal Procedure, it is well established that the proviso of statute must be given an interpretation limited to the subject-matter of the enacting provision. Reliance is placed on the decision of this court rendered by four Judge Bench in Dwarka Prasad v. Dwarka Das Saraf, (1976) 1 SCC 128, the relevant para 18 of which reads thus:

18. … proviso must be limited to the subject-matter of the enacting clause. It is settled rule of construction that proviso must prima facie be read and considered in relation to the principalmatter to which it is proviso. It is not separateor independent enactment. “Words are dependent on the principal enacting words to which they aretacked as 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 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 proviso must be considered in relation to the principal matter to which it stands as proviso. proviso ordinarily is but 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 harmonious construction.

12. Further, three Judge Bench of this Court by majority of 2:1 in the case of S. Sundaram

Pillai v. V.R. Pattabiraman, (1985) 1 SCC 591 has elaborately examined the scope of proviso to the substantive provision of the Section and rules of its interpretation. The relevant paras are reproduced hereunder:

30. Sarathi in Interpretation of Statutes at pages 294-295 has collected the following principles in regard to proviso:

(a) When one finds proviso to section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject-matter of the proviso.

(b) proviso must be construed with reference to the preceding parts of the clause to which it is appended.

(c) Where the proviso is directly repugnant to section, the proviso shall stand and be held repeal of the section as the proviso speaks the latter intention of the makers.

(d) Where the section is doubtful, proviso may be used as guide to its interpretation; but when it is clear, proviso cannot imply the existence of words of which there is no trace in the section.

(e) The proviso is subordinate to the mainsection.

(f) proviso does not enlarge an enactment except for compelling reasons.

(g) Sometimes an unnecessary proviso is inserted by way of abundant caution.

(h) construction placed upon proviso which brings it into general harmony with the terms of section should prevail.

(i) When proviso is repugnant to the enacting part, the proviso will not prevail over the absolute terms of later Act directed to be read as supplemental to the earlier one.

(j) proviso may sometimes contain substantive provision.

32. In Ishverlal Thakorelal Almaula v. Motibhai Nagjibhai it was held that the main object of proviso is merely to qualify the main enactment. In Madras and Southern Mahrata Railway Co. Ltd. v. Bezwada Municipality, Lord Macmillan observed thus:

The proper function of proviso is to except and deal with case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case.

33. The above case was approved by this Court in CIT v. Indo Mercantile Bank Ltd. where Kapur, J. held that the proper function of proviso was merely to qualify the generality of the main enactment by providing an exception and taking out, as it were, from the main enactment portion which, but for the proviso, would fall within the main enactment. In Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha Hidayatullah, J., as he then was, very aptly and succinctly indicated the parameters of proviso thus:

As general rule, proviso is added to anenactment to qualify or create an exception to whatis in the enactment, and ordinarily, proviso is not interpreted as stating general rule.

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36. While interpreting proviso care must be taken that it is used to remove special cases from the general enactment and provide for them separately.

37. In short, generally speaking, proviso is intended to limit the enacted provision so as to except something which would have otherwise been within it or in some measure to modify the enacting clause. Sometimes proviso may be embedded in the main provision and becomes an integral part of it so as to amount to substantive provision itself.

Thus, from reading of the abovesaid legal position laid down by this Court in the cases referred to supra, it is abundantly clear that the proviso to Section 372 of Code of Criminal Procedure must be read along with its main

enactment i.e., Section 372 itself and together with Sub section (3) to Section 378 of Code of Criminal Procedure otherwise the substantive provision of Section 372 of Code of Criminal Procedure will be rendered nugatory, as it clearly states that no appeal shall lie from any judgment or order of Criminal Court except as provided by Code of Criminal Procedure.”

12) Attention of this Court is also drawn towards judgment of Hon’ble Supreme Court in Rohitash Kumar and others vs Om Prakash Sharma and others, (2013) 11 SCC 451. Relevant paragraphs of said judgment are reproduced here-in-under for ready reference:

“20. The normal function of proviso is generally to provide for an exception i.e. exception of something that is outside the ambit of the usual intention of the enactment, or to qualify something enacted therein, which, but for the proviso would be within the purview of such enactment. Thus, its purpose is to exclude something which would otherwise fall squarely within the general language of the main enactment. Usually, proviso cannot be interpreted as general rule that has been provided for. Nor it can be interpreted in manner that would nullify the enactment, or take away in entirety, right that has been conferred by the statute. In case the language of the main enactment is clear and unambiguous, proviso can have no repercussion on the interpretation of the main enactment, so as to exclude by implication, what clearly falls within its expressed terms. If, upon plain and fair construction,the main provision is clear, proviso cannot expand or limit its ambit and scope.[Vide CIT v. Indo Mercantile Bank Ltd.,AIR 1959 SC 713; Kush Saigal v. M.C. Mitter, AIR 2000 SC 1390; Haryana State Coop. Land Development Bank Ltd. v. Employees Union, 2004 SCC (L&S) 257; Nagar Palika Nigam v. Krishi Upaj Mandi Samiti, AIR 2009 SC 187 and State of Kerala v. B. Six Holiday Resorts (P) Ltd. (2010) 5 SCC 186]

21. The proviso to particular provision of statute, only embraces the field which is covered by the main provision, by carving out an exception to the said main provision. (vide Ram Narain Sons Ltd. v. CST, AIR p. 769, para 10 and A.N. Sehgal v. Raje Ram Sheoran, SCC p. 315, para 14.)

22. In normal course, proviso can be extinguished from an exception for the reason that exception is intended to restrain the enacting clause to particular class of cases while the proviso is used to remove special cases from the general enactment provided for them specially.”

13) Learned Addl. C.S.C., on the other hand, submitted that prayer nos. 2, 3, 4, 5 and 6 of the relief clause of the writ petition have already been replied by learned Single Judge on 06.04.2015 while deciding WPMS no. 532 of 2013, WPMS no. 1526 of 2014 and WPMS no. 2282 of 2014. Special Appeals were preferred by Hindustan Unilever Limited against the judgment passed by learned Single Judge. Learned

Division Bench of this Court while dismissing special appeals no. 159 of 2015, 160 of 2015 and 161 of 2015, vide judgment and order dated 23.09.2015, observed as below:

“43. We are not impressed at all by the said arguments. We would think that to allege lack of wisdom is beyond the province of the court to probe. The Court is concerned only with constitutionality of the statute. It is not concerned with the policy behind the law. All goods, which are manufactured, which otherwise fall within Section 6(3)(d), are treated equally. The State only wished to provide the benefit of ITC in limited manner even in respect of raw materials used for production of finished goods, which are stock transferred. We cannot deny the right of the State with its plenary powers of legislation within the field of legislation, which is admittedly and legitimately exercised by it otherwise, the right to raise taxes. The Court must strike balance between the right of the State to raise taxes, which forms the major source of revenue for it for carrying out various public purposes, no doubt, while it stands ever vigilant against any move to treat goods manufactured from or brought from other States in discriminatory manner.

44. We see no merit at all in the contention that all the other States have provided for the benefit of ITC in respect of packing materials even on stock transferred products, or that the Committee of Ministers have provided for ITC on such transactions. We would think that none of these factors will detract

from the width of the power of sovereign Legislature exercising plenary legislative powers.

45. The result of the above discussion is that we would think that the appellant has not made out any case for interfering with the judgment of the learned single Judge. We have set out the effect of Section 6. Appellant is not entitled to the benefit of ITC in respect of packing materials used for its finished goods, which were stock transferred. Even the Circular of 2008, in our view, does not as such clearly provide for the grant of such benefit. Lack of clarity and place for doubt in stray sentence in Circular cannot be seized upon by the appellant to claim that, contrary to the clear mandate of the Legislature, it should be given the benefit of ITC for the years 2008-2009, 2009-2010 and 2010-2011.”

14) Special Leave to Appeals were preferred by Hindustan Unilever Limited against the aforesaid judgment before the Hon’ble Apex Court. Said SLPs were dismissed on 07.12.2015.

15) It is also the submission of learned Addl. C.S.C. that so far as the relief no. 1 is concerned, the petitioners may very well approach the Joint Commissioner (Appeals) for redressal of their grievances.

16) After hearing learned counsel for the parties and having gone through the documents brought on record, since an alternate remedy is available to the petitioners before Joint Commissioner (Appeals) in

respect of relief no. 1, therefore, the petitioners can avail the statutory remedy available to them. Since alternate remedy is available to the petitioner in respect of relief no. 1, therefore, the Court does not think it proper to entertain present writ petitions. So far as reliefs no. 2 to 6 are concerned, as has been stated and discussed above, those reliefs have been dealt with by learned Single Judge while deciding WPMS no. 532 of 2013, WPMS no. 1526 of 2014 and WPMS no. 2282 of 2014 on 06.04.2015. It has already been mentioned above that special appeals were filed on behalf of Hindustan Unilever Limited against the judgment and order of learned Single Judge without meeting any success. Furthermore, when the SLPs were preferred before the Hon’ble Supreme Court, the same were also dismissed on 07.12.2015. Since the propositions of law have already been dealt with and discussed by learned Single Judge and Hon’ble Division Bench of this Court and SLPs against which have also been dismissed, therefore, no useful purpose will be served by discussing those provisions again. There is no merit in the aforementioned writ petitions.

17) Writ petitions, therefore, fail and are dismissed at the admission stage.

(U.C. Dhyani, J.)