Saikh Abdul Motaleb, Member (J) - (1.) BY this application in the nature of writ under section 8 of the West Bengal Taxation Tribunal Act, 1987, the petitioners have challenged the legality and validity of the order dated March 2, 2010 passed by the Sales Tax Officer, Asansol charge, directing the petitioners to pay due tax with interest on reversion of the order of grant of ITC or in the alternative the Constitutional validity of the exception clause in column 3 corresponding to Sl. No. 5 of the negative list appended to section 22(4) of the VAT Act as discriminatory and thus violative to the Constitutional mandates of articles 14, 19 and 21 of the Constitution of India. The facts and circumstances leading to filing this application, in gist, are that petitioner Nos. 2 to 5 being the partners of the partnership firm, petitioner No. 1, incurred liability for registration under the West Bengal Value Added Tax (VAT) Act, 2003 and the Rules, 2005 as well as under the Central Sales Tax Act, 1956 for carrying on business as a reseller of cement with intention of manufacturing pre -cast concrete pole (FCC pole) at their business site at NH -2, Ningha, P. O. Ningha, Dist. Burdwan. The petitioner -firm filed the returns pertaining to quarters ending June 2009, September 2009 and December 2009 claiming input -tax credit (ITC) against purchase of cement and the claims were accordingly allowed with that of output tax of the petitioners. The petitioner -partners started their trial production of PCC pole on or around last week of June 2009 and by successful production they informed the Sales Tax Officer, Asansol charge, (respondent No. 1), by letter dated August 4, 2009 about the inception of their manufacturing activities of PCC pole at the said business site. On February 5, 2010, the petitioner -partners received a notice from respondent No. 1 asking to appear on March 4, 2010 and to produce all relevant documents regarding the input -tax credit claimed for the period from quarters ending June 2009 to December 2009 and on production of the relevant documents and examination thereof respondent No. 1 has passed the impugned order dated March 2, 2010 holding thereby that as the petitioner -partners purchased the cement as the retailer dealer but used that as the raw material for manufacturing their product of PCC pole and hence, in view of the entry of the purchased goods in Sl. No. 5 of the negative list appended to section 22(4) of the VAT Act and as they do not fall also within the exception clause of column 3 to Sl. No. 5 of the negative list, they were not entitled to claim and avail of ITC in respect of the purchased cement and, therefore, by reversing the order of ITC allowed and availed of during the relevant periods, they were asked to deposit the due tax along with interest for the period in question for such reversion and hence the present application is filed.
(2.) IT is contended as grounds in the application and submitted by Mr. S.S. Sengupta, learned advocate for the petitioners, that respondent No. 1 has erred in construing the expression "dealing in" appears in the exception clause in column No. 3 to Sl. No. 5 of the negative list in a narrow sense or meaning avoiding the pragmatic construction thereof according to the policy or object of the enactment of the provision of ITC itself. It is submitted by Mr. Sengupta that the expression "dealing in" does not necessarily mean the ultimate products or goods in the case of the petitioners though such a proposition can be said to be true in a case of a re -seller of cement as the goods there remains same and identical both at the purchase as well as at the sale point but that does not apply to the petitioners who purchased various raw materials and consumables for their manufacturing of PCC pole and for that they should be regarded as dealers of both the raw materials as well as of the PCC pole, the finished product. According to Mr. Sengupta for all practical purposes the petitioner -firm transacts its business in cement when it purchases the same as raw material as well as when it sells the PCC pole and for that it cannot be said that they arc not engaged in transaction of cement commercially and hence, the above findings of respondent No. 1 are liable to be set aside being self contradictory and without any analogy. It is the second limb of arguments of Mr. Sengupta that as the expression "dealing in" has not been defined under the VAT Act but applying the definition of "dealer" under subsection (11) of section 2 of the Act, that any person who carries on business of selling or purchasing goods in West Bengal or any person making sales under section 14 of the CST Act, the petitioner -firm is a dealer of cement both at purchase and selling point. According to Mr. Sengupta the words "selling" and "purchasing" in the above definition have made disjunctive by using the word "or" and for that if any dealer only purchases certain goods he can definitely be said to be a dealer of that goods alike the other dealer who purchases and sells that goods and respondent No. 1 has failed to consider that proposition of law as a whole and for that the order of dis -entitlement to ITC has no legal basis, and hence, it is liable to be set aside. It is the emphatically submission of Mr. Sengupta that the main objects of the VAT legislation are to achieve single market for India, to permit rate reduction to generate more revenue, to remove cascading effect both on export and domestic sale and to achieve neutrality and to reduce evasion and avoidance of payment of tax and in order to achieve the said objects the expression "dealing in" is to be understood/interpreted to harmonize the subject of enactment and the object in view of the Legislature in enacting the law and for that the said expression should not be limited to strict grammatical or etymological meaning and/or in its popular use because for construction in such a narrow sense, the dealers engaged in manufacturing of cement products, would not be able to carry their business in the stream of the VAT regime and would be kept aside and under deprivation which is bound to jeopardize their right to trade and business and also the very object of the enactment itself. It is the, categorical submission of Mr. Sengupta that if the expression "deal in" in exception clause in column 3 to Sl. No. 5 of the negative list is construed in such a pedantic manner as respondent No. 1 has sought to construe, it will grossly infringe the Constitutional right of quality before law and equal protection of law as is enshrined in the Constitution by article 14. It is alleged by Mr. Sengupta that if it would be found that the works contractors are in a position to avail of the ITC in respect of their purchases of the goods enumerated in Sl. No. 5 of the negative list but for exception clause under column 3 thereof as those goods are used in works contract, the petitioners, as a dealer under the said Act, should also be entitled to the ITC as otherwise a gross inequality be meted out between the two classes of dealer, i.e., the works contractors using the cement for their building purposes and that of the dealers using cement for purposes of manufacturing other goods therefrom and such a classification is surely discriminatory in nature being without any basis and/or any intelligible differentia and consequently will abridge the fundamental right and hence, liable to be declared ultra vires to Part III of the Constitution. It is also submitted by Mr. Sengupta that such a construction of the exception clause will also lead to infringe the right to trade under article 19 of the Constitution though such a right can only be restricted with reasons and here in this case, if the sovereign authority has really intended to keep a class of dealer of cement outside the ambit of ITC without any clarity and/or reasonability, the restriction be declared unconstitutional by this Tribunal and hence the present application is preferred by the petitioners. The respondents are contesting this application by filing affidavit -in -opposition contending, inter alia, that the petitioner -firm being a registered retailer dealer of cement, i.e., building material under the VAT Act used that as one of the raw materials in manufacturing its PCC pole and claimed ITC under section 22(4) of the West Bengal Value Added Tax Act, 2003 on purchase of cement but ITC is available only on purchase of such raw materials which are not included in the negative list appended to that section. It is the categorical contention in the affidavit -in -opposition and submission of Mr. B. Majumdar, learned State Representative, that in column 2 corresponding to Sl. No. 5 of the said negative list a few building materials including cement are mentioned and it is clear therefrom that only two categories of dealers can claim ITC on such building materials, i.e., (1) works contractors and (2) those who "deals in" such goods. It is submitted by Mr. Majumdar that admittedly the petitioners are not works contractors and as per dictionary as well as lexical meaning of the phrasal verb "dealing in" used in clause 3 to Sl. No. 5 of the list it refers to those dealers who are engaged in commercial activities of cement by means of purchase and sale and hence it can be inferred that only the whole -sellers/ retailers/distributors of cement are regarded to be the dealers "dealing in" cement and can claim ITC on purchase of the same from registered dealers in West Bengal but the petitioner -firm being the user of the cement as raw materials in manufacturing PCC pole, a different commercial goods, is not entitled to claim ITC on purchase of such cement and for that the order reversing the order of grant of ITC to the petitioner -firm is quite legal and valid and invites no interference at all.
(3.) THERE is no and cannot be any dispute that the petitioner -firm is a registered dealer of cement under the VAT Act and as per the annexed certificate of registration in form 3 the dealer purchases cement for re -sale in West Bengal as a retailer thereof. It is also the admitted fact on record that the petitioner -firm accordingly claimed and respondent No. 1 accordingly allowed ITC to the firm against purchase of cement for the quarters ending June, 2009 to December, 2009. Now the question of non -entitlement of ITC has arisen when the petitioner -firm informed the respondent No. 1 that it started trial production of PCC pole on or around last week of June, 2009 using the purchased cement as raw material. The question then comes whether the petitioner -firm still be treated as the dealer of cement and is entitled to any ITC under section 22(4) of the VAT Act read with the negative list appended thereto for using their purchased cement in manufacturing or production of PCC pole. For proper appreciation of the question and decision thereon now it appears to us to reproduce the relevant provisions of section 22 which deals with entitlement of input -tax credit by a registered dealer at the relevant period of 1999. The sub -section (4) of section 22 runs... (4) Subject to the other provisions of this section, the input tax credit... shall be allowed to the extent of the amount of tax paid or payable by the purchasing dealer on his purchase of taxable goods, other than such taxable goods as specified in the negative list appended to this section, made in the State from a dealer when such goods are purchased for - (a) sale or resale by him in West Bengal; or (b) and (c)... (d) use as raw materials and consumable stores required for the purpose of manufacture of taxable goods intended for sale in the State. (e) to (i)... (underline supplied).;