Andhra HC (Pre-Telangana)
Malabar Cashew Nuts & Allied Products vs The State Of Andhra Pradesh And Ors. on 22 April, 1987
Equivalent citations: [1988]68STC269(AP)
JUDGMENT Y.V. Anjaneyulu, J.
1. These three writ petitions are filed by M/s. Malabar Cashew Nuts & Allied Products, Vizianagaram. As the facts concerning all the three writ petitions are identical, it is convenient to dispose of them by a common order.
2. Writ Petition No. 11186 of 1986 relates to the sales tax assessment year 1984-85; Writ Petition No. 11187 of 1986 relates to the sales tax assessment year 1985-86; Writ Petition No. 12215 of 1986 relates to the provisional assessment of sales tax for the month of May, 1986 (for the assessment year 1986-87). For the assessment years 1984-85 and 1985-86 the petitioner's prayer is to quash the show cause notices issued by the Deputy Commissioner, Commercial Taxes, Vizianagaram, requiring the petitioner to show cause why turnovers of Rs. 97,75,925 and Rs. 2,12,500 respectively should not be assessed to tax at 6 per cent and additional tax at 1/2 per cent under section 5-A of the Andhra Pradesh General Sales Tax Act, 1957 and surcharge at 10 per cent on the tax due under section 6-B of the aforementioned Act. In Writ Petition No. 12215 of 1986 the petitioner's prayer is to quash the order of the Commercial Tax Officer-I, Vizianagaram, in G.I. No. 1866 of 1986-87 dated 25th July, 1986 levying tax on turnover of Rs. 32,97,500 at 6 per cent and additional tax at 1/2 per cent under section 5-A of the Andhra Pradesh General Sales Tax Act, and surcharge at 10 per cent on the tax determined under section 6-B of the Andhra Pradesh General Sales Tax Act.
3. The petitioner is a dealer and exporter in cashew-nuts with its head office at Quilon. It has branch office at Vizianagaram in Andhra Pradesh. It purchases large quantities of raw cashew-nuts in Andhra Pradesh. The petitioner has factories in Tamil Nadu in which the raw cashew-nuts purchased in the State of Andhra Pradesh are processed and thereafter the kernel is exported to countries outside India.
4. The petitioner filed returns for the sales tax assessment years 1984-85 and 1985-86, and also for the month of May, 1986, falling in the assessment year 1986-87, claiming exemption of its turnover indicating that it represents "export purchase of cashew-nuts".
5. Although there is no specific reference it would appear that the claim of exemption was made under section 5(3) of the Central Sales Tax Act, 1956 (for short "CST Act") which is in the following terms :
"5. (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for for or in relation to such export."
It may be pointed out that section 5(3) of the CST Act above referred envisages that goods are eligible for exemption on their preceding sale or purchase only when the same goods are agreed to be supplied to the foreign buyers. Exemption is not allowable if the goods agreed to be supplied to the foreign buyers are different from the goods purchased.
6. The petitioner's contention before the sales tax authorities is that raw cashew-nuts are purchased in the State of Andhra Pradesh solely for the purpose of complying with the agreements entered into with foreign buyers for sale of kernel and that raw cashew-nuts and kernel are not different goods, but constitute the same goods. In support of the contention that raw cashew-nuts and cashew-nut kernel constitute the same goods and are not different commercial commodities, the petitioner placed reliance no the judgment of a Division Bench of this Court in Singh Trading Company v. Commercial Tax Officer, Srikakulam [1979] 44 STC 1.
7. It may be pointed out that for the assessment years 1984-85 and 1985-86 the petitioner's claim for exemption was accepted by the Commercial Tax Officer-I, Vizianagaram, and the petitioner was declared not liable to tax - vide assessments completed on 17th April, 1986. For these two assessment years the Deputy Commissioner (Commercial Taxes), Vizianagaram, issued the impugned notices proposing revision of the assessment under section 20 of the Andhra Pradesh General Sales Tax Act. For the month of May, 1986, the petitioner filed a return claiming exemption likewise. The Commercial Tax Officer-I, Vizianagaram, made a provisional assessment levying tax as above stated.
8. Learned counsel for the petitioner, Sri T. Anantha Babu, urges that the show cause notices issued for the assessment years 1984-85 and 1985-86 proposing revision under section 20 of the Andhra Pradesh General Sales Tax Act, and the provisional assessment made for the month of May, 1986, are totally unsupportable in view of the decision of this Court to which reference has already been made above. Learned counsel pointed out that the sales tax authorities function in the State of Andhra Pradesh subject to the superintendence of this Court under article 227 of the Constitution of India and the authorities are, therefore, bound to follow the judgment of this Court above referred. Learned counsel submitted that the sales tax authorities cannot refuse to follow the decision of this Court on the ground that a contrary view has taken by the Madras, Karnataka and Kerala High Courts.
9. Learned Government Pleader for Commercial Tax Department does not dispute the fact that the petitioner is entitled to claim exemption under section 5(3) of the CST Act, if it could be shown that the goods purchased in this State are for the purpose of export to territory outside India pursuant to the agreements entered into. Learned Government Pleader pointed out that the agreements were entered into by the petitioner for the supply of cashew-nut kernel to purchases outside India. For the purpose of export of cashew-nut kernel, the petitioner purchases raw cashew-nut in this State, sends the same to factories in Tamil Nadu where the raw cashew-nut is processed into kernel and then the cashew-nut kernel is exported to outsider countries. It is submitted that raw cashew-nut and cashew-nut kernel constitute different commercial products and consequently the provisions of section 5(3) of the CST Act do not apply. The exemption for the assessment years 1984-85 and 1985-86 was wrongly given and the proposed revision of assessments, contends the learned Government Pleader, is perfectly justified. Learned Government Pleader also supports the provisional assessment order passed by the Commercial Tax Officer-I, Vizianagaram, for the month of May, 1986, for the same reasons. Learned counsel invites attention to the decision of the Supreme Court in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205. Attention in particular is invited to the observations of the Court at pages 5 and 6 where the Supreme Court considered whether the cashew-nut and cashew-nut kernel are two distinct and separate commodities. Taking note of the details relating to the process employed for extracting cashew-nut kernel, it is held by the Supreme Court that kernel and raw cashew-nut are separate commercial commodities. Learned Government Pleader also relied on the judgment of the Madras High Court in Dinod Cashew Corporation v. Deputy Commercial Tax Officer [1986] 61 STC 1 where the Madras High Court dissented from the judgment of this Court in Singh Trading Co. v. Deputy Commercial Tax Officer, Srikakulam [1979] 44 STC 1 above referred and held that raw cashew-nut and kernel are two different commercial products. It is submitted that the Madras High Court's decision is the subject-matter of appeal in the Supreme Court. Learned Government Pleader also invited attention to the decision of the Karnataka High Court in Peirceleslie India Ltd. v. State of Karnataka [1985] 59 STC 302 and the decision of the Kerala High Court in State of Kerala v. G. Sankaran Nair [1986] 63 STC 225, in support of the proposition that raw cashew-nut and kernel should be regarded as two different commercial products. Learned Government Pleader, therefore, urged that the decision of this Court in Singh Trading Co. v. Commercial Tax Officer, Srikakulam [1979] 44 STC 1 requires reconsideration.
10. We have given our anxious consideration to the submissions made by the learned Government Pleader. It is true that there is a conflict of judicial opinion in the matter. While coming to the conclusion that raw cashew-nut and cashew-nut kernel are not different commercial products, this Court has duly considered the decision of the Supreme Court in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205. If the aforesaid judgment of the Supreme Court was not considered by the Division Bench of this Court we would not have hesitated to refer the matter to a Full Bench for reconsideration. We, however, find that the Division Bench of this Court referred to the Supreme Court judgment in Travancore-Cochin case [1953] 4 STC 205 and explained why the ratio of that judgment cannot be applied in the facts and circumstances which were under consideration in Singh Trading Company case [1979] 44 STC 1 (AP). Learned counsel fairly brought to our notice that the judgment of the Madras High Court taking a contrary view is already the subject of an appeal in the Supreme Court. We, therefore, feel that no useful purpose will be served by our referring the matter to a Full Bench for reconsideration, as either side is likely to carry the matter further to the Supreme Court. We find that the judgment of the Division Bench in Singh Trading Co. case [1979] 44 STC 1 (AP) held the field for a period of seven years. A perusal of that judgment would show that the conclusion was reached on the basis of various other judgments of this Court as well as other High Courts. In our opinion, it would be inappropriate to refer the matter for reconsideration by a Full Bench just because there is a contrary view taken by another High Court or High Courts. What is more significant is that till now the sales tax authorities themselves accepted the judgment of this Court without any demur and even now it is pointed out that only in Vijayawada and Rajahmundry in the entire State of Andhra Pradesh the officers concerned decided to take a contrary view.
11. Having regard to the facts and circumstances, we do not think this is a fit case for reference to a Full Bench for reconsideration of the judgment of this Court in Singh Trading Co. case [1979] 44 STC 1.
12. We feel that the department may not be left without any remedy inasmuch as the matter is already pending in the Supreme Court by way of an appeal against the judgment of the Madras High Court above referred. If the Supreme Court were to uphold the Madras view and hold that the decision of this Court is Singh Trading Co. case [1979] 44 STC 1 is incorrect is would perhaps be possible for the sales tax authorities to seek a revision or rectification of the assessments already made. We do not wish to pronounce upon the question whether such a course would be permissible or not. We are only pointing out that the department may consider the question, at the relevant time, of the permissibility of revising the assessments pursuant to the Supreme Court decision if it is in its favour. In the meantime we consider that the Division Bench judgment of this Court in Singh Trading Co. case [1979] 44 STC 1 should prevail and be binding on all the officers functioning in the State of Andhra Pradesh.
13. As the revision of sales tax assessments for 1984-85 and 1985-86 is proposed solely on the above ground we quash the impugned notices for these two years. So far as the provisional assessment for the month of May, 1986 in W.P. No. 12215 of 1986 is concerned, we set aside the provisional assessment. It will be open to the sales tax authorities to make a final assessment at the appropriate time following the decision in Singh Trading Co. case [1979] 44 STC 1 (AP) and for the purpose of making final assessment it will be open to the Commercial Tax Officer to require the petitioner to produce agreements/orders for the export of cashew-nut kernel to territories outside India in order to factually support the claim of exemption under section 5(3) of the CST Act.
14. In the result, all the three writ petitions are allowed, but without costs. Government Pleader's fee Rs. 250 in each.
Immediately after the judgment was pronounced, the learned Government Pleader on behalf of the respondents made an oral request for leave to appeal to the Supreme Court. We do not find any substantial question of law of general importance which requires to be settled by the decision of the Supreme Court involved in these cases. Hence, leave rejected.
Writ petitions allowed.