Andhra HC (Pre-Telangana)
A.P. Northern Power Distribution ... vs State Of A.P. on 9 November, 2006
Equivalent citations: (2007)9VST436(AP)
Author: J. Chelameswar
Bench: J. Chelameswar
ORDER J. Chelameswar, J.
1. The petitioner is a Government company within the meaning of that expression under Section 617 of the Companies Act, 1956. It is a registered dealer under the Andhra Pradesh General Sales Tax Act, 1957 (for brevity, "the Act"). We are informed that the basic activity of the petitioner-company is distribution of electrical energy to the consumers in certain areas, (details of which are not necessary), generated or supplied by the A.P. Genco, another Government owned company. As a registered dealer under the Act, the petitioner obtained a certificate in form G2. Such a certificate is contemplated under Section 5B of the Act. Under the scheme of Section 5B of the Act, lower rate of tax is required to be collected on the sale of goods from one dealer to another dealer, when the latter purchases goods, as raw materials, for the purpose of manufacturing certain other products. Section 5B of the Act reads as follows:
...Levy of concessional tax in respect of component parts.-(1) Notwithstanding anything contained in this Act, every dealer shall pay tax at the rate of 4 paise in the rupee or at the rates specified in Section 5 in respect of goods other than declared goods, or under Section 6 in respect of declared goods, whichever is lower, on the turnover relating to such sale in the following circumstances, namely:
(a) when a dealer sells any goods to another dealer for use by the latter as raw material, component part, sub-assembly part, intermediate part and packing material in the manufacture or processing of goods inside the State:
(b) when a dealer sells to another dealer any goods other than those falling under Clause (a) which are notified by the Government from time to time for use by the latter in the manufacture or processing of the goods inside the State. The Government may also notify the goods which are not eligible for concessional rate of tax under this section.
2. It is obvious from the scheme of Section 5B of the Act read with Rule 30A of the Andhra Pradesh General Sales Tax Rules, 1957 framed under the Act, in order to ensure that claims of lower rate of tax are not made without any basis, the Rules prescribe registration of manufacturer intending to avail the benefit of Section 5B read with Rule 30A. Section 5B of the Act and Rule 30A of the Rules, contemplate an application in form G1 to be made by the manufacturer intending to avail the concessional rate of tariff under Section 5B of the Act. Upon such an application, the concerned Commercial Tax Officer, is required to issue certificate in form G2 after an appropriate enquiry. Form G2, insofar as it is relevant for the present purpose, reads as follows:
Form G2 (with effect from 21-1-1989) Certificate of registration as manufacturer under Section 5B of the A.P. General Sales Tax Act Registration No. : Date :
This is to certify that M/s. Sri...(name and style of the business)...whose principal place of business is situated at...(place)...and who has been registered as dealer under Section 12 of the Andhra Pradesh General Sales Tax Act...and whose place of manufacture is situated at...in the district of...has been registered...under Section 5B of the APGST Act, subject to the following conditions prescribed and the Rules framed thereunder from time to time.
Conditions : [The manufacturer shall use/consume the raw materials, component parts, sub-assembly parts, intermediate parts, packing material and any other goods notified by Government under Clause (b) of Section 5B(1) noted below in the manufacture or processing of goods noted above.]
3. It is clear from the above expression of form G2 that the certificate should specify the products of the manufacturer and also raw materials, component parts, etc., which are required for the purpose of manufacturing of the products.
4. The petitioner obviously made an application in form G1 for issuance of certificate in form G2. Admittedly, the registration in form G2 dated March 16, 2001 was issued to the petitioner by the Commercial Tax Officer, Jangoan. To the printed form in form G2, prescribed under the Rules, a list of items is enclosed. Heading of the list reads as under:
...List of raw materials and component parts-sub assembly parts and intermediate parts for manufacture of northern power distribution company of A.P. Ltd., H. No. 1-7-668,. Postal Colony, Hanamkonda for transmission and distribution of electricity....
5. The certificate does not disclose what is the final product of the petitioner. The petitioner, a Government owned company, run by bureaucrats, and the authority issuing G2 certificate, were happy with the state of affairs at that point of time. Neither of them ever bothered to check up the accuracy of the certificate or worth of the certificate in law.
6. It appears during the period relevant for assessment year 2004-05, the petitioner purchased cement worth Rs. 35,31,715 from Cement Corporation of India Limited. The petitioner claimed that such a purchase is required to be taxed at a lower rate of tax, as contemplated under Section 5B read with G.O. Ms. No. 496 Revenue (CT.II) Department dated July 17, 2001. The petitioner issued form G declaration, declaring that he is purchasing the cement as a raw material for the manufacture of some product, which is not very clear from the record. However, it is the case of the petitioner that cement was purchased for utilisation in the manufacture of PSCC poles. It is interesting to notice that the said PSCC pole is one of the items specified in the list appended to G2 certificate. As against the form G declaration issued by petitioner, it appears that the Cement Corporation of India sold cement to the petitioner collecting lower rate of tax.
7. However, on March 1, 2005, the Assistant Commissioner (CT), Intelligence and LTU, Warangal Division, issued a show cause notice to the petitioner calling upon it to explain as to why penalty proceedings under Section 7A(2)(ii) of the Act should not be initiated against the petitioner, which was followed by an order dated March 15, 2005 imposing a penalty of Rs. 16,95,223 on the petitioner. The substance of the proceedings is that cement is not one of the items mentioned in the certificate in form G2, in order to enable the petitioner to claim the relief of being taxed at lower rate on the purchase of cement made by the petitioner. Therefore, the petitioner issued false declaration that it is entitled to purchase cement at a lower rate of tax in terms of GO referred to above read with Section 5B of the Act.
8. G.O. Ms. No. 496 Revenue (CT.II) Department dated July 17, 2001 specifies certain goods, which are not eligible for concessional rate of tax under Section 5B of the Act. Cement happened to be one of the goods under the said G.O. However, under the second proviso to the G.O., the purchase of cement by the manufacturers of finished goods like asbestos sheets, pipes, etc., are made eligible for the lower rate of tax, on the purchase made by the manufacturer. In fact, the relevant portion of the said G. O. reads as follows:
...Provided further that the purchases of cement by manufacturers of finished goods like asbestos sheets, pipes, paint manufacturers using white cement, hallow bricks are eligible for concessional rate of tax under Section 5B if those manufacturers use the cement purchased by them as raw material to produce finished goods for sale....
9. It is the case of the petitioner that PSCC poles are manufactured by the petitioner as part of main activity of the Corporation, as distribution of electrical energy includes establishment and setting up of transmission lines, which are necessarily supported by either metallic or PSCC poles, as claimed by the petitioner. The mention of certain items in the above extracted proviso, occurring in G. O. Ms. No. 496 dated July 17, 2001 for manufacturing of which cement is utilised, may or may not, conclusively establish that the utilisation of cement as a raw material in the manufacture of certain products mentioned in the proviso alone, enables the purchaser of such cement to claim the benefit of G. O. Ms. No. 496 dated July 17, 2001. Whether the items mentioned in the said proviso is either exhaustive or only illustrative of various products, for the manufacture of which cement can be used as raw material, is a question with which we are not concerned in this matter. We are also not concerned in the present case with the truth or otherwise of the fact whether the claim of the petitioner that the cement purchased by him from the Cement Corporation of India was in fact used for the manufacture of PSCC poles. The order dated March 15, 2005 referred to earlier does not purport to levy penalty on the ground that the petitioner's claim that as a matter of fact, the cement purchased by the petitioner was utilised for the manufacture of PSCC poles was found false.
10. The order only purports to levy penalty on the ground that the petitioner is not entitled in law to give a declaration under form G against purchase of cement made by it from the Cement Corporation of India on the ground that cement is not one of the items specified in the certificate issued in form G2, referred to earlier.
11. Aggrieved by the order dated March 15, 2005, the petitioner carried the matter in appeal before the Deputy Commissioner, Warangal. The said appeal was dismissed by an order dated June 30, 2005. It must be placed on record that the submissions which are wholly irrelevant for the issue at hand, were made before the appellate authority regarding construction of second proviso to G.O. Ms. No. 496 Dated July 17, 2001, which for the reasons already explained earlier, is wholly irrelevant.
12. Apart from that, the legality of the invocation of Section 7A was also a ground of attack in the appeal, as according to the petitioner, the existence of specific provision under Section 5B(2) of the Act would exclude the operation of Section 7A; which according to us is a clear misconception of law. Penal proceedings under Section 5B(2) of the Act are proceedings in the context of two specific violations, viz., under Section 5B(2)(i) of the Act, the purchase of goods as raw material, etc., by the manufacturer, who does not have unit of manufacture in the State of Andhra Pradesh under declaration in form G, is made an event liable for penalty and secondly if the manufacturing unit, located in the State of Andhra Pradesh, purchases the goods as raw materials, etc., after giving declaration in form G, sells the goods again contrary to the declaration that the goods would be consumed for the manufacturing activity.
13. It is neither the allegation against the petitioner nor the finding in this case that the petitioner's case falls under either of the above-mentioned two contingencies. Therefore, the proceedings could not have been initiated under Section 5B(2). The objection of the petitioner on this count was rightly rejected. The petitioner carried the matter in further appeal to the Sales Tax Appellate Tribunal. Matching the irrelevance of the parties before it, the Tribunal also went into the question of utilisation of cement in the manufacture of PSCC poles, as a matter of fact and finally came to the conclusion that the petitioner misused G2 certificate.
14. In our view, the above-mentioned facts only demonstrate the indifference and irrelevance at every stage by all concerned, the petitioner, at the cost of repetition, we must say, a Government owned Company, the Revenue represented by the officers and the appellate bodies. We must place on record our disgust of the state of affairs. Apart from ignorance and lack of commitment on the part of each one of the officers dealing with this matter at every stage, issues such as this, between the State on one hand and a body owned and controlled by the State on the other hand, are required to be settled after appropriate deliberations at the level of the Government, as repeatedly pointed out by the Supreme Court. In the process what is sacrificed is public interest by each one of the personnel concerned on either side of the litigation who draw their livelihood from the exchequer. It all started with the issuance of certificate in form G2 without specifying what is the final product of the petitioner and what are the raw materials, component parts, etc., which are eligible for the purpose of concessional rate of tax.
15. In the background of the above-mentioned weird facts, the present revision is filed calling upon this Court to give a declaration that the order under revision was made by the appellate authority either erroneously or in the alternative it failed to decide the question of law. We decline to exercise the jurisdiction and hope that the facts narrated above sufficiently justify our reluctance to exercise the jurisdiction.
16. The TREVC is dismissed at the stage of admission.