Andhra HC (Pre-Telangana)
Sree Satyanarayana Spinning Mills Ltd. vs Commercial Tax Officer, Tanuku Circle, ... on 15 September, 1987
Equivalent citations: [1988]68STC95(AP)
Author: B.P. Jeevan Reddy
Bench: B.P. Jeevan Reddy
JUDGMENT B.P. Jeevan Reddy, J.
1. These writ petitions raise a question as to the interpretation of sub-section (2-A) of section 8 of the Central Sales Tax Act. For the sake of convenience we shall state the facts in W.P. No. 1871 of 1982.
2. The petitioner, a public limited company, manufactures cotton yarn of different kinds at its spinning mill in West Godavari district and sells the same within Andhra Pradesh, as well as to dealers outside the State. The petitioner is registered as a dealer both under the State Act, as well as the Central Act. It filed monthly returns for the months of April to December, 1981 and paid the tax thereon, but did not pay the surcharge leviable at 10 per cent on such tax, whereupon a notice dated 22nd February, 1982 was served upon the petitioner calling upon it to pay the same. The notice, inter alia, read as follows :
"...... Under the provisions of the Act, you have to pay tax at the rate of 2 per cent and surcharge at 10 per cent on the turnovers from April, 1981 to December, 1981 ...... You are therefore hereby requested to pay the surcharge amounting to Rs. 29,842 within seven days from the date of receipt of this notice ......"
3. The petitioner immediately approached this Court challenging the said notice. The relevant facts in W.P. No. 328 of 1983 are identical with the difference that the goods concerned therein are de-oiled cake and vegetable oils.
"Cotton yarn", "de-oiled cake" and "vegetable oils" are declared goods. They are exigible to sales tax at the rates of 2 per cent, 1 1/2 per cent and 3 1/2 per cent respectively, as per the relevant entries in the Third Schedule to the Andhra Pradesh General Sales Tax Act. For the sake of convenience we shall deal only with cotton yarn, concerned in W.P. No. 1871 of 1982. The transactions in question are inter-State transactions upon which Central sales tax is payable. The question is : at what rate ?
4. Section 8 of the Central Sales Tax Act deals with rates of tax on sales in the course of inter-State trade or commerce. According to sub-section (1) thereof, every dealer who, in the course of inter-State trade or commerce "(a) sells to the Government any goods; or (b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be 'four per cent' of his turnover". According to sub-section (2), in the case of inter-State sale of goods not falling under sub-section (1), the Central sales tax payable "(a) in the case of declared goods, shall be calculated 'at twice the rate' applicable to sale or purchase of such goods inside the appropriate State; and (b) in the case of goods other than declared goods, shall be calculated at the 'rate of ten per cent' or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher .............". Sub-section (2-A) which was introduced by an Amendment Act in 1958 and substituted as a whole in 1972, however, restricts the rate of tax to a lower rate in certain circumstances. It reads thus :
"(2-A) Notwithstanding anything contained in sub-section (1-A) of section 6 or sub-section (1) or clause (b) of sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate.
Explanation. - For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods ......"
5. A reading of this sub-section shows that notwithstanding the provisions contained in section 6(1-A), or sub-section (1) or sub-section (2)(b) of section 8, the tax payable on inter-State sales of goods, which are exempt from tax under the State Act, shall be "nil", and where the State Act charges tax at a rate lower than 4 per cent, it shall be such lower rate.
6. Now, cotton yarn is taxable at the rate of 2 per cent under the Andhra Pradesh General Sales Tax Act, if it is sold within the State. Section 6-B of the State Act, however, imposes a surcharge at the rate of 10 per cent upon the said tax. Section 6-B reads as follows :
"6-B. (1) Every dealer, who is liable to pay tax under this Act on the sale or purchase of goods, shall pay a surcharge on such tax at the rate of ten per cent of such tax :
Provided that if, in respect of declared goods, the tax under section 6 and the surcharge under this section, payable by such dealer exceeds four per cent of the sale or purchase price thereof, the rate of surcharge in respect of such goods shall be reduced to such an extent that the tax and the sur-charge together shall not exceed four per cent of the sale or purchase price of such goods.
(2) The provisions of this Act shall apply in relation to the surcharge payable under sub-section (1) as they apply in relation to the tax payable under this Act.
Explanation. - For the purposes of this section, the term "tax under this Act' shall include additional tax, concessional tax and other tax payable under section 6 or section 6-A."
7. According to this section, every dealer liable to pay State tax on sale or purchase of goods shall also be liable to pay surcharge at 10 per cent of such tax. However, in no case can the surcharge have the effect of increasing the total levy beyond 4 per cent in the case of declared goods. In other words, in the case of an intra-State sale of declared goods, not only 2 per cent of tax is payable under section 6 read with the Third Schedule to the Andhra Pradesh General Sales Tax Act, but an additional amount of 10 per cent of such tax is also payable as surcharge under section 6-B. Now the question is, where cotton yarn is sold in the course of inter-State trade or commerce upon which Central sales tax is payable, is such tax payable only at 2 per cent, or is it payable at the rate including surcharge, i.e., 2 per cent + 10 per cent thereof ? This question has to be answered with reference to sub-section (2-A) of section 8 of the Central Sales Tax Act.
8. Mr. S. Parvatha Rao, the learned counsel for the petitioners, contends that sub-section (2-A) applies only the rate at which tax is payable under the State enactment but it does not make the surcharge payable under the State Act, payable under the Central Act. In other words, the contention is that the word "rate" employed in the sub-section refers only to the rate of tax, i.e., 2 per cent, but does not refer to, nor can it include surcharge payable under section 6-B of the State Act. It is further argued that the reference to turnover in the sub-section also goes to indicate that only the tax payable under section 6 of the Act was made payable on account of Central sales tax by the said sub-section, but not the surcharge. Surcharge, it is submitted, is not a tax on turnover but is a tax on tax (surcharge on tax). We find it difficult to agree with the learned counsel.
9. The sub-section having used the words "subject to tax generally at a rate which is lower than four per cent" proceeds further to elucidate the expression "tax". The words "whether called a tax or fee or by any other name" are significant. The said words clearly indicate that the expression "tax" used in the said sub-section refers to, and means not only what is charged as a tax, but by any other name, which would naturally mean and include surcharge as well. Indeed, the surcharge levied by section 6-B is nothing but additional sales tax, though called "surcharge". Accepting the contention of the learned counsel would result in a situation where a sale, within the State, of declared goods would be chargeable to a higher amount of tax than the sale of same declared goods in the course of inter-State trade or commerce. The idea behind sub-section (2-A) of section 8 is to ensure a uniformity between tax charged under both the enactments. There is no reason to construe the sub-section in such a manner that an inter-State sale attracts less tax than an intra-State sale (sale within the State). It is brought to our notice that the Sales Tax Appellate Tribunal of Andhra Pradesh has also taken the same view in its decision reported in Anantapur Cotton Mills v. State of Andhra Pradesh 1 APSTJ 144.
10. Sri Parvatha Rao relied upon two decisions of the Kerala and Karnataka High Courts, to which a brief reference would be in order. In Assistant Commissioner (Assessment), Sales Tax v. Janatha Expeller Company [1987] 64 STC 435 it was held by the Kerala High Court that the levy of additional sales tax under the Kerala Additional Sales Tax Act, 1978 on inter-State sales taxable under section 8 of the Central Act, is unauthorised, and illegal. The ratio of the decision is that when sub-section (2-A) of section 8 refers to the "sales tax law of the appropriate State", it refers only to the Kerala General Sales Tax Act, 1963, but not to the Kerala Additional Sales Tax Act, 1978, and hence the tax payable under the 1978 Act cannot be levied on inter-State sales. We are, therefore, unable to see any relevance of the said decision, because, in our case, both the surcharge and he sales tax are levied by the same enactment.
11. The next decision cited is State of Karnataka v. P. K. P. Abdul Hakeem & Co. [1985] 59 STC 203 a decision of the Karnataka High Court. The question considered by the Court in this case was whether additional sales tax levied under section 6-B of the Karnataka Sales Tax Act (at the rate of 1 1/2 per cent of the total turnover of the dealer) is also payable on account of Central sales tax when the same goods are sold in the course of inter-State trade or commerce. The High Court answered the question in the negative on the reasoning that section 8 of the Central Sales Tax Act is not the charging section but only a provision stipulating the rates of taxes payable on inter-State sales or purchases. It was also observed that section 8 does not declare that the additional taxes, if any, levied under the State enactment, like section 6-B of the Karnataka Sales Tax Act, shall apply as if enacted in section 8 of the Central Act. With due respect to the learned Judges who decided the said case, we are unable to subscribe to the said reasoning. It is true that under the Central Sales Tax Act, section 6 the charging section, but it may not be correct to say that section 8 is not a charging section, and that it merely deals with the rate of tax. Indeed, the said distinction is not really relevant for the purpose of the present controversy. The only question is : when sub-section (2-A) of section 8 says that Central sales tax shall be payable at the same rate as is payable under the State Act (in case the goods were sold within the State), whether it includes additional sales tax and surcharge on sales tax levied by the State enactment ? As pointed out hereinbefore, the expression "at a rate" occurring in the said sub-section should be construed in a reasonable manner having regard to the object and purpose underlying the said sub-section. The object of the sub-section is to bring about a uniformity in the matter of rate of tax between an intra-State sale and an inter-State sale, and not to confer the benefit of lesser tax in the case of inter-State sale. Indeed, but for the said sub-section the tax would be chargeable at a higher rate. It cannot be gainsaid that even the provisions of a taxing enactment have to be reasonable construed having regard to the object and purpose underlying it, and the attempt should be to achieve the underlying object. Above all, the significance of the words "whether called a tax, or fee or by any other name" has to be duly recognised and given effect to.
12. An unreported Bench decision has been brought to our notice, in W.P. No. 2955 of 1968 and batch, dated 23rd November, 1970, where a similar question appears to have been considered. The question considered was, whether additional tax under section 5-A of the Andhra Pradesh General Sales Tax Act can be added in the computation of rate of tax applicable under the State law for the purpose of determining the liability to tax under sub-section (2-A) of section 8 of the Central Sales Tax Act. The Bench rejected the contention that the additional levy cannot be taken into consideration. It was observed that the additional tax provided by section 5-A is also a rate, and that like section 5, section 5-A is also a charging section. In fact, the Bench went further and observed that the same principle applies to surcharge in the calculation of lower rate of tax under section 8(2-A) of the Act. It was observed that surcharge is nothing but an additional tax. We are in respectful agreement with the said Bench decision, and hold that surcharge must be taken into account while determining the rate of tax payable under sub-section (2-A) of section 8.
13. For the above reasons, we are of the opinion that when sub-section (2-A) of section 8 of the Central Sales Tax Act speaks of the lower rate at which sales tax is charged under the State enactment, it includes not only the sales tax chargeable under section 5 and additional sales tax chargeable under section 5-A, but also surcharge leviable under section 6-B of the State enactment. In other words, whatever is payable by way of tax under the State enactment in the case of intra-State sale, will also be payable by way of Central sales tax in the case of inter-State sale, in cases to which sub-section (2-A) will apply.
14. The writ petitions are, accordingly, dismissed; but, in the circumstances, there shall be no order as to costs. Advocate's fee Rs. 150 in each.
15. Writ petitions dismissed.