Andhra HC (Pre-Telangana)
Quinn India Limited vs Government Of Andhra Pradesh And Anr. on 23 November, 1995
Equivalent citations: [1996]103STC264(AP)
Author: P. Venkatarama Reddi
Bench: P. Venkatarama Reddi
JUDGMENT
1. This writ petition is filed questioning the amended definition to section 2(r) of the Andhra Pradesh General Sales Tax Act as ultra vires of articles 14 and 19(1)(g) of the Constitution of India, as it lacks legislative competence by the State Legislature and consequently to declare that the assessment orders passed by the second respondent for the years 1986-87 and 1987-88 as illegal.
2. The petitioner is a limited company which is registered as small-scale industrial unit. It was also registered under the Andhra Pradesh General Sales Tax Act, 1957 and also under the Central Sales Tax Act, 1956. The State Legislature has introduced an amendment to the Andhra Pradesh General Sales Tax Act by Act 18 of 1985 with effect from July 1, 1985, according to which definition 2(r) was introduced by which total turnover in all goods of trader in all places of business in the State, whether or not the whole or portion of any such turnover is liable to tax should be taken into consideration. In view of this amendment, the second respondent who is the assessing authority imposed additional tax on the turnover of the petitioner-company in view of section 5-A of the Act. Section 5-A empowers the respondents to levy additional tax. As per section 5-A, additional tax has to be imposed on the turnover at one half paise on every rupee if the turnover in the year exceeds three lakhs, but does not exceed fifty lakh rupees; one paise if it exceeds fifty lakh rupees, but less than one crore of rupees; and one and half paise on every rupee when the total turnover exceeds one crore of rupees. In view of the amended definition to section 2(r), the respondents are including the total turnover, although it is exempt from sales tax under the Andhra Pradesh General Sales Tax Act. The second respondent is determining the total turnover basing on section 2(r) including the turnover in respect of inter-State sales by levying additional tax under section 5-A of the amended Act 19 of 1986 and also by Act 29 of 1988 which is unjust, arbitrary and illegal. The first respondent has no legislative competence. Hence, this writ petition.
3. In the counter-affidavit filed by the second respondent it is stated that the total turnover as defined under section 2(r) means aggregate turnover in all goods of a dealer. Earlier the method of calculation was the same. This amendment was made by way of clarification to remove the ambiguity, where the total turnover is to be understood as the total quantum of business of a dealer in the State. It was also denied that the tax liability of a dealer was enhanced in case the turnover in respect of inter-State sales or purchases are included in the turnover. The liability under the Act is confined only to the transactions within the State and additional tax liability is decided on the basis of the total quantum of business of a dealer. For the purpose of determining the tax liability of any dealer, total turnover is being taken into consideration, but tax is not imposed on the inter-State sales as such. Additional tax under the Act is not being fixed on inter-State transactions, but the inter-State sale turnover is being taken into account to determine the quantum of business of the dealer. Therefore, the amended definition is not unconstitutional and cannot be declared as illegal.
4. Sri A. T. M. Rangaramanujam, the learned counsel for the petitioner, submits that the first respondent has no legislative competence to levy tax on inter-State sales and the first respondent cannot circumvent the lack of legislative competence by indirectly bringing into effect the levy of tax on inter-State sales by enlarging the definition of section 2(r) of the Act. Therefore, it is colourable exercise of power by the 1st respondent. If the inter-State sales of the petitioner-company are not included in the total turnover, then the total turnover of the company will be below fifty lakhs and the liability to additional tax will be only at half per cent for the years 1988-89 onwards. In view of this amended definition to section 2(r), the petitioner's liability to pay additional tax is being determined at one per cent which is illegal. The petitioner's counsel also relies on section 38 of the Act and contends that this Act shall be deemed not to authorise imposition of tax on the sale or purchase of any goods when such sale or purchase takes place in the course of inter-State trade or commerce. Therefore, according to the learned counsel, section 38 is a bar for imposition of tax or for reckoning the inter-State sale for any other purpose. Therefore, the amended definition of section 2(r) is inconsistent with section 38 of the Act and in view of the express language used in section 38, the question of taking the turnover of inter-State sale for any purpose does not arise. Even under article 286 of the Constitution, imposition of any tax on the sale or purchase of goods where such sale or purchase takes place outside the State, by the State Government is prohibited and it is only the Parliament that can make a law in that regard.
5. We must make it clear that the additional tax under section 5-A is not being levied on the sales other than local sales taxable under the Andhra Pradesh General Sales Tax Act. The learned counsel is not right in submitting that the sales falling within the purview of section 38 or article 286 are liable to additional tax by virtue of the impugned provision. The only question is whether for the purpose of calculation of rate of additional tax, the turnover based on inter-State sales could be included or not.
6. A similar question arose before the Supreme Court in Hoechst Pharmaceuticals Ltd. v. State of Bihar . Before the Supreme Court, section 5(1) of the Act was challenged. The said provision provide for the classification of dealers whose gross turnover during a year exceeds Rs. 5 lakhs for the purpose of levy of surcharge, in addition to the tax payable by them. The Supreme Court followed its earlier decision in A. V. Fernandez v. State of Kerala , wherein it is held that the State Legislature notwithstanding article 286 of the Constitution while making a law under entry 54 of List II of the Seventh Schedule of the Constitution can for purpose of registration of a dealer and submission of his returns include the transactions covered by article 286 of the Constitution. Therefore, the liability to pay surcharge is not on the gross turnover including the transactions covered by article 286, but is only on the sales within the State, but the surcharge is sought to be levied on dealers who have a position of economic superiority. The definition of "gross turnover" in section 2(j) of the Act is adopted only for the purpose of classifying the dealers but not for the purpose of imposing surcharge on inter-State sales. Reiterating the same view upholding the said provision, the Supreme Court observed as follows :
".............So long as sales in the course of inter-State trade and commerce or sales outside the State and sales in the course of import into, or export out of the territory of India are not taxed, there is nothing to prevent the State Legislature while making a law for the levy of a surcharge under entry 54 of List II of the Seventh Schedule to take into account the total turnover of the dealer within the State and provide, as has been done by sub-section (1) of section 5 of the Act, that if the gross turnover of such dealer exceeds Rs. 5 lakhs in a year, he shall, in addition to the tax, also pay a surcharge at such rate not exceeding 10 per centum of the tax as may be provided. The liability to pay a surcharge is not on the gross turnover including the transactions covered by article 286 but is only on inside sales and the surcharge is sought to be levied on dealers who have a position of economic superiority. The definition of 'gross turnover' in section 2(j) of the Act is adopted not for the purpose of bringing to surcharge inter-State sales or outside sales or sales in the course of import into, or export of goods out of the territory of India, but is only for the purpose of classifying dealers within the State and to identify the class of dealers liable to pay such surcharge."
7. In view of this decision, the contention of the petitioner is no longer res integra. The said decision is a direct authority on the point. Following the said decision, we are of the view that the writ petition has to be dismissed and it is accordingly dismissed, but in the circumstances, without costs.
8. It is, however, open to the petitioner to question the assessment orders if such assessments were made subjecting the inter-State sales turnover to additional tax under section 5-A.
9. Writ petition dismissed.