Andhra HC (Pre-Telangana)
Bhadrachalam Paperboards Limited And ... vs Government Of Andhra Pradesh And Ors. on 28 September, 1988
Equivalent citations: [1989]75STC262(AP)
Bench: B.P. Jeevan Reddy, S.S. Mohammed Quadri
JUDGMENT Jeevan Reddy, J.
1. The petitioner in this writ petition - Bhadrachalam Paperboards Limited - is asking for the issuance of a writ of mandamus "declaring the action of the respondents in demanding payment and the collection of sales tax from the petitioner-company on royalty and extraction charges paid for bamboo and hardwood supplied to the petitioner-company from 1978-79 onwards as illegal, null and void and for a consequential order directing the respondents to refund the amounts collected from the petitioner-company so far and for not collecting the same in future". The respondents in the writ petition are Government of Andhra Pradesh represented by its Secretary, Forests and Rural Development, Hyderabad and other officials of the Forest Department as well as the Commissioner of Commercial Taxes, Government of Andhra Pradesh, Hyderabad. The petitioner entered into an agreement with the State Government for supply of bamboo and hardwood from the Government forest on certain terms and conditions. The agreement is dated 27th March, 1978. The Sales Tax Department demanded and collected sales tax upon the value of the bamboo and hardwood removed by the petitioner from the forest. The petitioner did not question the same until the Supreme Court delivered its judgment in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 in March, 1985. Soon after the petitioner came to know of the said judgment (evidently after it was reported in law journals), it filed this writ petition on 11th December, 1985, questioning the said levy. In W.P.M.P. No. 19431 of 1985 filed in this writ petition this Court by its order dated 26th December, 1985 granted interim stay of collection of sales tax from the petitioner. The petitioner is, therefore, asking for refund of the sales tax paid by it during the period from 27th March, 1978 to 31st October, 1985. Reliance is placed upon the aforesaid decision of the Supreme Court. According to the petitioner the principle of the said decision squarely applies to the facts herein. Reliance is also placed upon a Bench decision of this Court in W.P. No. 10550 of 1983 disposed of on 29th February, 1988 to which one of us (B. P. Jeevan Reddy, J.) was a party (Andhra Pradesh Paper Mills Limited v. Government of Andhra Pradesh [1989] 73 STC 26). In the said Bench decision this Court followed and applied the principle of the decision of the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 and held that in the case of an agreement for the sale of bamboo, and having regard to the terms and conditions of the agreement, there is no sale of goods attracting sales tax. The petitioner in that writ petition was Andhra Pradesh Paper Mills Ltd., Rajahmundry.
2. The learned Government Pleader for the Commercial Taxes submitted in the first instance that the principle of the said two decisions has no application to the facts of this case. According to him the Bench of this Court in W.P. No. 10550 of 1983 (Andhra Pradesh Paper Mills Limited v. Government of Andhra Pradesh [1989] 73 STC 26) considered the levy of sales tax under Section 6-A of the Andhra Pradesh General Sales Tax Act where the tax was being levied and collected from the purchaser. He submits that in the case of this petitioner the demand is not upon the petitioner but upon the Forest Department as seller of the goods. He submits that according to the definition of the "dealer" in the Act, the Forest Department is also a dealer. He submits that both bamboo and hardwood are placed in the First Schedule to the Andhra Pradesh General Sales Tax Act which means that the tax is payable at the point of first sale in the State. For this reason, he says, the principle of the said decision has no application.
3. We are not inclined to agree with the learned Government Pleader. Whether the tax is levied under section 6-A of the Act or under section 5(2) read with the First Schedule, there must be a purchase or sale, as the case may be, to attract the tax. Unless there is a sale the State cannot levy tax under section 5(2) read with the First Schedule. It is not disputed that the agreement entered into between the petitioner and the Government is in similar terms as the agreement considered by this Court in W.P. No. 10550 of 1983 (Andhra Pradesh Paper Mills Limited v. Government of Andhra Pradesh [1989] 73 STC 26). We may also mention that though the Bench was concerned in that case with bamboo alone, the discussion shows that the same principle is applicable even in the case of timber. Indeed that is the principle enunciated by the Supreme Court in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213. We are, therefore, of the opinion that the principle of the said decision squarely applies here.
4. But then the learned Government Pleader raised an alternative contention that inasmuch as the petitioner has already passed on the burden of the said sales tax to the consumers and also because there is no allegation in the writ petition that he has not so passed on the burden to the consumer, the petitioner is not entitled to the relief. He relied upon section 33-BB of the Andhra Pradesh General Sales Tax Act which reads as follows :
"33-BB. Non-refund of tax in certain cases. - Where a levy and collection of tax is held invalid by any judgment or order of a Court or Tribunal, it shall not be necessary to refund any such tax to the dealer unless it is proved by the dealer to the satisfaction of the assessing authority that the tax has not been collected from the purchaser :
Provided that where any Court or Tribunal holds the levy and collection of tax as invalid and orders the refund of any tax collected, the refund shall be restricted to the period of three years immediately preceding the judgment or order."
5. The said section was introduced by the amending Act 19 of 1986 with effect from 1st August, 1986. The learned Government Pleader says that the said provision being declaratory in nature is applicable to all cases where a court proposes to direct the refund. He brings to our notice that the validity of a similar provision in the U.P. Sales Tax Act has been upheld by the Supreme Court in Kasturi Lal Harlal v. State of U.P. [1987] 64 STC 1. He also relies upon a Bench decision of this Court in N. V. Ramaiah v. State of Andhra Pradesh AIR 1986 AP 361 where it has been held that whether it is a writ petition or a suit, it is necessary for the petitioner/plaintiff to establish that he will suffer loss or prejudice if the money is not refunded to him. It was held in the said decision that since the plaintiff is seeking an equitable remedy nnder Section 72 of the Contract Act, which provision is based upon and incorporates a rule of equity, it is for the plaintiff to allege and prove that equity demands grant of refund. It was also held by the Bench that there is a presumption that the manufacturer passes on the burden of tax to the consumer and that it is for him to allege and prove otherwise. The said decision has been followed by this Court in several other matters.
6. In this writ petition there is no averment by the petitioner that he has not passed on the burden of the said tax to the consumer. We must, therefore, presume that the burden was indeed passed on to the consumer. In such a case direction of refund would amount to unjust enrichment of the petitioner because the petitioner suffered no loss on that account. It is the consuming public that bore the burden and since it is not possible now to identify such consumers, the money collected should be retained with the Government to be used for public purposes. This appears to be the principle behind section 33-BB of the Andhra Pradesh General Sales Tax Act. In this connection we may quote the following observations from Ramaiah's case AIR 1986 AP 361 which in our opinion are apposite in the present context as well :
"Today we find that dealers and businessmen collect sales tax, market fee, and other similar impost from public on the representation that it has to be made over to the State; sometimes they show the said tax/fee separately, and at other times they include it in the price and show a consolidated figure. Then they litigate in the department and before the courts, disputing the exigence of tax; very often they ask for stay of collection of tax from them, which they have already collected from the public, and very often the courts grant them stay either wholly, or partially; they plough back that money into their business to make more profit. If they succeed ultimately, all that money is a windfall; it is an additional income to them : Even if they fail, they have nothing to lose, because they would pass on to the State the amount already recovered by them from the public and which they have beneficially made use of for the purpose of their business. It is well-known that litigation of this type takes years and years to pass through the hierarchy of Tribunals and Courts. The position under the Central Excise Act is no different. Wherever in doubt, a dealer or manufacturer collects duty or tax, as the case may be, from the public, and then fights the incidence in Tribunals and Courts; it makes little difference whether the excise duty levied is on a finished product, or upon the raw material purchased by a manufacturer; in either case it is passed on to the consumer. It is a matter for the courts to pause and consider whether in such situations they should grant stays, and finally refunds. The latest decision of the Supreme Court in State of M.P. v. Vyankatlal must guide us in this matter. It should also be noticed that the appeal before the Supreme Court in this case arose in a suit, and not in a writ petition."
7. For the above reasons we are not inclined to grant the relief of refund.
8. The writ petition is disposed of with the following directions :
(1) It is declared that no sales tax is payable by the petitioner on the royalty and extraction charges payable by it under the agreement entered into by it with the State for supply of bamboo and hardwood. Consequently the State shall not demand or collect any sales tax on the said account, i.e., with effect from 1st November, 1985 onwards.
(2) So far as the claim of refund of the sales tax is concerned (which claim is said to relate to the period 27th March, 1978 to 31st October, 1985) it is refused following the Bench decision of this Court in N. V. Ramaiah v. State of Andhra Pradesh AIR 1986 AP 361 and also in view of section 33-BB of the Andhra Pradesh General Sales Tax Act.
There shall be no order as to costs. Advocate's fee Rs. 250.
Writ Petition disposed of accordingly.