Andhra HC (Pre-Telangana)
Western India Gunnies Private Limited vs State Of Andhra Pradesh And Anr. on 2 July, 1996
Equivalent citations: [2003]133STC14(AP)
Bench: Syed Shah Mohammed Quadri, B. Sudershan Reddy
ORDER Syed Shah Mohammed Quadri , J.
1. These three tax revision cases are filed by the same dealer against the common order of the Sales Tax Appellate Tribunal in three different appeals passed on March 1, 1988. They relate to three different assessment years. T.R.C. No. 259 of 1988 relates to the assessment year 1978-1979, T.R.C. No. 260 of 1988 pertains to the assessment year 1979-1980 and T.R.C. No. 261 of 1988 is in regard to the assessment year 1980-1981.
2. A common question of law arises in T.R.C. No. 259 of 1988 and T.R.C. No. 260 of 1988, that is, whether the successor assessing authority was justified in withdrawing the exemption and assessing the disputed turnover relating to the alleged second sales of cement gunny bags.
3. We may note the facts relevant for consideration of the aforesaid question. For the years 1978-1979 and 1979-1980 the order of assessment was passed by the assessing authority on September 10, 1980. However, the successor-in-office noticed that exemption, on the alleged second sales of cement gunny bags, was wrongly granted; he, therefore, after issuing notice to the petitioner, passed revised orders of assessment on December 21, 1982. We may also note here that insofar as the year 1980-1981 is concerned, the assessing authority rejected the claim of the dealer that the turnover represents the second sales of cement gunny bags. Against the order of reassessment in respect of the assessment years 1978-1979 and 1979-1980 dated December 21, 1982 and the order of assessment of the year 1980-1981, the petitioner preferred appeals before the Appellate Deputy Commissioner who, by orders dated April 12, 1985, confirmed the order under appeal and dismissed the appeals. The assessee then carried the matter in second appeals before the Sales Tax Appellate Tribunal. The Tribunal heard all the three appeals together and dismissed the same by common order dated March 1, 1988. It is against that common order, the petitioner has filed these revision cases.
4. Insofar as the point under consideration is concerned, the Tribunal held that as the assessing authority had power under Section 14(4)(cc) of the Andhra Pradesh General Sales Tax Act, 1957 for assessing the correct amount of tax payable by the assessee, and as the exemption was wrongly allowed in the original assessment, invoking of the power under the said provision and passing the order of reassessment, was justified.
5. A Division Bench of this Court, of which one of us (Syed Shah Mohammed Quadri, J.) was a member, applying the ratio in State of Andhra Pradesh v. Ratna Sree Box Makers , held in Girdharlal & Company v. State of Andhra Pradesh that for the purpose of invoking the jurisdiction under Section 14(4)(cc) of the Act what is relevant is that there should be fresh material, de hors the material available at the time of first assessment, to justify the invoking of jurisdiction for reopening the assessment. Lack of diligence on the part of the assessing authority while passing order of assessment earlier, is no ground to reopen the assessment. What is to be shown is that there was lack of material at the time of first assessment and that is supplemented subsequently which necessitated invoking the jurisdiction under Section 14(4)(cc). In this case, admittedly, there is no fresh material to justify invoking of jurisdiction under Section 14(4)(cc). The same view is reiterated in our judgment in Tax Revision Case No. 195 of 1988 dated July 1, 1996. For the aforesaid reasons, we are unable to uphold the view of the Tribunal and accordingly the order of the Tribunal insofar it relates to reopening of assessment under Section 14(4) is concerned, is set aside. T.R.C. Nos. 259 and 260 of 1988 are, therefore, allowed.
6. Insofar as T.R.C. No. 261 of 1988 is concerned, Sri Prayaga Murty, learned counsel for the petitioner, contends that the petitioner filed the list of hawkers from whom the dealer had purchased the used cement gunny bags. He, however, argues that the very fact that they are the used cement bags would show that the sales in question are second sales. He relied on a judgment of the Karnataka High Court in Subramanya Reddy and Co. v. Karnataka Appellate Tribunal [1985] 59 STC 84.
7. Before we refer to the judgment of the Karnataka High Court, it would be useful to refer to the judgment of this Court in Lakshminarayana General Traders v. Commercial Tax Officer [1975] 36 STC 402, because that judgment was relied upon by the Karnataka High Court. In that case [Laxminarayana's case [1975] 36 STC 402 (AP)] the petitioners were dealers in jaggery. They claimed that jaggery was purchased by them from agriculturists and resident registered dealers and, therefore, the sales of the same jaggery by the petitioners within the State, were second sales and were not exigible to sales tax. The claim of the petitioners was negatived on the basis that the certificate required under Rule 45(3)(b) of the A.P. General Sales Tax Rules, 1957 was not filed and the sale by the petitioners was treated as first sales. Justice KONDAIAH, J. (as he then was) held that under Section 7-A of the A.P.G.S.T. Act, the onus was on the petitioner to establish that the transactions which were sought to be taxed by the assessing authority on the assumption that they were first sales were really second sales within the State. The learned Judge, with reference to certificate referred to in Rule 45(3)(b) of the Rules, observed that for proving that the sale was a second sale of the goods in respect of which tax has already been paid once, the method provided in Rule 45(3)(b) was only one mode of proof and the same can be proved by another method, therefore, a mere omission or failure on the part of the petitioners to produce the bill or cash memorandum accompanied by the certificate required under Rule 45(3)(b) of the Rules would not ipso facto entitle the assessing authority to include such turnover in the assessment for levying tax. The proof of the fact that the sale is a second sale might be established by adducing oral and documentary evidence. Now, reverting to the Karnataka case (Subramanya Reddy and Co. v. Karnataka Appellate Tribunal [1985] 59 STC 84), there the assesses was a dealer in empty bottles and tins. The bottles were second hand bottles. The Karnataka Appellate Tribunal held that the assessee was the first dealer and, therefore, was not entitled to claim exemption from tax since he was not able to produce any evidence to show that the old empty bottles were purchased from local registered dealers on payment of tax and he did not produce the declaration as required under Rule 26(9)(a) of the Karnataka Sales Tax Rules, 1957. The Karnataka rule was identical in terms with the Andhra Pradesh rule, viz., Rule 45(3)(b). The Karnataka High Court referred to the judgment of this Court in Sri Lakshmi Narayana General Trader's case [1975] 36 STC 402 and pointed out that Rule 45(3)(b) of the A.P.G.S.T. Rules, 1957 was similar to Rule 26(9)(a) of the Karnataka Sales Tax Rules, 1957. However, the Karnataka High Court held that the fact that the goods were second hand bottles itself was sufficient to hold that there was an earlier sale of the same bottles liable to tax and in that view of the matter set aside the order of the Tribunal and allowed the revision. To the extent the Karnataka High Court has impliedly held that not filing of the certificate as contemplated in the rule does not ipso facto enable the assessing authority to include the disputed turnover in the assessable turnover and that it was still open to the assessee to prove that the turnover in question related to second sales by producing other relevant oral or documentary evidence, we are in respectful agreement. But we are unable to pursuade ourselves to subscribe to the view that the fact that the goods are second hand goods, is in itself sufficient to hold that the goods have earlier suffered tax and their sale is exempted from tax because it is possible that second hand goods are imported in the State and they have not suffered tax in the State. Here we may state that this Court in T.R.C. No. 17 of 1978 dated November 22, 1982 (Rajendra Oil Mills Refinery v. State of Andhra Pradesh) laid down the following tests for the purpose of claiming exemption on the ground of second sale :
(i) that the first seller should be real and identifiable ; and
(ii) that mere non-payment of tax at the stage of the first sale does not shift the liability to pay tax to second seller.
8. In State of A.P. v. Thungabhadra Industries Ltd. , applying the above tests laid down by this Court, the Sales Tax Appellate Tribunal, on verification of the record, held that the said tests were satisfied and that the assessee was entitled to exemption. In revision against the order of the Tribunal a Division Bench of this Court confirmed the order holding that the Appellate Tribunal had correctly applied the tests in the said case.
9. From the above discussion, it follows that what is necessary to be shown to claim exemption on the ground of second sale, is that the first seller of the goods in question is a real and identifiable person and that the first sale is within the State and the goods were subjected to or liable to tax.
10. In the instant case, the petitioner is an agent in three States, namely, Andhra Pradesh, Karnataka and Maharasthra. There is no proof of the fact that the cement gunny bags were subjected to tax on the first sale within the State. The list of the hawkers were also not identifiable. Therefore, the tests laid down by this Court and subsequently approved by this Court in Thungabhadra Industries Ltd, case , are not satisfied. The Tribunal, in its order under revision, held that in the circumstances such credence could not be given to the claim that the entire disputed turnover related to cement bags collected within the State of Andhra Pradesh itself and that the assessee failed to establish that the purchases of empty gunny bags were made by them from real and identifiable dealers and that the assessee was not entitled to exemption automatically on the disputed turnover as relating to the second sales. In view of the above findings, in our view, the Tribunal has rightly come to the conclusion that the petitioner was not entitled for exemption. We find no merit in T.R.C. No. 261 of 1988 ; it is accordingly dismissed.
11. In the result, T.R.C. Nos. 259 and 260 of 1988 are allowed and T.R.C. No. 261 of 1988 is dismissed. No costs.