Andhra HC (Pre-Telangana)
The India Fruits Private Limited vs Commercial Tax Officer Ii, Rajahmundry on 21 September, 1987
Equivalent citations: [1988]68STC114(AP)
Author: B.P. Jeevan Reddy
Bench: B.P. Jeevan Reddy
JUDGMENT A. Lakshmana Rao, J.
1. In exercise of the powers conferred by sub-section (1) of section 9 of the Andhra Pradesh General Sales Tax Act, 1957 (for short "the Act") the Governor of Andhra Pradesh directed that the rate of tax payable under the said Act in respect of sales by a dealer to (1) Departments of Government of India or Government of Andhra Pradesh; or (2) Public sector undertakings including corporations owned by the Government of India or Government of Andhra Pradesh; or (3) Government companies as defined under section 617 of the Companies Act, 1956,
2. which are located in the State of Andhra Pradesh relating to the goods manufactured or produced in his own manufacturing unit which is located in the State of Andhra Pradesh be reduced to 4 paise in the rupee, with effect from the 1st April, 1984, notwithstanding anything contained in any of the Schedules to the said Act or if the rate of tax prescribed under the said Act is lower than 4 paise in the rupee, then it shall be at the prescribed rate [vide G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984]. A doubt was raised whether additional tax payable under section 5-A and surcharge payable under section 6-B of the Act were also leviable in addition to the reduced rate of tax at 4 per cent specified in the said G.O.Ms. No. 540. The State Government clarified that the reduction in rate of tax to 4 per cent in respect of sales, specified in G.O.Ms. No. 540 dated March 24, 1984, was only in respect of basic rate of tax specified in the Schedules to the Act but not total tax leviable under the Act. It was stated in the Memorandum No. 3920/51/84-6 dated April 3, 1986 issued by the State Government that the additional tax payable under section 5-A and surcharge payable under section 6-B of the Act were not exempt and hence they were also leviable in addition to the reduced tax at 4 paise in the rupee. Questioning the validity of that memorandum this writ petition was filed seeking a consequential direction to the first respondent herein not to collect sales tax from the petitioner at more than 4 per cent in respect of the goods supplied by him to the public sector undertakings and Government companies.
3. The petitioner is a registered dealer under the Act engaged in the business of manufacture and sale of electrical conductors. It established a factory at Kadiyam, Andhra Pradesh, for the manufacture of electrical conductors. They are sold to the A.P. State Electricity Board which is a statutory corporation owned by the State Government and the National Thermal Power Corporation which is a public sector undertaking owned by the Government of India. In accordance with the Notification in G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984, it has been paying tax along with the monthly returns at the rate of 4 per cent on the sale of electrical conductors to those corporations and those corporations have been reimbursing the sales tax at that rate to the petitioner.
4. While so, the first respondent started issuing provisional monthly demands in form "B-2" to the petitioner adding additional tax under section 5-A and surcharge under section 6-B to the rate of tax at 4 per cent specified in the said notification during the years 1984-85 and 1985-86. However, the first respondent was directed by this Court by an order dated July 19, 1985 passed in Writ Petition No. 7423 of 1985 to collect tax only at the rate of 4 per cent pending the clarification by the State Government. After the position was clarified by the State Government in its Memorandum No. 3920/51/84-6 dated April 3, 1986 the first respondent demanded tax of Rs. 2,21 908 for the year 1984-85 and Rs. 10,75,625 for the year 1985-86 from the petitioner through his endorsement dated May 6, 1986. At that stage this writ petition was filed.
It was contended by the learned counsel for the petitioner that (1) The object and purpose of reducing the rate of tax to 4 per cent under G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984 was to maintain parity to ensure that the local manufacturing units supplying goods to the public sector under takings and Government companies withstand the competition with manufacturers from outside the State and to prevent diversion of trade from this State.
(2) That object and purpose was frustrated by the Government memorandum dated April 3, 1986, and (3) In any event as per the terms of the G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984, the totality of the tax payable under the Act was not intended to exceed 4 per cent.
G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984 reads as follows :
"In exercise of the powers conferred by sub-section (1) of section 9 of the Andhra Pradesh General Sales Tax Act, 1957 (Andhra Pradesh Act VI of 1957), the Governor of Andhra Pradesh hereby directs, that the rate of tax payable under the said Act in respect of sales by a dealer to any of the departments and other agencies mentioned below, which are located in the State of Andhra Pradesh relating to the goods manufactured or produced in his own manufacturing unit which is located in the State of Andhra Pradesh be reduced to 4 paise in the rupee, under the Andhra Pradesh General Sales Tax Act with effect from the 1st April, 1984 notwithstanding anything contained in any of the Schedules to the said Act or if the rate of tax prescribed under the said Act is lower than 4 paise in the rupee, then it shall be at the prescribed rate.
1. Departments of Government of India or Government of Andhra Pradesh; or
2. Public sector undertakings including corporations owned by the Government of India or Government of Andhra Pradesh; or
3. Government companies as defined under section 617 of the Companies Act, 1956."
5. On the basis of that G.O. it was submitted by the learned counsel for the petitioner that the words "rate of tax payable under the said Act" clearly indicated that the total tax payable under the Act in respect of sale transactions governed by the said G.O. should not exceed 4 per cent. In that connection it was pointed out that the additional tax payable under section 5-A and the surcharge payable under section 6-B partake of the same character as the tax imposed by the charging sections like sections 5 and 6. Referring to (1) G.O.Ms. No. 520, Revenue, dated March 22, 1984 whereunder the Governor directed that the tax leviable under clause (a) of sub-section (2) of section 5 read with item 19 of the First Schedule to the said Act, shall, in respect of woven sacks/bags be at 2 paise in the rupee, (2) G.O.Ms. No. 697, Revenue, dated July 21, 1967 in which it was provided that the tax leviable under section 6 read with item 10 of the Third Schedule to the said Act shall, in respect of cotton yarn be 2 paise in the rupee, and (3) G.O.Ms. No. 523, Revenue, dated March 22, 1984 by which the tax leviable under clause (a) of sub-section (2) of section 5 read with item 157 of the First Schedule to the said Act shall, in respect of gunnies manufactured by jute mills situate in Andhra Pradesh and sold by them to the sugar factories and cement factories situate in the State for packing cement and sugar respectively be 4 paise in the rupee, it was urged by the learned counsel that wherever the State Government intended to reduce the rate of tax specified in any of the Schedules to the Act, it specifically referred to the charging section and the relevant Schedule and in the absence of such reference to the charging section and the relevant Schedule in G.O.Ms. No. 540, Revenue, dated March 24, 1984 the total tax leviable under the said G.O. shall not exceed 4 per cent.
6. On the other hand it was asserted by the learned Government Pleader that Government Orders reducing the rate of tax or granting exemptions shall be strictly construed giving full effect to each one of the words used in such Orders. In that connection it was pointed out that the words "notwithstanding anything contained in any of the Schedules to the said Act" were sufficiently clear to lead to the only conclusion that the rate of tax referred to in that G.O. was with reference to the rate of tax specified in the relevant entry of the Schedule. In such circumstances, it was stated that the clarification given by the State Government in its memorandum dated April 3, 1986 that the rate of tax referred to in G.O.Ms. No. 540 was not inclusive of the additional tax under section 5-A and surcharge under section 6-B was quite legal and justified.
7. We see force in the contention of the learned Government Pleader. If the State Government intended to reduce the total tax payable in respect of the sale transactions covered by the said G.O. to 4 per cent it would not have used the words "notwithstanding anything contained in any of the Schedules to the said Act". We cannot ignore those words and read the words "the rate of tax payable under the said Act" in isolation without reference to the other terms and expressions used in the G.O. On a plain reading of the entire notification we understand that the expression "the rate of tax payable under the said Act" is used with reference to the rate of tax specified in the relevant entries in any of the Schedules to the Act. So understood, the rate of tax payable under the said G.O. refers to the rate of tax specified in the charging section 5 but not to the rate of additional tax leviable under section 5-A and surcharge leviable under section 6-B. It may also be noticed that wherever the State Government granted exemption from payment of tax they specifically mentioned in the G.Os. granting exemption the nature of tax in respect of which such exemption was granted. Let us look into G.O.Ms. No. 383, Revenue, dated April 9, 1986. It provides that with effect from 1st April, 1986 exemption from the levy of additional tax under section 5-A and surcharge under section 6-B on the sales of component parts of any other goods specified in the schemes notified for being eligible for the levy of concessional rate of tax under section 5-B of the said Act, has been granted. When no such exemption from the payment of additional tax and surcharge has been granted in respect of the sale transactions governed by G.O.Ms. No. 540, Revenue, dated March 24, 1984 and the rate of tax payable under that G.O. has been merely reduced to 4 per cent notwithstanding anything contained in any of the Schedules to the Act, we find it difficult to hold that the total tax payable in respect of the sale transactions governed by the said G.O. shall not exceed 4 per cent.
8. It was strenuously urged by the learned counsel for the petitioner that the object and purpose of issuing the said G.O., as is evident from the speech made by the Honourable Finance Minister on the floor of the Assembly that the rates of tax in respect of some of the commodities have been reduced from the point of view of diversion of trade and to ensure that local manufacturing units supplying goods to departments of Government, public sector undertakings and Government companies withstand the competition from the manufacturers from outside the State and the consequent announcement made by the Commissioner of Commercial Taxes contained in the letter dated March 16, 1984, written by him to M/s. Anam Electrical Manufacturing Company, was to bring parity between the tax payable by the local manufacturing units and the manufacturers from outside the State and the clarification issued by the State Government in its memorandum dated April 3, 1986 defeated the very purpose and object sought to be achieved by the said G.O. The learned Government Pleader has produced before us the entire file relating to G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984. The Federation of Andhra Pradesh Chambers of Commerce and Industry made a representation on January 31, 1983, requesting the State Government to reduce the rate of sales tax to 4 per cent in respect of sales made by a dealer relating to the goods produced by him in his manufacturing unit situated within the State. They made a further representation on August 22, 1983. On the basis of those representations, the State Government issued G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984. On November 26, 1984 the Federation of Andhra Pradesh Chambers of Commerce and Industry brought to the notice of the State Government that some of the assessing authorities in the State were insisting on payment of additional tax under section 5-A and surcharge under section 6-B in respect of sale transactions covered by the said G.O. and requested the State Government to remove the difficulty faced by the industrialists in the State by issuing orders that the total tax leviable under the G.O. was only 4 per cent. After consideration of the various representations submitted by the Federation of Andhra Pradesh Chambers of Commerce and Industry, the State Government clarified the position that under the said G.O. only the basis rate of tax was reduced to 4 per cent and the additional tax under section 5-A and surcharge under section 6-B of the Act were leviable in addition to the reduced tax at 4 per cent. Having regard to the material referred to above and the contents of G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984, we are unable to hold that the State Government intended to limit the total tax leviable in respect of the transactions governed by G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984 to 4 per cent and that the clarification issued by the State Government in its memorandum dated April 3, 1986 frustrated the object and purpose of the said G.O. It may be borne in mind that dealers from outside the State paying tax under the Central Sales Tax Act at 4 per cent against C form have to bear the necessary expenditure to transport the goods from outside the State to supply them to the purchasers in this State. As held by this Court in its judgment dated September 15, 1987 in W.P. Nos. 1871 of 1982 and 328 of 1983 (Sree Satyanarayana Spinning Mills Ltd. v. Commercial Tax Officer [1988] 68 STC 95) the dealers paying tax under the Central Sales Tax Act are also liable to pay additional tax under section 5-A and surcharge under section 6-B of the A.P. General Sales Tax Act, under section 8(2-A) of the Central Sales Tax Act. Taking all those considerations into account we have to reject the contention of the learned counsel for the petitioner that the total tax payable under G.O.Ms. No. 540, Revenue (S) Department, dated March 24, 1984 shall not exceed 4 per cent.
9. It was however submitted by the learned counsel for the petitioner that though the A.P. State Electricity Board had agreed to reimburse the additional tax liability, the National Thermal Power Corporation which is a Central Government undertaking was not agreeable to reimburse the tax at more than 4 per cent in view of the contract entered into between the petitioner and that corporation. It was stated that at the time when the contract was entered into with the National Thermal Power Corporation, the rate of tax levied and collected was only 4 per cent and therefore the terms of the contract limited the reimbursement of tax to 4 per cent only. According to the learned counsel, by virtue of the clarification of the State Government in its memorandum dated April 3. 1986, the burden due to additional tax liability has to be borne by the petitioner and that would financially crush him and cripple its manufacturing unit.
10. Relying on the observations made by the Supreme Court in Hindustan Sugar Mills Ltd. v. State of Rajasthan the learned counsel has submitted that a similar observation may be made in the instant case also. In the case before the Supreme Court the question was whether the freight formed part of the "sale price". The learned Judges held that the amount of freight formed part of the sale price. As a result of that, the tax liability of the assessee had gone up. By that time the assessee had entered into a large number of transactions of sale of cement with the Central Government and when the assessee claimed to recover sales tax in respect of those transactions on the basis that the freight was part of sale price it was pointed out that the Law Department of the Government of India advised them that freight was not part of sale price and hence no sales tax was payable by the assessee on the amount of freight. In those circumstances the Supreme Court observed as follows :
"...... Now, it appears clearly from this judgment that the opinion given by the Law Department of the Government of India was not correct and the statement made on behalf of the Government of India that no sales tax will be payable by the assessee on the amount of freight was unjustified. There can be no doubt that this statement misled the assessee into not claiming the amount of sales tax on the freight component of the price from the Central Government. We think that, in the circumstances, fairness and justice demand that the Central Government should pay to the assessee the amount of sales tax on the freight component of the price in respect of transactions of sale of cement entered into by the assessee with them under the provisions of the Control Order. It is true and we are aware that there is no legal liability on the Central Government to do so, but it must be remembered that we are living in a democratic society governed by the rule of law and every Government which claims to be inspired by ethical and moral values must do what is fair and just to the citizen, regardless of legal technicalities. We hope and trust that the Central Government will not seek to defeat the legitimate claim of the assessee for reimbursement of sales tax on the amount of freight by adopting a legalistic attitude but will do what fairness and justice demand. After all, the motto of every civilized State must be : 'Let right be done'."
11. In the instant case it was stated by the learned counsel that the Andhra Pradesh State Electricity Board has fairly agreed to reimburse the additional tax liability of the petitioner. But the National Thermal Power Corporation which is also a Central Government undertaking is not agreeable to reimburse at more than 4 per cent as the contract entered into between the petitioner and that corporation limited the reimbursement only to 4 per cent of the sales tax. This Court directed the respondents by its judgment dated July 19, 1985 in W.P. No. 7423 of 1985 to collect sales tax at 4 per cent pending the clarification by the State Government. When the State Government clarified the position in its memorandum dated April 3, 1986 the respondent issued notices demanding payment of tax at more than 4 per cent by including the additional tax and surcharge. In those circumstances it would be just ad fair if the National Thermal Power Corporation pays to the petitioner the amount of sales tax it is liable to pay by virtue of the clarification of the State Government in its memorandum dated April 3, 1986. As observed by the Supreme Court there is no legal liability on the National Thermal Power Corporation to do so. But when the other statutory corporation owned by the State Government, namely, the A.P. State Electricity Board, has fairly and reasonably agreed to reimburse the additional tax liability of the petitioner, we hope and trust that the National Thermal Power Corporation "will not seek to defeat the legitimate claim of the petitioner for reimbursement of additional tax liability" due to inclusion of additional tax under section 5-A and surcharge under section 6-B of the Andhra Pradesh General Sales Tax Act.
12. Subject to the above observation, the writ petition is dismissed. But in the circumstances there shall be no order as to costs. Advocate's fee Rs. 200.
13. Writ petition dismissed.