Andhra HC (Pre-Telangana)
Blue Star Ltd. vs State Of Andhra Pradesh And Anr. on 23 November, 1989
Equivalent citations: [1990]78STC43(AP)
Author: Chief Justice
Bench: Chief Justice
JUDGMENT Yogeshwar Dayal, C.J. and Lakshmana Rao, J.
1. The petitioners M/s. Blue Star Limited, are manufacturers of water coolers and air-conditioners. They are taxable for the purpose of local sales tax under entry 2 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957, at the basic rate of 10 per cent. By a notification issued by the Government of Andhra Pradesh in G.O. Ms. No. 172, Revenue (S) Department, dated February 13, 1986, the rate of local sales tax is reduced to 4 paise in the rupee for such goods manufactured or produced in the dealer's own manufacturing unit which is located in the State of Andhra Pradesh and the goods are supplied to (1) the Departments of Government of India or Government of Andhra Pradesh; (2) public sector undertakings including corporations owned by the Government of India or Government of Andhra Pradesh; (3) Government companies as defined under section 617 of the Companies Act, 1956; and (4) local authorities mentioned therein.
2. The case of the writ petitioner is that this notification by which the sales tax has been reduced on locally manufactured units supplying goods to the aforesaid specified undertakings is violative of article 304(a) of the Constitution. Reliance on behalf of the writ petitioner for his submission that this notification is violative of article 304(a) of the Constitution, is placed on the recent decision of the Supreme Court reported in Indian Cement Ltd. v. State of A.P. and the decisions reported in Weston Electroniks v. State of Gujarat [1988] 70 STC 52 (SC); AIR 1988 SC 2038 and these two decisions were followed by the Supreme Court in Hi-Beam Electronics Pvt. Ltd. v. State of A.P. [1988] 71 STC 305 and two other decisions reported in the same volume, namely, Video Electronics Pvt. Ltd. v. State of Rajasthan [1988] 71 STC 304 (SC) and Besta Electronics Pvt. Ltd. v. State of M.P. [1988] 71 STC 307 (SC).
3. In Indian Cement Ltd. v. State of A.P. , the notification which was challenged as violative of article 304(a) of the Constitution was in the following terms :
"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 No. VI of 1957), the Governor of Andhra Pradesh hereby directs that the tax leviable under clause (a) of sub-section (2) of section 5 read with item 18 in the First Schedule to the said Act, shall, in respect of cement manufactured by cement factories situated in the State and sold to the manufacturing units situated within the State for the purpose of manufacture of cement products such as cement sheets, asbestos sheets, cement flooring stones, cement concrete pipes, hume pipes, cement water and sanitary fitting, concrete poles and other cement products, be at the reduced rate of four paise in the rupee at the point of first sale in the State with effect on and from the 1st January, 1987."
4. This, notification is in pari materia with the notification impugned in the present case. In the present case, the notification 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, other than -
(i) Omitted by G.O. Ms. No. 76, Revenue, dated January 24, 1987 (cement).
(ii) Engine oils, lubricating oils and greases (item 39 of the First Schedule).
(iii) Molasses (item 55 of the First Schedule).
(iv) Power alcohol, ethyl alcohol, rectified spirit, denatured spirit, (item 56 of the First Schedule).
(v) Aviation turbine fuel (item 70 of the First Schedule).
(vi) Aviation motor spirit other than turbine fuel (item 71 of the First Schedule).
(vii) Petrol other than aviation motor spirit (item 72 of the First Schedule).
(viii) Diesel oil (item 73 of the First Schedule).
(ix) Motor spirit not falling under items 70, 71, 72 and 73 (item 74 of the First Schedule).
(x) Mineral oil including furnace oil (item 98 of the First Schedule).
(xi) Naptha (item 103 of the First Schedule).
(xii) Fuel gas such as Burshane, Calgas, lndane and other gases in compressed, liquefied or solidified form (item 118 of the First Schedule).
(xiii) Asphalt (bitumen)
(xiv) Omitted (slack and wax, etc.).
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, notwithstanding anything contained in sub-section (1) of section 5 or in any of the Schedules, section 5-A and section 6-B of the said Act or if the rate prescribed under the said Act is lower than 4 paise in the rupee, then it shall be at the prescribed rates (of tax mentioned in the Schedules to the said Act and additional tax payable under section 5-A and the surcharge on sales tax payable under section 6-B of the said Act) provided the total rate of tax together with the rate of additional tax under section 5-A and the surcharge on sales tax under section 6-B shall not exceed 4%.
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; or
4. Local authorities, namely - Municipal Corporations of Hyderabad or Vijayawada or Visakhapatnam or any other Corporation constituted by a Special Act, or the municipal councils constituted under the Andhra Pradesh Municipalities Act, 1965, or the Grama panchayats constituted under the Andhra Pradesh Grama Panchayats Act, 1964, or the authority legally entitled to or entrusted by the State Government with the control or management of a local fund in areas other than the above, or
5. ......
Provided that the above concessional rate of tax shall be applicable only to such public sector, undertakings/Government companies/co-operative societies in respect of goods that are manufactured in the State and sold to them for being used or for captive consumption by them and the concessional rate of tax shall not be applicable to such public sector undertakings/Government companies/co-operative societies in respect of goods that are purchased and sold by them (as any other trader) without subjecting to any manufacturing process."
5. The Supreme Court in the aforesaid Indian Cement Ltd. v. State of A.P. case , observed as follows :
"The two notifications of the Andhra Pradesh Government may now be referred to. Under the first notification made under section 9(1) of the Andhra Pradesh General Sales Tax Act, the rate of tax has been reduced to 4 per cent in respect of sales made by indigenous cement manufacturers to manufacturers of cement products. Admittedly the Tamil Nadu producers have sales offices in Andhra Pradesh and in regard to their sale to such manufacturers of cement products the benefit of reduced rate of taxation is not applicable. The prescribed rate of tax under the Andhra Act is 13.75 per cent on cement. Thus under the Andhra notification in regard to the local tax the indigenous producers of cement have a benefit of 9.75 per cent. The return made to the court admits of the position that preference has been shown to local manufacturers. Two reasons have been advanced by way of justification. One is that it is beneficial to the State revenue and secondly it protects the local manufacturers too. The counsel for the State Government has not been able to demonstrate to us how the reduction in the rate of sales tax is beneficial to the State revenue. The other justification is what provisions of Part XIII of the Constitution do not permit. The reasonable restrictions contemplated in Part XIII have to be backed by law and not by executive action provided the same are within the limitations prescribed under the scheme of Part Xlll."
6. Earlier as well, Shah, J., speaking for the Supreme Court in State of Madras v. Nataraja Mudaliar [1968] 22 STC 376; AIR 1969 SC 147, while dealing with article 304(a) observed in paragraph 20 as follows :
"In the two cases the differential treatment violated article 304(a) of the Constitution, which authorises the Legislature of a State notwithstanding anything in article 301 and 303 by law to 'impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced'. Imposition of differential rates of tax by the same State on goods manufactured or produced in the State and similar goods imported in the State is prohibited by that clause. But where the taxing State is not imposing rates of tax on imported goods different from rates of tax on goods manufactured or produced, article 304(a) has no application. Article 303 prohibits the making of law which gives, or authorises the giving of, any preference to one State over another, or makes, or authorises the making of, any discrimination between one State and another. Prevalence of different rates of sales tax in the State which have been adopted by the Central Sales Tax Act for the purpose of levy of tax under that Act is, as already mentioned, not determinative of the giving of preference or making a discrimination. The view expressed by the High Court that section 8(2), 8(2A) and 8(5) infringe article 301 and article 303(1) cannot be sustained."
7. Sri A. Venkataramana, learned Government Pleader for Commercial Taxes, submitted that article 301, 303 and 304, clause (a) should be read together and unless it can be shown that the difference in the rate of taxation on the imported goods and locally manufactured or produced goods affects the movement of the goods or the free-flow of trade in the country, the notifications are not liable to be struck down. It may be noticed that article 304(a) of the Constitution starts with non obstante clause and the relevant portion of article 304(a) reads as follows :
"impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced."
8. Shah, J., we have quoted his observations earlier, in the case of State of Madras v. Nataraja Mudaliar , had stated that the imposition of differential rates of tax by the same State on the goods manufactured or produced in the State and similar goods imported in the State, is violative of that clause. Therefore, irrespective of 301 or 303, article 304(a) of the Constitution totally prohibits discriminative treatment being given to goods produced locally vis-a-vis goods which are imported. The learned counsel for the Revenue also brought to our notice the decision of our own Court reported in Mahindra and Mahindra Limited v. State of Andhra Pradesh [1986] 63 STC 274. Apart from the fact that this decision is under appeal, the fact remains that the court found that the goods which were imported are not similar to the goods which were locally produced. In view of this finding, article 304(a) had no application. The learned counsel also referred us to the earlier decision of this Court reported in Anand Commercial Agencies v. Commercial Tax Officer, VI Circle, Hyderabad [1988] 71 STC 45. However, in view of the latest pronouncement of the Supreme Court in the aforesaid case of Indian Cement Ltd. v. State of A.P. , we have no option but to hold that the impugned Notification dated February 13, 1986, is violative of article 304(a) of the Constitution. Having regard to the facts and circumstances of the case, Notification No. II in the aforesaid G.O. Ms. No. 172, Revenue (S) Department, dated February 13, 1986, is quashed. All concerned parties will pay tax at the uniform higher rate. In view of the facts and circumstances of the case and in view of this order, the past transactions will not be affected. The writ petition is disposed of accordingly. No costs. Advocate's fee Rs. 150.
9. Writ petition disposed of accordingly.