1998 (8) TMI 528 - SC - VAT and Sales Tax

EXEMPTIONS AND CONCESSIONS - MANUFACTURERS OF CEMENT - RECOVER DIFFERENCE IN TAX BETWEEN NORMAL AND CONCESSIONAL RATES

Summary

Issues:
1. Validity of notifications under Central Sales Tax Act and Andhra Pradesh General Sales Tax Act
2. Nature of the order and recovery proceedings
3. Equitable considerations for collecting concessional amounts
4. Review petitions and the outcome

Issue 1: Validity of notifications under Central Sales Tax Act and Andhra Pradesh General Sales Tax Act
The judgment pertains to a case where notifications providing concessions to cement manufacturers in Andhra Pradesh were challenged by manufacturers not entitled to the benefits. The Supreme Court quashed the notifications as they were found to obstruct interstate trade. The Court held that the notifications impeded the free-flow of trade between states, leading to their annulment. The order directed the cancellation of the notifications issued under the Central Sales Tax Act, 1956, and the Andhra Pradesh General Sales Tax Act, 1957. The judgment emphasized the importance of maintaining a level playing field for local and out-of-state industries.

Issue 2: Nature of the order and recovery proceedings
Following the Court's order, recovery proceedings were initiated by the State to collect the concessional amounts that would have been paid if not for the annulled notifications. The affected parties filed writ petitions under Article 32 seeking a declaration that the order was prospective and requesting the quashing of the recovery proceedings. The petitioners argued that it was unjust for the State to demand the concessional amounts after the notifications were invalidated. The Court noted that the assessees were not at fault and should not be penalized for the State's actions. The judgment highlighted the need for fairness and equity in dealing with the recovery of taxes post the annulment of the notifications.

Issue 3: Equitable considerations for collecting concessional amounts
The petitioners contended that it was inequitable for the State to collect the concessional amounts from them, especially considering the legal restrictions that prevented them from passing on these amounts to their customers. The Court acknowledged the petitioners' predicament and observed that the recovery of the concessional amounts would be unjust under the circumstances. In light of the submissions made by both parties, the Court decided to treat the petitions as review petitions to rectify the situation. The judgment directed that the State of Andhra Pradesh should not collect the sales tax amounts due solely because of the invalidated notifications.

Issue 4: Review petitions and the outcome
The Court, upon reviewing the situation, concluded that it was not just or fair to allow the State to recover the concessional amounts from the petitioners. The judgment ordered a review of the assessment orders and recovery proceedings in line with the revised decision. The Court modified the original order to prevent the State from collecting the sales tax amounts that became due only as a result of the quashing of the notifications. The judgment highlighted the importance of upholding principles of justice and equity in tax recovery matters, especially when legal restrictions had prevented the affected parties from passing on the tax burden to their customers.