1972 (4) TMI 88 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Government is considered to be carrying on business in selling forest timber.
2. Whether the transaction between the forest department and the petitioner constitutes the first sale.
3. Whether the petitioner is liable to pay sales tax on subsequent sales of timber.
4. Validity of the assessment order and the demand notice issued against the petitioner.

Issue-wise Detailed Analysis:

1. Whether the Government is considered to be carrying on business in selling forest timber:
The court examined the definition of "business" under Section 2(bbb) of the Andhra Pradesh General Sales Tax Act, 1957, which includes any trade, commerce, or manufacture carried on irrespective of the motive to make gain or profit. The court referred to the Supreme Court decision in State of Gujarat v. Raipur Manufacturing Co., Ltd., which held that regular and continuous sales indicate an intention to carry on business. Applying this principle, the court concluded that the Government, by regularly and continuously selling forest timber through auctions, is carrying on business within the meaning of the term "business" under the Act.

2. Whether the transaction between the forest department and the petitioner constitutes the first sale:
The court determined that the auction conducted by the forest department, where the petitioner was the highest bidder, constitutes the first sale in the State. This conclusion was based on the combined reading of the relevant provisions of the Act, specifically items 63 and 64 of the First Schedule, which charge timber and firewood with sales tax at the point of first sale in the State. The court held that the Government, by auctioning the timber, is the first seller, and thus the transaction with the petitioner is the first sale.

3. Whether the petitioner is liable to pay sales tax on subsequent sales of timber:
The court ruled that since the Government is the first seller and the transaction with the petitioner constitutes the first sale, any subsequent sales by the petitioner to third parties are considered second sales. According to the Act, sales tax is leviable only on the first sale. Therefore, the petitioner is not liable to pay sales tax on the subsequent sales of timber.

4. Validity of the assessment order and the demand notice issued against the petitioner:
The court found that the assessing authority erred in levying sales tax on the petitioner for the second sale. The court emphasized that the existence of an alternative remedy, such as an appeal, does not bar the exercise of its jurisdiction under Article 226 of the Constitution when the assessment order is inconsistent with the provisions of the Act. Consequently, the court quashed the assessment order dated 31st March 1970, and the demand notice issued on 10th July 1970, as they were without jurisdiction.

Conclusion:
The court allowed the writ petition, quashed the impugned assessment order, and the demand notice. The petitioner was awarded costs, and the advocate's fee was set at Rs. 100. The judgment clarifies that the Government, by auctioning forest timber, is carrying on business and is liable for sales tax on the first sale, thereby exempting subsequent sales by the petitioner from sales tax.

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