1976 (8) TMI 139 - HC - VAT and Sales Tax

Issues Involved:
1. Whether "atukulu" (parched rice) and "muramaralu" (puffed rice) are "rice" within the meaning of entry 66(b) of Schedule 1 to the Andhra Pradesh General Sales Tax Act, 1957.
2. Whether the levy of sales tax on these commodities is unauthorized and violative of the provisions of the Sales Tax Act and Article 265 of the Constitution.
3. Whether the cancellation of the exemption granted under G.O.Ms. No. 2197 by G.O.Ms. No. 208 was valid.
4. Whether the withdrawal of the exemption contained in G.O.Ms. No. 208 was issued under section 9 of the Act and whether the government had the power to revoke the exemption.

Detailed Analysis:

1. Classification of "Atukulu" and "Muramaralu" as "Rice" under Entry 66(b):
The court examined whether "atukulu" (parched rice) and "muramaralu" (puffed rice) fall under the definition of "rice" in entry 66(b) of Schedule 1 of the Act. The court noted that while rice is obtained by merely eliminating the husk from paddy, parched and puffed rice undergo additional processes. Despite being derived from paddy, these commodities differ significantly from rice in terms of their usage and characteristics. The court concluded that these commodities do not fall within the ambit of entry 66(b), which specifically deals with rice obtained from paddy that has met tax under the Act.

2. Legality of Levy of Sales Tax:
The appellants argued that the levy of sales tax on these commodities lacked legislative sanction and violated Article 265 of the Constitution, which mandates that no tax shall be levied or collected except by authority of law. The court rejected this argument, stating that section 5(1) of the Act provides a general power to impose sales tax on any dealer whose turnover exceeds Rs. 25,000 per year, at a rate of five paise on every rupee of turnover. The court emphasized that the absence of these commodities in Schedules I and II does not negate the state's authority to impose tax under the general provision of section 5(1).

3. Validity of Cancellation of Exemption (G.O.Ms. No. 208):
The appellants contended that by canceling the exemption granted under G.O.Ms. No. 2197, the government effectively added new items to the list of taxable commodities, which is a legislative function. The court dismissed this argument, clarifying that the government did not add new items but merely withdrew an existing exemption. The court referenced the statutory notification under section 9(1) of the Act, which has the force of law, and concluded that the cancellation of the exemption was valid and did not constitute the imposition of a new tax.

4. Power to Revoke Exemption under Section 9:
The appellants argued that section 9 of the Act only empowers the government to grant exemptions or reductions in rate, not to withdraw them. The court referred to section 15 of the Andhra Pradesh General Clauses Act, which includes the power to rescind, revoke, amend, or vary orders. The court held that the government had the authority to revoke the exemption granted under section 9, read with section 15 of the General Clauses Act. The court also addressed the contention that the revocation must be done within the scope of section 9, affirming that the revocation was within the legal framework.

Conclusion:
The court dismissed the assessee's appeal (W.A. No. 1 of 1975) and the writ petition (W.P. No. 6909 of 1974), and allowed the state's appeal (W.A. No. 61 of 1976), setting aside the decision of Chennakesava Reddy, J. The court concluded that parched rice and puffed rice do not fall within the ambit of entry 66 of Schedule 1 of the Act and upheld the validity of the tax levied under section 5(1). The parties were directed to bear their own costs.

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