1988 (3) TMI 418 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the supplies of wheat products to the nominees of the Director of Civil Supplies constitute "sales" under section 2(n) of the A.P. General Sales Tax Act, 1957.
2. Whether the reopening of assessments under section 14(4)(cc) of the A.P. General Sales Tax Act, 1957, was valid.

Issue-wise Detailed Analysis:

1. Whether the supplies of wheat products to the nominees of the Director of Civil Supplies constitute "sales" under section 2(n) of the A.P. General Sales Tax Act, 1957:

The assessee argued that the supplies made to the nominees of the Director of Civil Supplies were not "sales" as defined under section 2(n) of the A.P. General Sales Tax Act, 1957, because these transactions were not made at the volition of the assessee but were compulsory under the terms of the licence issued by the Director. The assessing authority initially accepted this contention and excluded the value of these supplies from the gross turnover for the assessment years 1974-75 and 1975-76. However, upon review, the Tribunal disagreed with the assessee's contention and held that the supplies possessed the characteristics of sales and were liable to be taxed under the Act.

2. Whether the reopening of assessments under section 14(4)(cc) of the A.P. General Sales Tax Act, 1957, was valid:

The second issue revolved around the validity of reopening the assessments under section 14(4)(cc) of the Act. The assessee contended that section 14(4)(cc) was introduced by the A.P. General Sales Tax (Amendment) Act, which came into force on 17th January, 1978, and since the assessments for the years 1974-75 and 1975-76 were completed before this date, they had become final and could not be reopened using a provision that was not in force at the time of the original assessments. The Tribunal accepted this contention, stating that the assessments had reached finality before the introduction of section 14(4)(cc) and thus could not be reopened unless the provision had retrospective operation, which it did not.

The Tribunal further noted that section 14(4)(cc) specifically dealt with cases where deductions or exemptions were wrongly allowed. In this case, the original exclusion of the turnover was not due to any exemption or deduction under the Act, rules, or notifications but was based on the erroneous belief that the supplies did not constitute sales. Therefore, the Tribunal concluded that section 14(4)(cc) was not applicable, and the reopening of assessments under this provision was without jurisdiction.

Conclusion:

The High Court upheld the Tribunal's decision, agreeing that the assessments for the years 1974-75 and 1975-76, which had become final before the introduction of section 14(4)(cc), could not be reopened under this provision. Additionally, the Court noted that the original exclusion of the turnover was not due to any exemption or deduction wrongly allowed but was based on the erroneous belief that the supplies did not constitute sales. Consequently, the orders passed by the assessing authority under section 14(4)(cc) were deemed without jurisdiction, and the tax revision cases were dismissed.