1987 (3) TMI 505 - HC - VAT and Sales Tax

Issues Involved:
1. Taxation of rice and paddy under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act.
2. Interpretation of Section 15(c) of the Central Sales Tax Act and Explanation III of the Third Schedule to the Andhra Pradesh General Sales Tax Act.
3. Entitlement to refund of sales tax paid on paddy when the sale price of rice is less than the purchase price of paddy.
4. Applicability of the judgment in Aitha Narasaiah & Co. v. State of Andhra Pradesh.
5. Effect of the amendment to the Andhra Pradesh General Sales Tax Act on the taxation of paddy.

Detailed Analysis:

1. Taxation of Rice and Paddy:
The petitioners, rice-millers in Andhra Pradesh, purchase paddy and mill it into rice for sale. Due to Control Orders, they must deliver a portion of the rice to the State at a notified price, with the remaining rice sold in the open market or exported. Paddy and rice are declared goods under Section 14(1) of the Central Sales Tax Act, with restrictions on their taxation under Section 15. The Andhra Pradesh General Sales Tax Act aligns with these provisions, taxing paddy at the first purchase point and rice at the first sale point, both at 4%.

2. Interpretation of Section 15(c) and Explanation III:
Section 15(c) of the Central Act and Explanation III to the Third Schedule of the Andhra Pradesh Act stipulate that the tax on rice should be reduced by the amount of tax levied on paddy. This is based on the assumption that rice's price will always exceed paddy's price. The provisions aim to ensure that only a single stage of tax is levied on these goods.

3. Entitlement to Refund of Sales Tax:
A unique situation arose where the notified price for levy rice was lower than the market price, causing rice-millers to incur losses when supplying rice to the State. The millers argued that they should be refunded the tax paid on the difference amount (i.e., the purchase price of paddy minus the sale price of rice). The court disagreed, stating that the term "reduced" cannot be interpreted as "reimbursed." The tax on rice should be reduced by the tax paid on paddy only when the rice's price exceeds the paddy's price. If the rice's price is lower, no tax is payable on rice, and the tax paid on paddy is retained by the State.

4. Applicability of Aitha Narasaiah & Co. Judgment:
The petitioners relied on the judgment in Aitha Narasaiah & Co., where the court interpreted "reduced" as "reimbursed." However, the court clarified that this interpretation was context-specific and not applicable to the current situation. The judgment in Aitha Narasaiah & Co. did not address a scenario where the rice's price was lower than the paddy's price, and thus, it cannot be used to justify a refund in the present case.

5. Effect of Amendment to the Andhra Pradesh Act:
The petitioners argued that the proviso in the earlier version of item 21 in the Third Schedule, which exempted paddy from tax if rice was taxed, should still apply. The court found no merit in this argument, as the amending Act had deleted the entire entry and substituted a new one, including the proviso. Therefore, the proviso no longer had any effect.

Conclusion:
The court upheld the Tribunal's decision that no tax refund is warranted when the sale price of rice is less than the purchase price of paddy. The tax paid on paddy is retained by the State, and no tax is levied on rice in such cases. The tax revision cases were dismissed without costs.

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