1987 (11) TMI 366 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to constitutionality of section 6-A of A.P. General Sales Tax Act, petitioner's classification as "dealers," liability to pay sales tax on purchased materials not consumed in manufacturing.

Analysis:
The judgment addressed three key contentions raised in the writ petitions. Firstly, the constitutionality of section 6-A of the A.P. General Sales Tax Act was challenged. The court noted that previous decisions had upheld the constitutionality of this provision. Secondly, the classification of the petitioners as "dealers" for the purpose of section 6-A was disputed. The court referred to a previous decision which held that the petitioners must be considered as "dealers." Thirdly, the liability of the petitioners to pay sales tax on materials purchased but not consumed in manufacturing goods for sale was examined. The petitioners argued that since the purchased materials were not used in manufacturing goods for sale, section 6-A did not apply. This argument was supported by reference to a Supreme Court decision and observations in a subsequent case.

The petitioners, who were contractors executing works contracts for the Government of Andhra Pradesh, purchased materials like sand and gravel from unregistered dealers. Section 6-A of the Act imposed tax liability on goods purchased from unregistered dealers if they were consumed in manufacturing goods for sale or otherwise. The court analyzed the interpretation of clause (a) of section 6-A, focusing on whether the goods purchased needed to be consumed in manufacturing goods for sale specifically or if consumption for any purpose sufficed. A Supreme Court decision was cited to support the interpretation that consumption of goods rendered the purchase taxable regardless of the purpose of consumption.

The court also considered a subsequent Supreme Court decision regarding the interpretation of a similar provision in another state's sales tax act. This decision suggested a broader interpretation of the clause, aligning with the petitioners' argument. The court acknowledged a conflict between these decisions and chose to follow the interpretation favoring the petitioners. The court declined to refer the matter to a Full Bench, suggesting that any clarification should come from the Supreme Court directly. The judgment concluded by rejecting the government pleader's argument that clause (b) of section 6-A applied, emphasizing that the petitioners' use of materials in construction did not constitute disposal under the provision.

In light of the analysis and arguments presented, the court upheld the petitioners' third contention, ruling in their favor. The writ petitions were partly allowed, and no costs were awarded.