1990 (2) TMI 285 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of sales tax on wheat and wheat products.
2. Alleged violation of Article 301 of the Constitution of India.
3. Comparison of sales tax rates across different states.
4. Impact of statutory changes on sales tax liability.
5. Applicability of surcharge and additional turnover tax.

Detailed Analysis:

1. Constitutionality of Sales Tax on Wheat and Wheat Products:
The petitioners, several roller flour mills, sought a declaration that the collection of sales tax on the sale or purchase of wheat or its products like maida, atta, and ravva is unconstitutional and illegal. They argued that the high rate of sales tax under the Andhra Pradesh General Sales Tax Act, 1957, makes it cheaper for bakeries in the state to buy wheat products from mills outside the state.

2. Alleged Violation of Article 301 of the Constitution of India:
The petitioners contended that the levy of sales tax in the manner and at the rates prescribed by the state violates Article 301 of the Constitution of India, which ensures freedom of trade, commerce, and intercourse throughout the territory of India. They relied on several Supreme Court decisions, including Atiabari Tea Co. Ltd. v. State of Assam, to support their claim that the sales tax affects the free flow of trade and commerce.

3. Comparison of Sales Tax Rates Across Different States:
The court reviewed the sales tax rates in neighboring states and found that the rates in Andhra Pradesh were not significantly higher. For instance, Karnataka imposed a 2% tax on wheat and 3% on wheat products, with a set-off for tax-paid wheat. Tamil Nadu had a 1% tax on wheat and 2% on wheat products, with an exemption for wheat. Maharashtra granted an exemption to both wheat and wheat products. The court concluded that except for Maharashtra, the sales tax rates in Andhra Pradesh were comparable to those in other states.

4. Impact of Statutory Changes on Sales Tax Liability:
The court noted that significant statutory changes had been made by the state after the writ petitions were filed. The Andhra Pradesh General Sales Tax (Third Amendment) Act, 1988, increased the levy of additional tax on turnover. Additionally, G.O. Ms. No. 130, Revenue, dated 14th February 1989, reduced the sales tax on wheat and its products. The effective rate of sales tax on maida or ravva was reduced to 2% where wheat had not suffered state sales tax and 1% where it had. The tax on wheat itself was reduced to 1%.

5. Applicability of Surcharge and Additional Turnover Tax:
The court examined sections 5-A and 6-B of the Andhra Pradesh General Sales Tax Act, which provided for the levy of additional tax and surcharge, respectively. The surcharge was 10% of the sales tax, and the additional turnover tax was 1.5 paise per rupee for turnovers over 1 crore and 1 paisa per rupee for turnovers between fifty lakhs and one crore. The court found that these provisions did not per se violate Article 301.

Conclusion:
The court dismissed the writ petitions, concluding that the sales tax laws of Andhra Pradesh did not violate Article 301 of the Constitution. The court noted that the differences in sales tax rates among states were inherent in the federal structure and did not by themselves indicate a hindrance to the freedom of trade. The court also dismissed an oral application for leave to appeal to the Supreme Court under Article 132 of the Constitution, stating that the case did not involve any substantial question of law regarding the interpretation of the Constitution. No orders as to costs were made, and the Government Pleader's fee was set at Rs. 250 in each case.