1990 (11) TMI 382 - HC - VAT and Sales Tax

Summary

Issues:
1. Application of notifications under Andhra Pradesh General Sales Tax Act to finished products manufactured outside the state.
2. Constitutionality of notifications under articles 301, 304, and 14 of the Constitution of India.
3. Possibility of severing offending words from the notifications.
4. Violation of article 14 of the Constitution by restricting benefits to locally manufactured goods.
5. Justification for classification based on situs of manufacture.
6. Possibility of unjust enrichment by the petitioner.

Analysis:
1. The petitioner, a registered dealer under the Andhra Pradesh General Sales Tax Act, operates a re-rolling mill in Karnataka. It purchases tax-suffered steel scrap and ingots in Andhra Pradesh, manufactures finished products in Karnataka, and sells them in Andhra Pradesh. The petitioner seeks to apply notifications meant to reduce taxation on locally manufactured iron and steel products to its sales, despite manufacturing outside Andhra Pradesh.

2. The petitioner argues that treating goods manufactured outside Andhra Pradesh differently for taxation purposes violates articles 301 and 304 of the Constitution or, alternatively, article 14. The court refers to various Supreme Court decisions and notes that the notifications in question benefit only locally manufactured goods, excluding the petitioner. However, the court declines to strike down the notifications, citing difficulties in severing offending words and lack of significant benefit to the petitioner.

3. The court examines the possibility of removing offending words from the notifications or directing equal treatment for the petitioner. It references legal precedents but ultimately finds that the notifications do not violate article 14 as the State has the discretion to classify goods based on situs of manufacture to ensure revenue and industrial development within the state.

4. The court upholds the classification based on situs of manufacture, stating that restricting benefits to locally manufactured goods is a valid classification. It notes that tracking manufacturing activity outside the state for goods brought in is challenging, justifying the differential treatment. The court cites a previous case where concessions were limited to products of a local industry, which was upheld.

5. The court raises concerns about potential unjust enrichment by the petitioner if the notifications are declared invalid. It suggests that if the petitioner collected tax from customers during the period covered by the notifications, it may not be entitled to discretionary relief under article 226. Consequently, the court dismisses the writ petition without costs.

6. In conclusion, the court dismisses the writ petition, finding that the notifications are not in violation of the Constitution and that the petitioner may have benefited from collecting tax from customers during the period covered by the notifications.