1996 (9) TMI 571 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of exemption under the Central Sales Tax Act, 1956 based on G.O. Ms. No. 604, Revenue(S), dated April 9, 1981.
2. Application of section 8(2-A) of the CST Act in relation to exemption granted under the Andhra Pradesh General Sales Tax Act, 1957.
3. Reversal of the Sales Tax Appellate Tribunal's decision based on the interpretation of G.O. Ms. No. 604 in Pinakini Seeds case [1995] 98 STC 144.

Detailed Analysis:
The High Court of Andhra Pradesh dealt with a case involving the assessment year 1986-87 where two turnovers were brought to tax under the Central Sales Tax Act, 1956. The assessing officer rejected the assessee's contention that exemption under section 8(2-A) of the CST Act applied due to G.O. Ms. No. 604, Revenue(S), dated April 9, 1981, granting exemption under the Andhra Pradesh General Sales Tax Act, 1957. The assessing officer argued that the exemption was conditional, not general, and therefore did not apply under the CST Act. The first appellate authority and the Sales Tax Appellate Tribunal upheld this view, leading to the filing of a tax revision case by the petitioner (assessee).

The G.O. Ms. No. 604, Revenue(S), dated April 9, 1981, exempted sales or purchases of certified and truthfully labelled seeds for agricultural purposes under the Andhra Pradesh General Sales Tax Act, 1957. A subsequent clarification by the government confirmed the exemption for both types of seeds. Another government order, G.O. Ms. No. 129, (C.T.-III) Revenue dated February 14, 1989, exempted sales of certified and truthfully labelled seeds for agricultural purposes in inter-State trade under the CST Act.

The Division Bench of the High Court, in Pinakini Seeds case [1995] 98 STC 144, reversed the Sales Tax Appellate Tribunal's decision, interpreting G.O. Ms. No. 604 as a general exemption for certified and truthfully labelled seeds. This interpretation was crucial in determining the applicability of section 8(2-A) of the CST Act, which provides for exemption if goods are exempted under the state's sales tax law. The High Court, citing Vinod Solvent Extracts (P.) Ltd. v. State of Andhra Pradesh [1989] 73 STC 175, held that goods exempted under the state sales tax law cannot be taxed under the CST Act.

The High Court rejected the government pleader's argument that the exemption was conditional, emphasizing that the Division Bench's interpretation of G.O. Ms. No. 604 as a general exemption was binding. The Court also dismissed the plea to reconsider the Pinakini Seeds case [1995] 98 STC 144 as a binding precedent, as the issue in question was different from the Supreme Court cases cited. Ultimately, the Court allowed the tax revision case, excluding the disputed turnovers from the tax net under section 8(2-A) of the CST Act and ordering refunds or adjustments if tax had already been collected from the petitioner.