1997 (1) TMI 495 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of Section 6-C of the Andhra Pradesh General Sales Tax Act, 1957.
2. Applicability of the impugned provision to transactions involving containers.
3. Interpretation of the amended Section 6-C.
4. Whether the impugned provision violates Article 14 of the Constitution of India.

Detailed Analysis:

1. Constitutional Validity of Section 6-C:
The petitioners challenged the constitutional validity of Section 6-C of the Andhra Pradesh General Sales Tax Act, 1957, as amended by Act 22 of 1995, arguing that it violated Articles 14, 19(1)(g), and 301 of the Constitution of India. The court noted that the original Section 6-C, inserted by Act 11 of 1984, had been previously upheld by both the High Court and the Supreme Court in the Raj Sheel case. The amended provision, which eliminates the statutory presumption of sale of containers and mandates that the rate of tax on containers sold with goods be the same as that of the goods packed or filled, was scrutinized to determine if it was consistent with constitutional principles.

2. Applicability to Transactions Involving Containers:
The court examined the facts of the case, particularly focusing on whether the impugned provision applied to the sale of containers, whether sold separately or along with their contents. The rationale behind taxing containers at the same rate as their contents was that containers are often perceived as integral to the goods they hold. The court noted that the amended provision applies when containers are sold with their contents, disregarding any separate terms of sale for the containers.

3. Interpretation of Amended Section 6-C:
The court analyzed the amended Section 6-C, comparing it with the unamended version. The amended provision states: "the rate of tax on packing material sold with the goods shall be the same as that of the goods packed or filled, whether or not there is separate sale or agreement for sale for the packing material and the goods packed or filled." The court interpreted this to mean that the provision applies to two types of transactions: (i) separate sale of the product and container, and (ii) integrated sale of the product and container. The court emphasized that the amended provision does not apply to cases where there is no sale of the container.

4. Violation of Article 14:
The petitioners argued that the impugned provision was discriminatory, violating Article 14 of the Constitution. The court held that the classification of containers into two categories-sold as such and sold with contents-was reasonable and had a rational nexus with the objective of the legislation, which was to simplify tax collection and minimize tax evasion. This classification had been previously upheld by the Supreme Court and other High Courts. The court concluded that the impugned provision did not violate Article 14.

Conclusion:
The court held that the amended Section 6-C of the Andhra Pradesh General Sales Tax Act, 1957, is constitutionally valid and does not violate Article 14 of the Constitution of India. The court also emphasized that the assessing authority must determine the ingredients of the contract and the intention of the parties in each case, in accordance with the Supreme Court's guidelines in the Raj Sheel case. The writ petitions were partly allowed, with no order as to costs.