2003 (10) TMI 624 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Eligibility of petitioners for sales tax concession under G.O. Ms. No. 108 dated May 20, 1996.
2. Definition and interpretation of "manufacturing activity" in the context of packaged drinking water.
3. Compliance of respondents with court directives in previous litigation rounds.
4. Applicability of the Kerala High Court's decision in Teejan Beverages Ltd. v. State of Kerala [2002] 128 STC 216.

Issue-wise Detailed Analysis:

1. Eligibility of petitioners for sales tax concession under G.O. Ms. No. 108 dated May 20, 1996:

The Government of Andhra Pradesh issued G.O. Ms. No. 108 dated May 20, 1996, offering incentives for industries established in certain areas. These included investment subsidies and sales tax deferment or exemption. The petitioners, having established small-scale industries for mineral water production, claimed these benefits. Initially, the benefits were extended, but later, the commercial tax department withdrew the sales tax exemption, leading to the current litigation.

2. Definition and interpretation of "manufacturing activity" in the context of packaged drinking water:

The core issue was whether the process of making packaged drinking water qualifies as a "manufacturing activity," which was not defined in G.O. Ms. No. 108. The petitioners argued that the process and the significant investment involved should qualify as manufacturing. The respondents, however, denied this, citing a decision from the Kerala High Court, which held that making packaged drinking water does not constitute manufacturing.

3. Compliance of respondents with court directives in previous litigation rounds:

The court observed that in two prior rounds of litigation, it had directed the respondents to determine whether the process undertaken by the petitioners was a manufacturing activity. Despite these directives, the respondents failed to comply, reiterating their initial stance without proper examination or providing the petitioners an opportunity to present their case.

4. Applicability of the Kerala High Court's decision in Teejan Beverages Ltd. v. State of Kerala [2002] 128 STC 216:

The respondents based their denial of sales tax exemption on the Kerala High Court's decision, which held that making packaged drinking water is not a manufacturing activity. However, the court noted that the Kerala case involved a specific definition of "manufacture" in the notification, which was absent in the current case. Therefore, the Kerala High Court's decision was not applicable.

Conclusion:

The court concluded that the petitioners are entitled to the sales tax exemptions under G.O. Ms. No. 108 dated May 20, 1996. It noted the distinction in the sales tax schedules between ordinary water and packaged drinking water, taxed at different rates. The court found that the respondents unjustifiably denied the concessions and failed to follow court directives in previous litigation rounds. Consequently, the writ petitions were allowed, granting the petitioners the claimed tax exemptions.