2005 (10) TMI 507 - HC - VAT and Sales Tax

Tax revision - rice millers and registered dealers under the APGST Act - revision of assessment u/s 20(2) - Whether gunnies which have suffered tax within the State of A.P. can, u/s 6-C of the Andhra Pradesh General Sales Tax Act, 1957 ( APGST Act) again be subjected to tax when they are sold along with the contents, despite the prescription in entry 19 of the First Schedule that gunnies, sold with or without its contents, are liable to be taxed only at the point of first sale in the State? - HELD THAT - We are unable to appreciate the distinction sought to be made by Sri V. Bhaskar Reddy, learned counsel for the respondents, between sections 5, 5-B, 5-C, 5-F, 6 and 6-A on the one hand and section 6-C on the other. The expression shall pay tax used in sections 5, 5-B, 5-C, 5-F, and 6-A and shall be liable to tax used in section 6 are not dissimilar to the expression tax shall be levied and collected as used in section 6-C. Further the heading of section 5 is levy of tax on sale or purchase of goods , that of section 5-A is levy of tax on turnover , section 5-F is levy of tax on transfer of property in goods involved in the execution of works contract , section 6-A is levy of tax on turnover relating to purchase of certain goods and section 6-C is levy of tax on packing material . Thus sections 5, 5-A, 5-F, 6-A and 6-C are provisions which relate to levy of tax. If sections 5 and 5-A are to be held as charging sections we see no reason, in the absence of any discernible distinction, to hold that section 6-C is not. Sri V. Bhaskar Reddy, learned counsel for the respondents, would urge, rightly so, that the interpretation placed by us on section 6-C would result in gunnies being taxed at multiple points. If that is what the Legislature intended, by providing a non obstante clause in section 6-C, and in subjecting section 5(1) to the other provisions of the APGST Act including section 6-C, such a consequence would indeed be the result and must be accepted. It is also true, as contended by Sri V. Bhaskar Reddy, learned counsel for the respondents, that entry 19(iii) was inserted, in the First Schedule, by Act No. 30 of 1997 with effect from May 12, 1997 after section 6-C was amended by Act No. 22 of 1995 with effect from April 1, 1995. As referred to supra, prior to May 12, 1997 gunnies were enumerated under entry 157 of the First Schedule and the point of levy then was also at the point of first sale in the State. The First Schedule, when gunnies were under entry 157 and now under entry 19(iii), details goods in respect of which single point tax is leviable u/s 5. While bringing gunnies under entry 19(iii) from entry 157 with effect from May 12, 1997 the State Legislature did not choose to amend section 6-C or to omit the non obstante clause therein. By Act No. 30 of 1997 gunnies are now classified as two sub-entries under entry 19(iii), gunnies when sold without contents under entry 19(iii)(a) and gunnies when sold with contents under entry 19(iii)(b). This subclassification is obviously to bring gunnies, which are packing material, in tune with the requirements of section 6-C. Since the point of levy of tax on gunnies, both prior to its amendment, under entry 157, and after the amendment with effect from May 12, 1997 under entry 19(iii), is at the point of first sale, nothing turns on its amendment by Act No. 30 of 1997, while interpreting section 6-C of the APGST Act. We therefore hold that gunnies which have suffered tax within the State of A.P. can, u/s 6-C of the APGST Act, again be subjected to tax when sold along with its contents despite the prescription in entry 19(iii) of the First Schedule that gunnies, sold with or without its contents, are liable to be taxed only at the point of first sale in the State. These batch of tax revision cases are accordingly allowed and the order of the Sales Tax Appellate Tribunal set aside. There shall however be no order as to costs.

Summary

Issues Involved:
1. Whether gunnies that have already suffered tax within the State of Andhra Pradesh can be subjected to tax again under Section 6-C of the Andhra Pradesh General Sales Tax Act, 1957, when sold along with their contents.

Issue-wise Detailed Analysis:

1. Background and Legal Framework:
The case revolves around the interpretation of Section 6-C of the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act), particularly in the context of whether gunnies (sacks) that have already been taxed within the state can be taxed again when sold with their contents. The respondents, rice millers and registered dealers, were initially exempted from paying tax on second sales of gunnies by the Commercial Tax Officers. However, the Deputy Commissioners revised these assessments, invoking Section 6-C to levy a 4% tax on the turnover of gunnies, aligning it with the tax rate of the rice they contained. The Sales Tax Appellate Tribunal (S.T.A.T.) ruled that gunnies already taxed within the state should not be taxed again when sold with rice.

2. Contentions of the State:
The State argued that the non obstante clause in the amended Section 6-C overrides other sections of the APGST Act, asserting that the rate of tax on packing material sold with goods should be the same as that of the goods packed, regardless of whether the packing material had previously been taxed. They contended that Section 6-C is a charging section and should be interpreted to include the point of levy due to the non obstante clause.

3. Contentions of the Respondents:
The respondents argued that gunnies, having already suffered tax at the first sale point within the state, should not be taxed again when sold with rice. They contended that Section 6-C only prescribes the rate of tax on packing material and does not provide for its taxation in cases where it has already been taxed. They relied on the Supreme Court's decision in Raj Sheel v. State of Andhra Pradesh, which held that packing material should not be taxed again if it has already suffered tax.

4. Tribunal's Findings:
The Tribunal, relying on previous judgments, held that Section 6-C only prescribes the rate of tax on packing material and does not cover the point of levy. It ruled that gunnies already taxed within the state should not be taxed again when sold with rice, as it would lead to multiple taxation, contrary to the provisions of the First Schedule of the APGST Act.

5. Court's Analysis and Judgment:
The court examined the provisions of the APGST Act, particularly the amended Section 6-C, which states that the rate of tax on packing material sold with goods should be the same as that of the goods packed, irrespective of whether there is a separate sale agreement for the packing material and the goods. The court noted the non obstante clause in Section 6-C, which overrides other sections of the Act, including Section 5(1) that prescribes the point of levy.

The court held that the non obstante clause in Section 6-C gives it an overriding effect over other provisions, including the point of levy specified in the First Schedule. It concluded that the rate of tax on gunnies should be the same as that of the goods packed, and the application of Section 6-C cannot be restricted to the point of first sale within the state. The court rejected the respondents' contention that Section 6-C is not a charging section, stating that it is indeed a provision relating to the levy of tax.

6. Conclusion:
The court ruled that gunnies, which have already suffered tax within the State of Andhra Pradesh, can be subjected to tax again under Section 6-C of the APGST Act when sold along with their contents, despite the prescription in entry 19(iii) of the First Schedule that gunnies are liable to be taxed only at the point of first sale in the state. The court allowed the batch of tax revision cases filed by the State and set aside the order of the Sales Tax Appellate Tribunal.