2005 (10) TMI 523 - HC - VAT and Sales Tax

Issues Involved:
1. Eligibility for concessional tax rate under Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957.
2. Validity of circulars issued by the Commissioner of Commercial Taxes.
3. Penal proceedings and penalties imposed under Section 5-B(3)(b)(ii) of the Act.
4. Responsibility of selling dealers versus purchasing dealers regarding the misuse of concessional tax certificates.

Detailed Analysis:

1. Eligibility for Concessional Tax Rate:
The primary issue is whether the petitioners, manufacturers of ready-mix concrete, are eligible for a concessional tax rate on cement under Section 5-B of the Andhra Pradesh General Sales Tax Act, 1957, despite G.O. Ms. No. 496, dated July 17, 2001, which made cement ineligible for such a concession. The petitioners argued that they should be entitled to the concessional rate because the ready-mix concrete is a finished product and cement is a raw material for its manufacture. The court noted that the provision under Section 5-B is an enabling one for concessional tax on component parts, and cement is indeed a component for ready-mix concrete. However, the government notification specifically excluded cement from this benefit.

2. Validity of Circulars Issued by the Commissioner:
The court examined the circulars issued by the Commissioner of Commercial Taxes, particularly those dated August 9, 2001, January 8, 2005, and February 10, 2005. The court found that these circulars were administrative in nature and not issued under Section 42-A of the Act, thus not legally binding. The earlier circular by the Commissioner (dated August 9, 2001) allowed the purchase of cement as a raw material, but the subsequent circulars revoked this concession. The court held that since these circulars were not issued under the statutory authority, they should not influence the assessment decisions.

3. Penal Proceedings and Penalties:
The court addressed the issue of penalties imposed on the petitioners under Section 5-B(3)(b)(ii) for purchasing cement at a concessional rate against the provisions of G.O. Ms. No. 496. The court noted that the penalties were levied without proper consideration of the objections raised by the petitioners. The court found that the authorities had relied on the non-binding circulars, which was improper. Consequently, the court set aside the penalty orders and directed the authorities to reconsider the matter afresh, giving due notice and opportunity to the petitioners.

4. Responsibility of Selling Dealers:
In the related writ petitions (Nos. 4581, 4582, and 4587 of 2005), the issue was whether selling dealers could be held liable for the misuse of concessional tax certificates by purchasing dealers. The petitioners argued that the responsibility for misuse lies with the purchasing dealers, not the sellers, as sellers have no control over the buyers' use of the purchased goods. The court agreed, stating that the authorities should proceed against the buyers if they misuse the concessional certificates, not the sellers. The court set aside the orders against the selling dealers and remanded the cases for reconsideration, directing the authorities to consider the objections raised by the sellers.

Conclusion:
The court allowed the writ petitions, setting aside the impugned orders and circulars. It directed the assessing authorities to reconsider the matters afresh, providing due notice and opportunity to the petitioners. The authorities were instructed to dispose of the cases within three months, considering all legal aspects and objections raised by the petitioners. No costs were awarded.

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