2014 (7) TMI 702 - HC - VAT and Sales Tax

Liability to tax - Exemption from tax - Whether the petitioner is liable to pay purchase tax under section 6A of the Andhra Pradesh General Sales Tax Act in respect of burnt lime notwithstanding the fact that the dealers from whom the petitioner purchased the burnt lime were exempted from payment of sales tax - Held that - Where there is no collection of tax there is no levy and accordingly the goods which are not subjected to levy of tax at the point of sale could be subjected to levy of purchase tax under section 5A. The appellant carried the matter to the Supreme Court contending that goods being declared goods, under section 14 of the Central Sales Tax Act, 1956, they are subjected to limits placed by section 15 of the Central Sales Tax Act and therefore if iron and steel are subjected to a single point levy of tax at the first point of sale, then there is no question of a second levy or charge at any subsequent point of sale or purchase. liability to tax or taxability under section 5 of the Kerala General Sales Tax Act remains unaffected by an exemption under section 10 of the said Act and consequently the respondent cannot validly shift the burden of tax to the purchaser under section 5A for the same would violate the condition of single stage tax under section 15 of the Central Sales Tax Act - following the decision in Peekay Re-Rolling Mills (P) Ltd. s case 2007 (3) TMI 356 - SUPREME COURT OF INDIA , we hold that the petitioner cannot be made liable to pay the purchase tax under section 6A of the Andhra Pradesh General Sales Tax Act, 1957 - Decided in favour of assessee.

Issues Involved:
1. Liability of the petitioner to pay purchase tax under section 6A of the Andhra Pradesh General Sales Tax Act (APGST Act) on burnt lime.
2. Interpretation of tax exemption granted to selling dealers and its impact on the purchasing dealer's tax liability.
3. Applicability of the Supreme Court's decisions in Peekay Re-Rolling Mills (P) Ltd. v. Assistant Commissioner and State of Tamil Nadu v. M.K. Kandaswami to the present case.

Detailed Analysis:

1. Liability of the Petitioner to Pay Purchase Tax Under Section 6A of the APGST Act:
The petitioner, a manufacturer of paper, purchased burnt lime from dealers within Andhra Pradesh who were exempted from sales tax under G.O. Ms. No. 2566 dated June 11, 1980. The petitioner claimed that since the selling dealers were exempted from tax, they should not be liable to pay purchase tax under section 6A of the APGST Act. Initially, the assessing authority accepted this claim, but the Deputy Commissioner revised the assessments, imposing tax on the purchase turnover. The Sales Tax Appellate Tribunal upheld this revision, leading to the present revision cases.

2. Interpretation of Tax Exemption Granted to Selling Dealers and Its Impact on the Purchasing Dealer's Tax Liability:
The Tribunal rejected the petitioner's contention that the selling dealers had collected tax and that the purchase price was inclusive of taxes, citing a lack of proof. The Tribunal also dismissed the argument that the petitioner was not liable for tax due to the selling dealers' exemption, suggesting that the petitioner should seek recovery of any illegally collected taxes through appropriate legal action. The petitioner argued that the exemption granted to the selling dealers should prevent the imposition of purchase tax on them, referencing the Supreme Court's decision in Peekay Re-Rolling Mills (P) Ltd. v. Assistant Commissioner.

3. Applicability of Supreme Court Decisions:
The petitioner cited Peekay Re-Rolling Mills (P) Ltd. v. Assistant Commissioner, where the Supreme Court held that the burden of tax cannot be shifted to the purchaser if the selling dealers are exempted from tax. The respondents, however, argued that this case dealt with "declared goods" and was not applicable. Instead, they referenced State of Tamil Nadu v. M.K. Kandaswami, where the Supreme Court held that the purchasing dealer is liable to pay tax on their purchase turnover if certain conditions are met, drawing parallels between section 7A of the Madras General Sales Tax Act and section 6A of the APGST Act.

Court's Ruling:
The court examined the relevant provisions of the APGST Act, including sections 5, 6, and 6A, and the definitions of "declared goods." It noted that burnt lime is not a declared good and falls under item 212 of the First Schedule, typically subject to single point tax at the first sale. However, due to the exemption granted to the selling dealers, the court found merit in the petitioner's argument that they should not be liable for purchase tax under section 6A.

The court distinguished the facts of Peekay Re-Rolling Mills (P) Ltd. from the present case but emphasized the principle that exemption from tax does not negate the liability to tax. It concluded that the ratio of Peekay Re-Rolling Mills (P) Ltd. applied to the present case, despite the difference in the type of goods involved.

Conclusion:
The court held that the petitioner could not be made liable to pay purchase tax under section 6A of the APGST Act, following the Supreme Court's decision in Peekay Re-Rolling Mills (P) Ltd. Consequently, the orders of the Tribunal and the Appellate Deputy Commissioner were set aside, and the revision cases were allowed. No costs were awarded, and any pending miscellaneous petitions were closed.

← Previous Next →