2022 (10) TMI 1242 - HC - VAT and Sales Tax

Exemption from Sales Tax - Transmission Belts - cotton fabric falling under Entry 5 of IV Schedule read with Section 8 of APGST Act or not - HELD THAT - The findings of the Hon ble Supreme Court, in in Fenoplast s case 1998 (9) TMI 92 - SUPREME COURT , clearly applies to the case on hand. Explanation to IV Schedule of the State Sales Tax Act makes it clear that the expression used in Item 5 thereof has the meaning that is assigned to in the Central Act 58 of 1957. Hence, the words cotton fabrics, man made fabrics and woollen fabrics in Item 5 of IV Schedule, have to be read in the light of Item 59.03 of the I Schedule to Central Act 58 of 1957, which refers to textile fabrics, impregnated cloth covered or laminated. Therefore, the appellants product is covered by Item 59.03 and the appellants were liable to pay and accordingly, paid additional duties of excise under the Central Act 58 of 1957. Having regard to the above, the petitioner is liable for exemption, in view of Section 8 of the State Sales Tax Act. Hence, inclusion of Entry 101 of I Schedule would not make any difference to this decision. Both the Tax Revision Cases are allowed. There shall be no order as to costs.

Summary

Issues:
1. Interpretation of tax liability on sales of transmission belts under Andhra Pradesh General Sales Tax Act, 1957.
2. Application of relevant legal precedents to determine tax exemption eligibility for the petitioner.
3. Assessment of the impact of shifting entries in the tax schedules on the petitioner's tax liability.

Issue 1: Interpretation of Tax Liability on Sales of Transmission Belts
The Tax Revision Cases (TRC) were filed under Section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957, challenging the order of the Sales Tax Appellate Tribunal. The primary issue revolved around the petitioner, a registered dealer selling transmission belts, being exempted from sales tax. The Deputy Commissioner revised the exemption, leading to an appeal before the Tribunal. The Tribunal, relying on legal precedents, upheld the tax liability at 15%. The main contention was whether the petitioner was correctly directed to pay tax as per the Tribunal's order.

Issue 2: Application of Legal Precedents for Tax Exemption Eligibility
The petitioner argued citing the judgment of the Honorable Supreme Court in Fenoplast vs. State of Andhra Pradesh, challenging the Tribunal's decision based on legal precedents like the Good Year India case. The petitioner contended that they were entitled to exemption based on entries in the tax schedules and the payment of additional duties of excise under the Central Act 58 of 1957. The Assistant Government Pleader defended the Tribunal's decision, emphasizing the applicability of the Division Bench judgment in the Good Year India case to uphold the tax liability at 15%.

Issue 3: Impact of Shifting Entries on Tax Liability
The assessment period in question was 1995-1996, where Entry 101 of I Schedule was shifted to Item 12 of VI Schedule due to the introduction of VAT Tax. The Tribunal and Deputy Commissioner relied on the Good Year India case to impose tax on transmission belts under Entry 101, despite being classified as cotton fabric under Entry 5 of VI Schedule. The petitioner's payment of additional duties of excise under the Central Act 58 of 1957 played a crucial role in determining their exemption eligibility under Section 8 of the State Sales Tax Act. The legal interpretation of the relevant schedules and precedents led to the conclusion that the petitioner was indeed entitled to exemption, overturning the Tribunal's decision.

In conclusion, the High Court allowed both Tax Revision Cases, setting aside the Tribunal's orders and granting exemption to the petitioner. The judgment extensively analyzed the legal provisions, precedents, and tax schedules to determine the petitioner's tax liability, emphasizing the importance of paying additional duties of excise under the Central Act 58 of 1957 for exemption eligibility under the State Sales Tax Act.