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TMI Blog1999 (9) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase point whereas rice is taxable at the point of first sale at 4 per cent. In order to avoid the contingency of both paddy and corresponding rice being subjected to tax, the Legislature introduced Explanation III of the Third Schedule in tune with section 15(c) of the Central Sales Tax Act, 1956. The said explanation reads as follows: Explanation III.-For the purposes of items 21 and 22, where a tax has been levied under this Act in respect of the sale or purchase inside the State of any paddy, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy. 2.. To illustrate the application of the explanation if the sale value of rice is Rs. 5,000 and the purchase value of paddy from which rice is derived is Rs. 4,000, the actual rate of tax payable would be Rs. 40, i.e., 0.8 per cent. This is the net amount of tax payable, though if the general rate of 4 per cent is applied, the tax would have been Rs. 200. 3.. Sale tax is leviable on the net turnover of the dealer which, broadly speak ing, is nothing but an aggregate of sale prices of taxable goods. Normally and in the absence of the stipulations to the contrary, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales of rice is the net tax payable after providing rebate towards the tax on paddy as provided in the Explanation III to the Third Schedule of the APGST Act and also as provided under section 15(c) of the CST Act, 1956. In all paddy and rice cases, the deduction towards tax component on rice will be worked out on the basis of the net tax payable on sales of rice after the rebate is given on the basis of tax paid on corresponding purchase of paddy consumed. 6.. Under section 42-A of the Andhra Pradesh General Sales Tax Act, 1957 the Commissioner is empowered to issue orders, instructions and directions not inconsistent with the provisions of the Act or the Rules made thereunder to his subordinate officers for the proper administration of the Act and such officers are bound to comply with them. 7.. It is not in dispute that the tax deduction vis-a-vis the turnover of rice was worked out in the light of the circular. Taking the figures in Writ Petition No. 7690 of 1999, let us explain how the assessing officer arrived at the figure qualifying for deduction towards the tax component. The sale value of rice is mentioned at Rs. 3,19,71,580. From this purchase value of corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat within the frame work of the rule, it is not possible to give effect to the circular. What is clarified by the Commissioner goes contrary to what is laid down in the formula enunciated in rule 6(1)(l). The formula does not contemplate that the tax attributable to corresponding turnover of paddy shall be excluded before arriving at the deduction of the amount relatable to tax on rice as per rule 6(1)(l). The only possible way of reconciling the circular with the rule is to construe the expression rate of tax as the net amount of tax payable on rice after allowing the rebate on paddy tax in accordance with the Explanation III of the Third Schedule. Such an interpretation would amount to giving strained interpretation to the expression rate of tax . In fact, it is not the stand of the respondents that rate of tax on rice is anything other than the standard rate of 4 per cent. 11.. The rebate or reduction provided for by Explanation III of the Third Schedule does not determine the rate of tax contemplated by the formula. Even the assessment order shows that the rate of tax was taken as 4 per cent. Apart from the direct decisions of this Court which interpreted the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, the tax revision case having been rejected in limine. It is brought to our notice that the view taken in Sri Ganesh Trading Company [1988] 71 STC 431 (AP); (1988) 6 APSTJ 258 was followed and applied by the Tribunal to a case in which section 8-A(1) of the Central Sales Tax Act, 1956 [identical to rule 6(1)(l)] came up for consideration. The Tribunal rejected the contention that the rebate under section 15(c) has to be excluded while giving deduction for the tax element in respect of inter-State sales. Thus, the Commissioner s circular runs counter to the catena of decisions both of the High Court and of the Tribunal. The effect and impact of these decisions were obviously not considered by the Commissioner. 14.. It is relevant to refer to one more decision of the division Bench in State of Andhra Pradesh v. Laxminarayana Gupta (1995) 21 APSTJ 21. Their Lordships were construing the proviso to section 8-A(1)(a) of the Central Sales Tax Act, 1956 which is identical to the proviso to rule 6(1)(l) of the Andhra Pradesh General Sales Tax Rules, 1957. While observing that the basic principle embodied in section 8-A of the Central Sales Tax Act, 1956 is that there should be no t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified whether it is 4 per cent or less as no enquiry at all was made on those lines. 16.. Our conclusion is that the circular of the Commissioner is contrary to law and cannot control the plain effect of formula laid down in rule 6(1)(l). However, it is open to the assessing authority to hold an enquiry whether and to what extent the tax element has been included in the sale price. In view of the fact that the assessment orders are based on the Commissioner s circular (in fact, in some of the assessments a specific reference has been made to the Commissioner s circular) and the mode of arriving at the deduction under rule 6(1)(l) is based on incorrect understanding of the rule, we set aside the assessments and direct fresh assessments to be made without reference to the Commissioner s circular. 17.. Before parting with the case, we must record that we have found fault with the Commissioner s circular because it goes contrary to the plain language of the formula and for the reason that the expression rate of tax does not take any rebate under Explanation III of the Third Schedule. But, it seems to us that the circular rests on a rational basis and perhaps gives better effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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