9911796707
TMI Blog1999 (8) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents to refund the excess tax of Rs. 2,51,93,646 paid by the petitioner during the assessment years 1991-92 to 1994-95 by setting aside the assessment order dated May 15, 1995, May 1, 1996, January 10, 1997 and July 8, 1997 passed by the second respondent and to pass such other relief or reliefs as the court may deem fit and proper. 2.. A few facts as stated by the petitioner in the affidavit filed in support of the writ petition are as follows: M/s. Crane Betel Nut Works, Guntur, is a registered private firm. It is an assessee under the provisions of the Andhra Pradesh General Sales Tax Act, 1957 (for short "the APGST Act"). The petitioner purchases arecanuts from other States. The arecanuts so purchased are subject to tax under the local Acts where they are purchased. 3.. The petitioner manufactures betel-nut powder out of the arecanuts purchased from other States. As per entry 158(a) of the First Schedule to the APGST Act the betel-nut powder is liable for tax. The said entry reads as follows: Entry 158: Sl. No. Description of goods Point of levy Rate of tax Effective from 158 Betel-nut powder (a) Not covered by item (b) below At the point of first sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased from other States which are not subject to tax under the APGST Act is quite discriminatory and violative of articles 301 and 304 of the Constitution of India. Lower rate of tax is levied on the betel-nut powder manufactured out of arecanut which is subjected to tax under the APGST Act. There is a difference in tax rates levied though the end-product is the same. In case of groundnut oil which was used to be assessed under entry 24(a) of the First Schedule and which was also placed in similar circumstances, but lower rate of tax under entry 24(b) of the First Schedule was levied. As there was difference in rate of tax levied, which was discriminatory, an assessee by name M/s. Ananda Commercial Agencies challenged the constitutional validity of entry 24(a) before this Court on the ground that the groundnut oil manufactured out of groundnuts which has suffered tax in other States shall not be subjected to higher rate of tax. The said contention was rejected by this Court. In appeal the Supreme Court reversed the view of this Court holding that clause (a) of item 24 of the First Schedule to the APGST Act which was identical to entry 158(a) of the Act relating to betel-nut pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is only mentioned payment of service tax at 14 per cent. Since the petitioner has not submitted the bills for the years 1991-1992 to 1994-95, the respondent is not in a position to state whether the said arecanuts suffered tax under the KST Act or CST Act. It is stated by the second respondent that Andhra Pradesh is not an arecanut growing area. It has to import arecanuts from the other States. It is the case of the respondents that if the betel-nut powder is made out of the arecanuts which has met the tax under the APGST Act then the tax will be levied at 4 per cent at the point of first sale in the State, w.e.f. April 1, 1995 which works out to 9 per cent of tax on arecanut as per item 96 of the First Schedule of the APGST Act and 4 per cent tax on the resultant betel-nut powder as per entry 158(b). Thus the total works out to 13 per cent for the dealer who purchases arecanuts within the State of A.P. and manufactured betel-nut powder out of it. The betel-nut powder manufactured out of arecanut purchased from other States which has not met tax under the APGST Act was proposed to tax at 10 per cent as per entry 158(a) of the APGST Act. The dealer who purchases arecanut locally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Supreme Court in Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu [1976] 37 STC 517; STI 1976 SC 94 wherein it is held that "when the assessment was made on the basis of the returns filed by the assessee against which no appeal was preferred nor any steps taken by the assessee for modifying the assessment, the assessee cannot later claim refund of the tax paid and plea of mistake of law is not available". Further section 33BB of the APGST Act does not entitle the petitioner to seek refund. The position of betel-nut powder cannot be equated to the groundnut oil which was the subject-matter in Anand Commercial Agencies case [1997] 107 STC 586 (SC). Because that was a case where the court found that the oil manufactured was a major portion. In the case on hand, a major portion of arecanuts is imported from other States. 8.. Regarding constitutional validity of entry 158(a) of the First Schedule to the APGST Act, the respondent submits that this aspect was explained by the Supreme Court in the case of Video Electronics Pvt. Ltd. v. State of Punjab [1990] 77 STC 82; 15 198 A (Suppl.) SC 457; AIR 1990 SC 820 which suggests that levying of higher rate of tax does not impair trade an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refund of alleged excess tax paid be kept open to be decided by the appropriate authorities as already appeals for the period in question are pending before the Deputy Commissioner for Appeals. He maintained that whatever tax the petitioner collected from the purchasers on the end-product was under a bona fide mistake of law. Thus, whatever excess amount that has been paid shall have to be refunded. He lastly contended that from November 20, 1998 onwards, the petitioner is liable to be taxed at 4 per cent only. 11.. Sri M. Ramaiah, learned Government Pleader, submitted that the writ petition is not maintainable for the following reasons, namely, (i) the petitioner without exhausting the alternative remedy has approached this Court by filing the present writ petition; (ii) the petitioner is not entitled for refund of the amount as it has not paid any amount under a mistaken belief. Refund is also not permissible as the claim made has been spread over to ten years; (iii) the petitioner is liable to tax as mentioned at entry 158(a) of the First Schedule to the APGST Act and (iv) the principles laid down in the decisions referred above on facts have no application to the case on h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Act, was fixed at 6½ per cent and in case of groundnut oil mentioned at entry No. 24(b) tax was fixed at the rate of 2½ per cent. The assessee therein, who was the dealer in groundnut oil sold the groundnut oil in the State of A.P. which was brought from Karnataka State which oil was extracted out of groundnuts which had borne tax under the Karnataka Sales Tax Act. It was contended that higher rate imposed by entry 24(a) on such oil was discriminatory and violative of the assessee's freedom of trade and commerce throughout India. The said contention was rejected both by the authority and by this Court. Then an appeal was filed before the Supreme Court. The honourable Supreme Court considered the scope of entry 24(a) and (b) of the First Schedule to the APGST Act and entry 6 of the Third Schedule under which groundnut or peanut (arachis hypogaea) was specified as declared goods. The Supreme Court considered the scope of articles 301, 302, 303 and 304 of the Constitution of India which deal about freedom of trade and commerce and inter-course; powers of Parliament to impose restrictions on trade and commerce and intercourse; restrictions on the legislative powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminatory and violative of article 304(a) of the Constitution of India. 16.. The Supreme Court also referred to its earlier view taken in the case of Weston Electroniks v. State of Gujarat [1988] 70 STC 52 (SC); AIR 1988 SC 2038 whereby the notification fixing lower rate of tax in respect of local manufacturers of electronic goods while fixing higher rate for others was quashed observing that an exception to the mandate laid down by article 301 and the prohibition contained in article 303(1) could be sustained on the basis of clause (a) of article 304 only if the conditions contained therein were satisfied. 17.. The Supreme Court approved the decision rendered in the case of Shree Mahavir Oil Mills v. State of Jammu and Kashmir [1997] 104 STC 148 wherein the court declared that the Act of Jammu and Kashmir giving exemption from payment of tax first five years and then extending for another five years in case of manufacturer of indigenous edible oil while denying the same to the manufacturers of edible oil from adjoining States, as discriminatory and violative of article 304(a) of the Constitution of India. 18.. On its examination, the Supreme Court found that no special case wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted from the groundnut has no merit. There is no rationale behind such levy, as such the entry 24(a) suffers from discrimination. The Full Bench also observed that merely because an intermediary product comes into existence before the end-product is ultimately brought into existence, it does not make the end-product different. The end-product remains the same whether it is extracted from groundnut or groundnut cake. When the end-product is the same, there is no justification for levy of two different rates of tax-one higher and the other lower. While overruling the view taken by the Division Bench of this Court in the case of State of Andhra Pradesh v. Jayanti Oil Mills Private Ltd. (1995) 20 APSTJ 255, the Full Bench held that where the groundnut oil whether imported or extracted which suffered tax in the State it should be subjected to same rate of tax. While observing thus, the Full Bench declared entry 24(a) of the First Schedule to the APGST Act as discriminatory and violative of article 14 of the Constitution of India. 20.. Subsequent to the Full Bench decision of this Court in the case of Rajashree Oils & Extractions [1998] 111 STC 668, similar question had arisen for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hroughout the territory of India shall be free. Article 302: Power of Parliament to impose restrictions on trade, commerce and intercourse.-Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest. Article 303: Restrictions on the legislative powers of the Union and of the States with regard to trade and commerce.-(1) Notwithstanding anything in article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule. (2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to the APGST Act on the betel-nut powder whether imported from outside the State or manufactured from out of the arecanuts which has not suffered tax under the APGST Act in view of the principles laid down by the Supreme Court in the case of Anand Commercial Agencies [1997] 107 STC 586, Full Bench of this Court in the case of Rajashree Oils & Extractions [1998] 111 STC 668, and also the Division Bench of this Court in the case of Srinivasa Poultry & Cattle Feed Pvt. Ltd. [1999] 114 STC 67 has to be held as discriminatory, illegal, ultra vires and unconstitutional. Accordingly entry 158(a) is declared as illegal, arbitrary, ultra vires and violative of articles 301 to 304 of the Constitution of India. 24.. Regarding second prayer that the petitioner is liable to be assessed under entry 158(b) of the First Schedule to the APGST Act in respect of betel-nut powder though stand to reason, the petitioner himself restricts his request to extend the benefit of entry 158(b) w.e.f. November 20, 1998. Thus the petitioner's entitlement is only prospective and not retrospective. For the preceding period, it is stated that appeals are pending. As such he has to work out the same before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich we gave on considering the questions involved and conclusions reached on several points raised supported by the authorities referred to above, we have been compelled to (i) declare that entry 158(a) of the First Schedule to the APGST Act, 1957 in so far as it imposes higher rate of tax on betel-nut powder imported from other States or betel-nut powder manufactured from out of arecanut which has not suffered tax under the APGST Act, while imposing a lower rate of tax on the betel-nut powder if the arecanut has suffered tax in the State, as illegal, ultra vires and violative of articles 301 to 304 and 14 of the Constitution of India. (ii) The respondents are directed to levy tax on the sales of betel-nut powder made by the petitioner as required under clause (b) of entry 158 of the First Schedule to the APGST Act. (iii) Whether the petitioner was liable to pay tax at 4 per cent only on the sale of betel-nut powder w.e.f. November 20, 1998 or otherwise has to be agitated before appropriate forum. (iv) The petitioner's claim to refund of excess tax alleged to have been collected from the petitioner is ordered to be agitated before appropriate forum if he is entitled, since it i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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