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TMI Blog2007 (10) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... category of "bulk drugs" they can be charged to tax only at four per cent under section 4(3) read with entry 16 of Schedule IV of the VAT Act. W.P. allowed. - Writ Petition No. 17678 of 2007 - - - Dated:- 10-10-2007 - BILAL NAZKI AND RAMESH RANGANATHAN , JJ. ORDER:- The order of the court was made by RAMESH RANGANATHAN J. The assessment order of the first respondent dated May 10, 2007, levying tax and penalty, is impugned in this writ petition as arbitrary, illegal and contrary to the provisions of the Andhra Pradesh Value Added Tax Act, 2005 (Act No. 5 of 2005) (hereinafter referred to as the APVAT Act ) and the petitioner seeks a declaration that aluminium hydroxide paste, and magnesium hydroxide paste, manufactured by them, and certified by the Director, Drugs Control Administration, are bulk drugs and are taxable for the assessment year 2005-06 only at four per cent under entry 16 of Schedule IV of the APVAT Act. The petitioner, a private limited company carrying on the business of manufacture and sale of bulk drugs, pharmaceutical formulations, etc., is an assessee with the first respondent. For the assessment year 2005-06, the petitioner reported a net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only such of the bulk drugs covered by the HSN codes notified against entry 16 of Schedule IV were liable to be taxed at four per cent and other bulk drugs taxable at 12.5 per cent. The assessment order dated May 10, 2007 in Form VAT 305 was served on the petitioner on August 2, 2007. The petitioner submits that G.O. Ms. No. 502 dated May 1, 2006 was issued directing levy of tax at four per cent on all bulk drugs falling under Chapter 28 of the Central Excise Tariff Act which includes aluminium hydroxide paste and magnesium hydroxide paste, that, while an appeal could be preferred against the order of the first respondent to the Appellate Deputy Commissioner, it would, however, be an exercise in futility since the order passed and the clarification issued by the Advance Ruling Authority was binding on the Appellate Deputy Commissioner. The short question which arises for consideration is whether the scope of entry 16 of Schedule IV, i.e., bulk drugs , can be restricted by an executive order only to eight specified items and other bulk drugs be treated as unclassified goods under Schedule V of the APVAT Act and taxed at the higher rate of tax at 12.5 per cent. Since this q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficulty arises in giving effect to the provisions of the Act (otherwise than in relation to the transition from the provisions of the corresponding Acts in force before the commencement of the Act), the Government may, by order make such provisions, not inconsistent with the purposes of the Act, as appear to it to be necessary or expedient for removing the difficulty. . . . 79.. Power to amend Schedules. (1) The Government may, by notification, alter, add to or cancel any of the Schedules. (2) Where a notification has been issued under sub-section (1) there shall, unless the notification is in the meantime rescinded, be introduced in the Legislative Assembly, as soon as may be, but in any case during the next session of the Legislative Assembly following the date of the issue of the notification, a Bill on behalf of the Government, to give effect to the alteration, addition or cancellation, as the case may be, of the Schedule specified in the notification, and the notification shall cease to have effect when such Bill becomes law, whether with or without modifications, but without prejudice of the validity of anything previously done thereunder: Provided that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The APVAT Act, 2005 was amended by the A.P. VAT (Second Amendment) Act, 2006 (Act No. 34 of 2006) and the amendment, in G.O. Ms. No. 502 dated May 1, 2006, was inserted into the Act as entry 100 of Schedule IV. In addition entries 102 to 113 were also added to Schedule IV. The power, conferred on the Government, to alter, add or cancel any of the Schedules to the Act, under section 79(1), can be exercised only for a limited period till the amendment to the Schedule is either approved or rejected by the State Legislature. The power under section 79(1) is hedged and circumscribed by the conditions stipulated in sub-section (2) thereof. The notification, issued under section 79(1) amending the Schedule, is required to be introduced in the Legislative Assembly at the earliest and, in any case, during the next session of the Legislative Assembly following the date on which the notification is issued. Introduction of the notification, in the Legislative Assembly, is to be by way of a Bill giving effect to the alteration, addition or cancellation of the Schedule specified in the notification. On the Bill becoming law, with or without modification, the notification issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 76(2), cannot restrict the scope of the entry and limit it only to the eight categories of bulk drugs which, under G.O. Ms. No. 1615 dated August 31, 2005, were covered by HSN codes. It cannot be lost sight of that the assessing authority can exercise his power to levy tax only in accordance with the provisions of the APVAT Act. As stipulated in section 4(3) thereof, the VAT dealer is required to pay tax, on the sale of goods taxable under the Act on the sale price, at the rates specified in Schedule IV. Since Schedule IV is the list of goods taxable at four per cent, and entry 16 thereof relates to bulk drugs , all bulk drugs are liable to be taxed only at four per cent. Prescription of HSN codes for eight categories of bulk drugs , under G.O. Ms. No. 1615 dated August 31, 2005, is in exercise of the power conferred under section 76(2) of the Act to remove difficulties and cannot run contrary to the provisions of the Act. Since entry 16 of Schedule IV of the Act, prior to its amendment by Act 34 of 2006, did not classify bulk drugs on the basis of its coverage by HSN codes, no reliance can be placed by the assessing authority on G.O. Ms. No. 1615 dated August 31, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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