TMI Blog1999 (8) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... ner 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, levying of tax on higher rate on the betel-nut powder manufactured out of arecanuts 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act or under General Sales Tax Act of any other States. From the information available, 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount which was spread over for nearly ten years is impermissible in view of the decision of 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 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo different types of tax as stated above is discriminatory. He submitted that the claim relating 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this Act. (1165) do. 2 do. 4 do. 1-7-1985 1-4-1995 13. In the case of Anand Commercial Agencies [1997] 107 STC 586 (SC), the constitutional validity of entry 24(a) and (b) had come up for judicial consideration where under entry 24(a) tax in respect of groundnut oil or refined oil obtained from groundnut which had not borne any tax under the Act, was fixed at 6 per cent and in case of groundnut oil mentioned at entry No. 24(b) tax was fixed at the rate of 2 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 gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that such an act is discriminatory and it affects free flow of trade and commerce and, thus, it offends article 301 of the Constitution of India. Thus observing the Supreme Court declared rule 16(2) which imposed different taxes in respect of same item manufactured from two different sources-one from outside the State and another within the State, as discriminatory 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 exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no rationale behind levying different rates of tax-one lower and the other higher-on the same endproduct and, therefore, it is arbitrary. The reason for imposing different rates of tax on the same end-product, namely, groundnut oil on the ground that the cost of groundnut oil which is extracted from the groundnut cake is more than the groundnut oil extracted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t petition and to hold the validity or otherwise of entry 158(a) and (b) of the First Schedule to the APGST Act, it is necessary to keep in mind the effect of articles 301 to 304 of the Constitution of India which read as follows: Article 301: Freedom of trade, commerce and intercourse.-Subject to the other provisions of this Part, trade, commerce and intercourse throughout 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me an impediment for free-flow of trade and commerce. 23.. From the above discussion, it is clear that tax on a commodity whether manufactured within the State or imported from outside the State shall be one and the same unless it is authorised by law and protected under article 304(a) of the Constitution of India. Levying higher rate of tax under entry 158(a) of the First 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 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenge the assessment in accordance with the provisions of the Act or seek relief by filing writ petitions seeking extension of benefit to him under that G.O. at an appropriate time by challenging the final assessment order. Hence it is proper for the petitioner to approach appropriate authority for the relief of refund, if he is entitled and so advised. 26.. The findings which 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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