1987 (9) TMI 404 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of G.O. Ms. No. 540 regarding the tax rate.
2. Applicability of additional tax under Section 5-A and surcharge under Section 6-B.
3. Object and purpose of G.O. Ms. No. 540.
4. Contractual obligations regarding tax reimbursement.

Issue-Wise Detailed Analysis:

1. Interpretation of G.O. Ms. No. 540 Regarding the Tax Rate:
The petitioner argued that the phrase "rate of tax payable under the said Act" in G.O. Ms. No. 540 indicated that the total tax payable should not exceed 4%. The court, however, interpreted the phrase to mean the rate of tax specified in the relevant entries in the Schedules to the Act, not including additional tax and surcharge. The court emphasized the importance of the words "notwithstanding anything contained in any of the Schedules to the said Act," which suggested that the reduction was only in the basic rate of tax and not in the total tax liability.

2. Applicability of Additional Tax Under Section 5-A and Surcharge Under Section 6-B:
The petitioner contended that the additional tax under Section 5-A and surcharge under Section 6-B should not be levied in addition to the reduced tax rate of 4%. The court disagreed, noting that the State Government's clarification in its memorandum dated April 3, 1986, was legal and justified. The court stated that the additional tax and surcharge were not exempted by G.O. Ms. No. 540 and thus were still applicable.

3. Object and Purpose of G.O. Ms. No. 540:
The petitioner argued that the purpose of G.O. Ms. No. 540 was to maintain parity and prevent the diversion of trade from the State by reducing the tax rate to 4%. The court reviewed the representations made by the Federation of Andhra Pradesh Chambers of Commerce and Industry and concluded that the State Government intended only to reduce the basic rate of tax to 4%, not the total tax liability. The court found that the clarification issued by the State Government did not frustrate the object and purpose of G.O. Ms. No. 540.

4. Contractual Obligations Regarding Tax Reimbursement:
The petitioner claimed that the National Thermal Power Corporation (NTPC) was not agreeable to reimburse the tax at more than 4% due to the terms of their contract. The court noted that while the Andhra Pradesh State Electricity Board had agreed to reimburse the additional tax liability, NTPC had not. The court referenced the Supreme Court's observations in Hindustan Sugar Mills Ltd. v. State of Rajasthan, emphasizing fairness and justice. The court expressed hope that NTPC would reimburse the additional tax liability, although it acknowledged there was no legal obligation for NTPC to do so.

Conclusion:
The court dismissed the writ petition, upholding the State Government's clarification that the additional tax and surcharge were applicable in addition to the reduced tax rate of 4%. The court also made an observation encouraging NTPC to reimburse the additional tax liability to the petitioner, in the interest of fairness and justice. No order as to costs was made, and the advocate's fee was set at Rs. 200.