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2015 (5) TMI 804 - ANDHRA PRADESH HIGH COURT

2015 (5) TMI 804 - ANDHRA PRADESH HIGH COURT - [2015] 81 VST 1 (T&AP) - Levy of purchase tax u/s 4 - agriculture product processors i.e. (1) rice millers, or (2) dhal millers, or (3) soyabean oil millers, or (4) cotton millers - whether in the nature of levy on farmers - Held that:- Notwithstanding the goods being "taxable goods", there may be circumstances by reason of which the particular sale transaction does not attract tax under the Act. Section 4(4) provides for such a situation and makes .....

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not on the sale of goods by a farmer/agriculturist, but on the VAT dealer who purchases goods (agricultural produce) from the farmer. The contention that a farmer or an agriculturist is being subjected to tax is not tenable, as tax is levied not on him but on the VAT dealer who purchases goods from him. It is not every purchase of taxable goods from an agriculturist/farmer, but only such goods which fall within the ambit of clauses (i) to (iii) of Section 4(4), and its proviso, which attracts le .....

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er under Section 2(10) of the Act. Purchase of such agricultural produce by a VAT dealer is in circumstances in which no tax is payable by the seller. In such circumstances tax, at 4%/5% of the purchase price of such goods, is liable to be paid by the VAT dealer who purchases the aforesaid goods i.e., agricultural produce. This liability of a VAT dealer to pay purchase tax would, however, arise only if any one of the conditions, mentioned in clauses (i) to (iii) of Section 4(4), are satisfied. .....

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evied on goods which are used as inputs for other goods which are exempt from tax, or for goods which have been transferred on consignment or to branches of the VAT dealer outside the State otherwise than by way of sale. While the provisions of the Act must, in view of Article 286(3) of the Constitution of India, be complaint with Sections 14 and 15 of the CST Act, it is not clear as to how denial of input-tax credit, or computation of input-tax credit in accordance with Rule 20 of the Rules, in .....

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cided in favour of assessee. - Writ Petition Nos.17972 of 2014 & Writ Petition Nos.17972, 22902, 22907, 28240 of 2008; 6503,6519, 7877, 7898, 7907, 18756, 18791 of 2009; 10710, 11596 of 2010; 17136, 17151, 21980, 22013, 22035, 22123 of 2012; - Dated:- 4-3-2015 - Writ Petition Nos.17972, 22902, 22907, 28240 of 2008; 6503,6519, 7877, 7898, 7907, 18756, 18791 of 2009; 10710, 11596 of 2010; 17136, 17151, 21980, 22013, 22035, 22123 of 2012;15515, 15570, 22425, 22426, 22428, 22446, 22552, 22632, 22717 .....

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, 30941, 31743, 31871, 31894, 31939, 32032, 33027, 34323, 34452, 34474, 34476 and 34890 of 2014 SRI RAMESH RANGANATHAN AND SRI M.SATYANARAYANA MURTHY, JJ. For the Appellant :S.R.R. Viswanath, Sri V. Bhaskar Reddy, Sri Shaikh Jilani Basha and Sri M.V.J.K. Kumar For the Respondent: Sri D. Srinivas, Sri M. Govind Reddy and Sri J. Anil Kumar, Learned Special Standing Counsel for Commercial Taxes COMMON ORDER: (Per Honble Sri Justice Ramesh Ranganathan) In this batch of writ petitions, the validity o .....

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FCI or in the open market, and pay value added tax (VAT) on the said sales. The husk obtained, after milling rice, is either sold or consumed by the dealer. In such cases, the assessing authorities have levied 5% purchase tax on the purchase price of paddy which was used as input for husk which is exempt from tax under the first Schedule to the Act. The second category of petitioners purchased raw dhal from agriculturists, milled it to produce dhal, and paid value added tax (VAT) on the sale of .....

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chase price of soyabean seed which was used as input for soyabean deoiled cake which is exempt from tax under the Act. The fourth category of petitioners purchased raw cotton (Kapas) from agriculturists, and ginned it. Cotton seeds were separated in the process. The ginned cotton i.e., cotton lint was sold. The cotton seeds were crushed, and cotton seed oil was extracted and sold. Cotton deoiled cake, obtained after crushing cotton seed, was sent outside the State otherwise than by way of sale. .....

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h by Dr. S.R.R. Viswanath, Sri V. Bhaskar Reddy (1993) 88 STC 98, Sri Shaikh Jilani Basha and Sri M.V.J.K. Kumar, Learned Counsel for the petitioners and Sri D. Srinivas, Sri M. Govind Reddy and Sri J. Anil Kumar, Learned Special Standing Counsel for Commercial Taxes. Written submissions have also been filed by Dr. S.R.R. Viswanath and Sri M.V.J.K. Kumar, Learned Counsel for the petitioners and Sri D. Srinivas, Sri M. Govind Reddy and Sri J. Anil Kumar, Learned Special Standing Counsel for Comme .....

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happening of certain events subsequent to the purchase viz., (1) consumption in the manufacture/production of other goods for sale; (2) consumption otherwise; (3) disposal of those goods within the State otherwise than by way of sale; and (4) dispatch of goods outside the State. Purchase tax, levied under Section 4(4) of the Act, is similar to Section 6-A of the A.P. General Sales Tax Act, 1957 (for short the APGST Act). Section 6-A was inserted in the APGST Act by Act 49 of 1976 w.e.f. 1-9-1976 .....

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-A. 4. The constitutional validity of Section 6-A of the APGST Act, and Section 9 of the Haryana Sales Tax Act, was upheld by the Supreme Court in Hotel Balaji v. State of A.P (1993) 88 STC 98. The constitutional validity of Section 5-A of the Kerala General Sales Tax Act, Section 4-B of the Punjab Sales Tax Act and Section 7-A of the Tamilnadu General Sales Tax Act, all of which were similar to Section 6-A of the APGST Act, was upheld by the Supreme Court in Devi Dass Gopal Krishan (P) Ltd. v. .....

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ality of statutes, and in the absence of a challenge to its validity, we must proceed on the footing that Section 4(4) and its proviso is constitutionally valid. Our approach must be to uphold the validity of the provision by a process of a fair and broad reading of the constitutional mandate, (State of Punjab v. Devans Modern Breweries Ltd ((2004) 11 SCC 26), and interpret it in such a manner that its constitutionality is upheld. (Aslam Mohammad Merchant v. Competent Authority (2008) 14 SCC 186 .....

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62 SC 955 (Five Judge Bench). If the language is not clear and precise as it ought to be, the attempt of the court should to ascertain the intention of the legislature and put that construction which would lean in favour of the constitutionality unless such construction is wholly untenable. (State of Karnataka v. Hansa Corpn. (1980) 4 SCC 697 ; Seaford Court Estates Ltd. v. Asher (1949) 2 ALLER 155 (SC)). II. SECTION 4(4) OF THE ACT ITS SCOPE: 6. Section 4(4) of the Act provides that every VAT d .....

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of sale in the State or dispatched outside the State otherwise than by way of sale in the course of inter-State trade and commerce or export out of the territory of India; or (iii) disposed of otherwise than by way of consumption or by way of sale either within the State or in the course of inter-State trade or commerce or export out of the territory of India. Under the first proviso thereto, wherever a common input is used to produce goods, the turnover, taxable under Section 4(4), shall be th .....

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the measure or value to which the rate will be applied for computing the tax liability. If these components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme, in defining any of these components of the levy, will be fatal to its validity. (Govind Saran Ganga Saran v. Commissioner of Sales Tax (1985) 60 STC 1 (SC). The scheme of the Act involves three interrelated but distinct concepts .....

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t to their purchase by the dealer, if those goods were not available for taxation owing to the acts of the dealer as specified in clauses (i) to (iii) thereof. (The State of Tamil Nadu v. M.K. Kandaswami AIR 1975 SC 1871 : AIR 1975 SC 1871 : (1975) 36 STC 191 (SC) 8. The ingredients of Section 4(4) of the Act are (1) a VAT dealer, in the course of his business, purchases taxable goods from (a) any person, or (b) a dealer not registered as a VAT dealer, or (c) from a VAT dealer in circumstances i .....

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re exempt from tax under the Act; or (ii) used as inputs for goods which are (a) disposed of otherwise than by way of sale in the State, or (b) dispatched outside the State otherwise than by way of (1) sale in the course of inter-state trade or commerce or (2) export out of the territory of India; or (iii) disposed of, otherwise than by way of consumption or by way of sale, either (a) within the State or (b) in the course of inter-state trade or commerce or (c) export out of the territory of Ind .....

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the State, no purchase tax is collected on the inputs as the State gets larger revenue by taxing the sale of such goods. (The value of manufactured/produced goods is bound to be higher than the value of the goods used as inputs). The State legislature does not wish in the interest of trade and general public to tax both the input and the output (i.e., the finished/manufactured product). But where the manufactured goods are not sold within the State but are yet disposed of, or where the manufactu .....

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uation, the State says, it would retain the levy and collect it since there is no reason for waiving the purchase tax in these situations. In the case of inter-state sale, the State gets tax-revenue may not be to the full extent. Though Central Sales Tax (CST) is levied and collected by the Government of India, Article 269 of the Constitution provides for making over the tax collected to the States in accordance with certain principles. In the case of export sale, within the meaning of Section 5 .....

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es, (Hotel Balaji1; Madhur Trading Co. v. State of Karnataka (1993) 90 STC 537 (Karnataka HC)), or where a VAT dealer purchases goods and disposes it otherwise than by way of consumption or by way of sale. The idea is that the State should have the benefit of one tax atleast from a transaction in such goods involving sale or purchase. (Madhur Trading Co.). 10. Section 4(4) of the Act brings to tax goods the sale of which would, normally, have been taxed at some point in the State. Subsequent to .....

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such goods otherwise than by consumption or by way of sale either within the State or in the course of inter-state trade or export, tax is levied on the purchase price of such goods. (Kandaswami12). True it is that the levy materialises only when the purchased goods (raw material/input) is consumed in the manufacture of different goods and those goods are disposed of within the State otherwise than by way of sale or are consigned to the manufacturing-dealers depots/agents outside the State. Mere .....

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C 537 (Ker) ; M.K. Kandaswami ; State of Madras v. Narayanaswami Naidu (1968) 21 S.T.C. 1 (S.C) . Section 4(4) creates a liability against the VAT dealer on his purchase turnover with regard to goods which, though taxable, are not taxed due to other factors such as exemption etc. (The State of Tamil Nadu v. Tvl. Pari Trading Co. (Order of the Tamil Nadu High Court in TRC No.2286 of 2008 dated 12.07.2010) 11. Section 4(4) is at once a charging as well as a remedial provision. (M.K. Kandaswami). S .....

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Ltd. v. State of A.P (1982) 51 STC 1 (APHC) 12. Each transaction of purchase, used or disposed of in the manner contemplated under clauses (i) to (iii) of Section 4(4), is distinct and is neither capable of being construed as overlapping or as redundant. (Hindustan Milkfood Manufacturers Ltd. (1982) 51 STC 1 (APHC) ). The scheme of Section 4(4) is to levy tax on the purchase of raw material/input, and not to forego it, where the goods manufactured out of them are disposed of (or despatched) in .....

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sed are not available for taxation inside the State and, by reason of one of the contingencies, the State is likely to lose its revenue, the interest of the State needs to be secured. The policy underlying Section 4(4) is to tax every transaction either at the point of sale or purchase. Where the seller is not taxed or cannot be taxed, the purchaser is taxed. By the same reasoning, when the seller is taxed, the purchases is not taxed. (Ruchi Soya Industries Limited v. Commercial Tax Officer Harb .....

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t on one transaction of sale/purchase of the goods. If the goods are not available in the State for subsequent taxation, by reason of the circumstances mentioned in clauses (i) to (iii) of Section 4(4), then the purchaser is made liable to tax under Section 4(4). (Ruchi Soya Industries Limited(2008) 12 VST 546; M.K. Kandaswami). 14. Bearing in mind the scope and purport of Section 4(4) and its first proviso, we shall now examine the submissions, put forth by Learned Counsel on either side, under .....

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ct respectively was completely paid; the cotton-seed, derived out of ginning (i.e., the cotton seed was not purchased), was crushed and the resultant cotton seed oil or cotton seed oil cake was sent on consignment to agents in other States; in a few cases cotton-seed was sent on consignment to agents in other states; cotton kapas and cotton lint are the same commodity; unginned cotton (that is raw cotton or cotton kapas) cannot be brought under any of clauses (i), (ii) or (iii) of Section 4(4); .....

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the word manufacture in clause (i) thereof, the Legislature has expanded the scope of Section 4(4) of the Act; the petitioner(s)-dealer(s) purchase raw cotton, process it and dispatch cotton deoiled cake outside the State, otherwise than by way of sale; purchase tax is levied only when the goods, produced from the inputs, are not subjected to tax; and the petitioners cannot escape the liability to pay purchase tax on raw cotton (proportionately), as no tax is levied on the oil cake, extracted b .....

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rchase value of paddy and raw dhal on the ground that husk has not been subjected to tax under the Act. Tax has also been levied on the proportionate purchase value of soyabean seed on the ground that soyabean deoiled cake has not been subjected to tax under the Act. 18. Raw cotton, paddy, raw dhal and soyabean seed are all taxable goods. The expression taxable goods, as used in Section 4(4), can be defined as goods the sale of which is liable to tax under the Act. The word "taxable qualifi .....

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ch no tax is payable by the seller. Both these ingredients are not mutually exclusive and the existence of one does not necessarily negate the other. Both can co-exist and in harmony. The former ingredient would be satisfied if it is shown that the particular goods were "taxable goods". (M.K. Kandaswami). In these Writ Petitions the goods, on which purchase tax has been levied, under Section 4(4) of the Act, are all taxable goods ie they are goods the sale of which is generally taxable .....

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be circumstances by reason of which the particular sale transaction does not attract tax under the Act. Section 4(4) provides for such a situation and makes the purchase of such goods taxable in the hands of the purchasing VAT dealer, on his purchase turnover, in any of the circumstances referred to clauses (i) to (iii). For instance, branch transfer or stock transfer of goods by a VAT dealer to his consignee/agent is not taxable under the Act. Such transactions attract the ingredients of clause .....

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on 4(4) has been levied in this batch of Writ Petitions), are subjected to, resulting in production of other goods. IV. SALE OF AGRICULTURAL PRODUCE TO VAT DEALERS FARMERS ARE NOT SUBJECTED TO TAX UNDER THE ACT: 21. It is contended, on behalf of the petitioners, that the goods, i.e., paddy, cotton kapas, soyabean seed, and dhal, are purchased from farmers in all these cases, except in the case of cotton mills where kapas are also purchased from registered dealers; the farmer is outside the purvi .....

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to business and trade; trade and business are synonymous; and, as the farmer is excluded from the definition of business, he is equally exempt from the definition of sale also. 22. On the other hand Learned Special Standing Counsel for Commercial Taxes would submit that, under the APGST Act, various goods were taxable either at the point of sale or at the point of purchase despite which some transactions escaped levy of tax which prompted the legislature to introduce Section 6-A; under the Act a .....

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ear that the dealers are liable to pay purchase tax if the conditions mentioned therein are present; in all these cases, since the petitioners have purchased agricultural produce such as paddy, dhal, kapas, soya etc. from agriculturists and have used them as inputs for other goods which are exempt from tax or have used them as inputs for goods which were sent out of the State otherwise than by way of sale, the dealers are liable to pay purchase tax on the proportionate purchase value of the inpu .....

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r who, in the course of his business, purchases taxable goods from (1) a person; or (2) a dealer not registered as a VAT dealer; or (3) a VAT dealer in circumstances in which no tax is payable by the selling VAT dealer. The word purchase, as used in Section 4(4), is not defined under the Act. Purchase is the other side of a sale transaction. Every transfer of the property in goods for consideration results in a sale and a purchase. (Madhur Trading Co.). Section 4(4) visualises imposition of tax .....

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nd whether or not any gain or profit accrues therefrom; (b) any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern; and (c) any transaction in connection with commencement or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, adventure or concern. Under Explanation (iii) thereto, for the purpose of Section 2(6), a sale by a person, whether by himself or through an agent of agricultural o .....

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supply or use of material directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration. Under Explanation II thereto, where a grower of agricultural or horticultural produce sells such produce grown by himself on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, in a form different from the one in which it was produced after subjecting it to any physical, chemical or any process .....

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Section 2(10) of the Act nor can he be said to be carrying on business for the purposes of the Act. The word person is not defined under the Act. Section 2(22) of the A.P. General Clauses Act defines person to include any company or association of individuals whether incorporated or not. The word person, in Section 2(22) of the A.P. General Clauses Act, brings within its ambit not only natural persons but also artificial persons. It is an inclusive definition, and must receive an extended connot .....

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the context does not otherwise provide, under Section 4(4) of the Act also. 27. The tax levied under Section 4(4) is not on the sale of goods by a farmer/agriculturist, but on the VAT dealer who purchases goods (agricultural produce) from the farmer. The contention that a farmer or an agriculturist is being subjected to tax is not tenable, as tax is levied not on him but on the VAT dealer who purchases goods from him. It is not every purchase of taxable goods from an agriculturist/farmer, but on .....

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urchasing dealer is being taxed. When taxable goods are sold by a farmer/agriculturist he cannot be taxed because he is not a dealer. The purchaser is taxed in such cases provided one of the conditions specified in clauses (i) to (iii) in Section 4(4) are satisfied. (Hotel Balaji1). Where goods, liable to tax under the Act, are purchased by a VAT dealer from other dealers who are not registered under the Act, and the goods have not suffered any sales tax, a liability is imposed on the purchasing .....

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e tax on the sale of goods exempt from tax, by virtue of its being placed in the exempt list by the legislature; such a construction would defeat the very object and purpose of the exemption granted by the legislature; as sale and purchase are but two facets of the same transaction, purchase tax cannot be levied on the ground that sales tax is exempt or vice versa; and tax, under Section 4(4), cannot be levied merely to augment revenue. 30. When taxable goods are sold by a person, who is not a d .....

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s liable to be paid by the VAT dealer who purchases the aforesaid goods i.e., agricultural produce. This liability of a VAT dealer to pay purchase tax would, however, arise only if any one of the conditions, mentioned in clauses (i) to (iii) of Section 4(4), are satisfied. 31. The provisions contained in a statute, with respect to exemption of tax on the one hand, must be distinguished from the total non-liability or non-imposition of tax on the other. (Rattan Lal & Co. v. Assessing Authorit .....

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remains unaffected, only the subsequent requirement of payment of tax to fulfil the liability is done away with. (Peekay Re-Rolling Mills (P) Ltd. (2007) 4 SCC 30). Section 4(4)(i) of the Act is attracted where the purchased goods are used as inputs for goods which are exempt from tax under the Act. Section 7 of the Act stipulates that the goods, listed in Schedule I to the Act, shall be exempt from tax under the Act. The VAT dealer, who purchases paddy from a farmer and mills it, obtains rice .....

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um ; M. Narayanan Nambiyar v. State of Kerala (MANU/KE/0089/1979 ; Ganesh Trading Co., Karnal v. State of Haryana [1973] 32 STC 623; State of Karnataka v. B. Raghurama Shetty [1981] 47 STC 369 ). 32. While rice is taxable under Entry 85 of the IV Schedule, husk is exempt under Entry 41 of the First Schedule to the Act. As VAT is liable to be paid on the sale of rice, tax cannot be levied under Section 4(4), on the purchase price of paddy, to the extent it results in production of rice. However, .....

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. Soyabean oil is taxable under Entry 67 of the IV Schedule to the Act. However soyabean deoiled cake is exempt under Entry 3 of the First Schedule to the Act. The VAT dealer is, therefore, subjected to tax under Section 4(4)(i) on the proportionate purchase value of soyabean seed which has yielded soyabean deoiled cake. It is only because the goods listed in the first schedule to the Act are exempt from payment of VAT under the Act, is purchase tax levied, under Section 4(4)(i) of the Act, on g .....

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is not deprived of its revenue and that goods are taxed once either at the time of its sale or at the time of its purchase. It is only because certain goods are exempt from tax under the Act, is purchase tax levied on other goods which are used as input for such exempted goods. Both Section 4(4) and Section 7 form part of the Act and the submission that the executive is seeking to levy tax on goods, which are exempt from tax under the Act, does not merit acceptance. Having granted exemption in r .....

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prescribed; no purchase tax is leviable as the use of expression disposed of in the proviso makes it clear that branch transfers or stock transfers to ones own consignee/agents, which do not involve transfer of ownership, will not attract the charge; the pro- rata principle is not applicable to stock transfers; Section 4(4), as interpreted by the Revenue, tries to reach out to the purchase followed by two taxable events by looking to derivatives of the derivates of the input, even though the ma .....

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ue on the sale of cotton lint (i.e ginned cotton), no purchase tax can be levied on cotton kapas relatable to cotton seed; disposal by way of sale, of the entire cotton lint, amounts to disposal of cotton kapas; the condition precedent for the levy of purchase tax, i.e., disposed otherwise than by way of sale, is not fulfilled; levy of purchase tax under Section 4(4), by subjecting by-products to tax (which are otherwise exempt from tax by the legislature), is impermissible; the goods i.e. husk, .....

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purchase turnover of kapas purchased from farmers, for arriving at the corresponding purchase turnover of kapas presumed to have been used for manufacturing hank yarn and cotton delint husk. 35. On the other hand the Learned Special Standing Counsel for Commercial Taxes would submit that the word input, used in Section 4(4), has a broader meaning than raw material; it includes any goods that are put in; there may be intermediary products, but the goods which first go into the process also becom .....

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e than by way of sale (i.e. consignment) of cotton seed oil, cotton seed cake and, in some instances, cotton seed; since it is an exempt transaction, purchase tax is levied on the proportionate purchase value of the goods i.e., input i.e., raw cotton under clause (ii) of Section 4(4) of the Act; a common input is one which gives rise to an output or outputs; inputs, which are not related to the outputs, are specific inputs; a common input is one which gives rise to both common and specific outpu .....

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i) and (iii) of Section 4(4); anything that is put in is input; there may be an intermediary product between the first good (input) and the end products (outputs); and the goods which first go into the process becomes the input for the end products. 36. Learned Standing Counsel would seek to explain the scope of Section 4(4) by way of an illustration. Example: A -B- C (output) (Input) D (output) If the dealer purchases A from VAT dealers and sells C and D within the State, VAT paid on A is allow .....

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on (Kapas) purchased from farmers is used as an input to produce cotton lint and cotton seed; and cotton seed is further processed into cotton seed oil and cotton seed cake. The input purchased is raw cotton and not cotton seed. Purchase tax is levied on the purchase price of raw cotton which is used as an input for cotton lint, cotton seed, cotton seed oil and cotton seed cake, and one or two outputs are dispatched otherwise than by way of sale. Common inputs are taxable on the happening of any .....

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signed goods is taken from the account books of the dealer and then, through a method of backward calculation, the proportionate purchase value is arrived at, and purchase tax is levied thereon at 4%/5%. This is because, except for raw cotton, the dealer has not purchased any other input to produce cotton seed de-oiled cake consigned by him outside the State. 37. A proviso may serve four different purposes: (1) qualifying or excepting certain provisions from the main enactment; (2) it may entire .....

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am v. V.R. Pattabhiraman AIR 1985 SC 582 ). The proviso to Section 4(4) prescribes the manner in which the turnover, taxable under Section 4(4) of the Act, should be determined. It stipulates that, where a common input is used to produce goods, the taxable turnover under Section 4(4) shall be the value of the inputs proportionate to the value of the goods used or disposed of in the manner prescribed in clauses (i) to (iii) thereunder. 38. The goods used in the manufacture of any output or end- p .....

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t be burnt-up or consumed in the process. (Collector of C.E. v. Ballarpur Industries Ltd. (1990) 77 STC 282). "Disposing of" means parting with the goods in some or the other manner. It means transfer of goods from one to another. (Venkata Krishna Constructions v. Commercial Tax Officer (1988) 68 STC 287 (APHC) , No.I, Vijayawada ; State of Tamil Nadu v. E.C. Constructions and Industries [1968] 61 STC 337 (Mad) , State of Kerala v. Ocean Wealth [1987] 65 STC 16 (Ker), Goodyear India Lt .....

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ictionary of English Law and Webster Comprehensive Dictionary, International Edition, Vol. 1. p. 368). If the manufactured goods are not sold within the State, but are yet disposed of within the State then no tax is payable on such disposition. Again where such manufactured goods are taken out of State to the manufacturers own depots or to the depots of his agents then no such tax is payable on such removal. (Shri Krishna Oil and General Mills v. State of Punjab (2010) 35 VST 226 (P&H) ). 39 .....

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128 , ). The word common, as used in the proviso to Section 4(4), is significant. The Concise Oxford Dictionary of Current English (Eighth Edition) defines common, among others, to mean belonging to two or more quantities (common factor). The input must be common to one or more outputs. Paddy, as an input, is common both to rice and husk and soyabean seed, as an input, is common both to soyabean oil and soyabean deoiled cake. 40. The proviso to Section 4(4) is attracted where a common input is .....

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torney General (1965) 1 All E.R. 225 ). As the word inputs, referred to in the second limb of the proviso, refers only to the common input in the first limb, it matters little that the word inputs is used in the plural in the second limb, and the word input in the singular in the first limb of the proviso to Section 4(4) of the Act. The submission that it is only where multiple inputs are used would the proviso be attracted does not merit acceptance, for then the word common input in the first l .....

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ords are necessary in order to tax the subject, which does not mean that words are to be unduly restricted against the State, or that there is to be any discrimination against the State in those Acts. It simply means that, in a taxing Act, one has to look merely at what is clearly said. (Cape Brandy Syndicate v. Inland Revenue Commissioner (1921) K.B. 64). The rule of literal construction is that a statutory enactment must, ordinarily, be construed according to the plain natural meaning of its l .....

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is that the court is not confined to a literal interpretation. There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded. This new principle was not invented on a juristic basis independent of statute. That would be indefensible since a court has no power to amend a tax statute. The principle is developed as a matter of statutory construction. The new development is not based on a linguistic analysis of the mea .....

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982) AC 300). The main object of Section 4(4) is to plug leakage of revenue and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workability, and efficacy is to be preferred to the one which would render it otiose or sterile. (Hotel Balaji; M.K. Kandaswami). 42. The proviso to Section 4(4) of the Act is .....

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imary product. However, it also brings into existence oil cakes which are sold outside the State and are, therefore, not subject to tax under the provisions of the Act. Therefore, the taxable event is the purchase of cotton seed to the extent the by -product oil -cakes have been sold outside the State. (Shri Krishna Oil and General Mills39). If the purchased goods are utilised partly for manufacture of goods that are taxable, and another part for the manufacture of goods that are not taxable, an .....

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cake disposed of by way of stock transfer on consignment basis outside the State, was under challenge. The petitioner therein contended, like in the present batch of Writ Petitions, that, as oilcakes were merely a by -product in the course of production of oil, such goods could not be subjected to levy of tax. The Division bench of the Gauhati High Court negatived the contention and upheld the validity of the levy. 44. The goods used as input/inputs are distinct and different from the goods whic .....

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n circumstances in which no tax is payable by the person who sold the goods, then the proportionate purchase value of cotton seed can be subjected to tax under Section 4(4) of the Act. That would, however, not justify raw-cotton, which is a commodity distinct from cotton seed, being subjected to tax in terms of the proviso to Section 4(4), as raw-cotton is not the common input for cotton seed hull, cotton seed oil and cotton seed de-oiled cake. The use of the words used or disposed of in the man .....

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which is the common input for cotton seed oil or cotton seed hull or cotton seed de-oiled cake. The proviso to Section 4(4) cannot be so extended as to bring within its ambit goods whose derivatives are common inputs for other goods (outputs) which attract the ingredients of clauses (i) to (iii) of Section 4(4) of the Act. 45. The theory, of common input/specified input, put forth on behalf of the respondents does not derive support from a plain and literal reading of the proviso to Section 4(4 .....

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ld not be interpolated even if the remedy of the statute would thereby be advanced, or a more desirable or just result would occur. Even where the meaning of the statute is clear, and sensible, either with or without the omitted word, interpolation is improper since the primary source of the legislative intent is in the language of the statute. (Crawford in his book on "Construction of Statutes": 1940 Edn 269; Polester Electronic (P) Ltd44). 46. Where the literal reading of a statute p .....

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own by the rest of the statute. (R. v. Dakes [1959] 2 All E.R. 350 ; Federal Steam Navigation Co. Ltd. v. Department of Trade and Industry [1974] 2 All E.R. 97; Polester Electronic (P) Ltd44). Addition or modification of words, used in a statutory provision, is generally not permissible but courts may depart from this rule to avoid a patent absurdity. (Narayanaswami v. Pannerselvam (1972) 3 SCC 717 = ([1973] 1 S.C.R. 172; Polester Electronic (P) Ltd.). 47. The proviso to Section 4(4) is not inde .....

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For instance, cotton seed is an input both for cotton seed oil and cotton seed cake. If cotton seed oil were to constitute 70% of cotton seed and the remaining 30% cotton seed deoiled cake, and if cotton seed oil is sold and the cotton seed deoiled cake is used or disposed of in the manner specified in clauses (i) to (iii) of Section 4(4), it is only the proportionate value of cotton seed, representing cotton seed deoiled cake, which can be subjected to purchase tax under Section 4(4) of the Ac .....

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rchased. Where Raw cotton is purchased, tax under Section 4(4) can only be levied on cotton seed, provided the ingredients of clauses (i) to (iii) are satisfied, as the former is the input and the latter is the output. However Section 4(4) is not attracted where cotton seed oil and cotton seed deoiled cake satisfy the ingredients of clauses (i) to (iii) as cotton seed, which is their input, has not been purchased by the VAT dealer and, instead, the goods purchased are raw cotton. 48. The questio .....

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n by inter - State sale, would be liable to tax and calculated accordingly. The tax is imposed on the raw material purchased by the dealer (ie cotton seed) for, if purchase tax is calculated on the value of the end product (ie oil cake), it would then be a tax imposed on the manufacture of goods which would be beyond the competence of the State Legislature. Purchase tax is, therefore, levied on the purchase of raw material/input. (Shri Krishna Oil and General Mills39). 49. The contention that pu .....

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r Section 4(4) of the Act, is not on the goods which constitute the output, but on the proportionate value of the purchased goods which constitute the input, to the extent it has resulted in production of goods which constitute the output. Tax under Section 4(4) is not levied on soyabean deoiled cake, husk etc but on paddy and soyabean seed which have yielded the aforesaid goods. VII. IS THE METHOD PRESCRIBED IN THE FIRST PROVISO TO SECTION 4(4), FOR COMPUTING THE CORRESPONDING VALUE, IRRATIONAL .....

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he value of the inputs which is relevant; and the proviso should be understood to be applicable in cases where multiple inputs are used for obtaining an output or different outputs exempt from payment of tax, in which case only the proportionate purchase value of the specific input, used for obtaining the output, has to be calculated as the second limb refers to the value of inputs which is plural in nature. Reliance is placed on Delux Wires v. State of A.P (1990) 77 STC 373 (APHC) in this regar .....

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first proviso to Section 4(4) of the Act deals with the method of calculation of purchase tax on a proportionate basis; the proportionate basis or method was introduced to bring uniformity in the calculation of purchase tax in respect of different commodities, and among different assessing authorities in the State; there is no ambiguity in the proviso; it prescribes the method to be adopted to calculate the purchase price of the input liable to tax under Section 4(4); and, to arrive at the purch .....

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nce in the numerator exempt transactions are taken and in the denominator total sales are taken, the purchase price of Kapas, liable to tax under Section 4(4), will generally be less than the consignment value; this proportionate method adopted cannot, therefore, be said to be irrational or irregular; the measure or value is clearly ascertainable because the value of the portion of cotton kappas, out of which the proportionate value of the goods (oil cake) is produced, is derived from the yield .....

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14-B of the APGST Act, as incorporated by the Amendment Act 18 of 1985, must be read down by not giving effect to the said provisions until and unless the legislature prescribes guidelines for exercising the power conferred thereunder; and the expressions "prevailing market prices" and "abnormally low" occurring in Section 14-B of the Act, are defined. The Division bench, however, made it clear that, as and when the legislature chooses to define the said two expressions and .....

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to tax under Section 4(4) of the Act. While paddy is the common input for rice and husk, soya bean seed is the common input for soya bean oil and soya bean de-oiled cake. The proportionate quantity of husk obtained from paddy would differ from the proportionate quantity of soya bean de-oiled cake obtained from soya bean seed. It is neither possible, nor is it required for the application of the proviso to Section 4(4), that a specific formula be uniformly prescribed for arriving at the proportio .....

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y determined the proportionate value is a question of fact to be determined on the facts and circumstances of each case. Suffice it to hold that the mere fact that no uniform formula is prescribed does not disable the assessing authority from giving effect to the proviso to Section 4(4) of the Act, and in subjecting the proportionate value of the purchase price of taxable goods to tax under Section 4(4) of the Act. VIII. IS THE 1ST PROVISO TO SECTION 4 (4) PROSPECTIVE IN ITS APPLICATION? 56. It .....

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h impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction. Courts construe the machinery sections in such a manner that a charge to tax is not defeated. (Associated Cement Company Ltd. v. Commercial Tax Officer (48) STC 466 at 476 , Kota ; Commissioner of Wealth Tax, .....

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ction i.e., Section 4(4) of the Act. (Sharvan Kumar Swarup & Sons (1994) 6 SCC 623; W.H. Cockerline & Co. v. The Commissioner of Inland Revenue (16) TC 1 at 19 ). It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a .....

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Cloth and General Mills Co. Ltd. v. Income Tax Commissioner (1927) P.C. 242 ; Jose Da Costa. v. Bascora Sadasiva Sinai Narpomim (1976) 2 SCC 917; Sharvan Kumar Swarup & Sons). 59. We are concerned, while applying the proviso to Section 4(4), with the determination not whether a particular turnover can be brought to tax under the Act but whether, if the turnover is liable to be charged to sales tax, the manner in which the turnover must be determined. In other words, we are concerned with a .....

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ble turnover, it can only be considered to be procedural and not substantive. It has not the effect of impairing any vested right or creating any new obligation. (Sharvan Kumar Swarup & Sons54). As the proviso to Section 4(4) is a machinery provision, the contention that it has no application to the assessment period prior to 24.09.2008, when it was inserted by Act 28 of 2008, does not merit acceptance. IX. IS TAX, LEVIED UNDER SECTION 4(4), IN THE NATURE OF CONSIGNMENT TAX? 60. It is conten .....

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Hotel Balaji, wherein the Supreme Court held:- .The section applies only in those cases where (a) the goods are purchased (for convenience sake, I may refer to them as raw material) by a dealer liable to pay tax under the Act in the State, (b) the goods so purchased cease to exist as such goods for the reason they are consumed in the manufacture of different commodities and (c) such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a .....

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the depots of his agents, no tax is payable on such removal. Goodyear1 takes only the last eventuality and holds that the taxable event is the removal of goods from the State and since such removal is to dealers own depots/agents outside the State, it is consignment, which cannot be taxed by the State legislature. With the greatest respect at our command, we beg to disagree. The levy created by the said provision is a levy on the purchase of raw material purchased within the State which is consu .....

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e object is to tax the purchase of goods by a manufacturer whose existence as such goods is put an end to by him by using them in the manufacture of different goods in certain circumstances. The tax is levied upon the purchase price of raw material, not upon the sale price or consignment value of manufactured goods. Would it be right to say that the levy is upon consignment of manufactured goods in such a case? True it is that the levy materialises only when the purchased goods (raw material) is .....

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ng otherwise would defeat the very object and purpose of Section 9 and amount to its nullification in effect. .. In the light of the above scheme of Section 9, it would not be right, in our respectful opinion, to say that the tax is not upon the purchase of raw material but on the consignment of the manufactured goods. It is well settled that taxing power can be utilised to encourage commerce and industry. It can also be used to serve the interests of economy and promote social and economic plan .....

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r products. Once the scheme and policy of the provision is appreciated, there is no room, in our respectful opinion, for saying that the tax is on the consignment of manufactured goods. (emphasis supplied). The judgment in Hotel Balaji1 was followed in Devi Dass Gopal Krishan (P) Ltd.. The contention urged on behalf of the petitioners, that tax levied under Section 4(4) of the Act is in the nature of consignment tax, does not, therefore, merit acceptance. X. SECTION 15 (a) OF THE CST ACT: ITS SC .....

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oners herein have sold cotton lint either within the State or in the course of inter- state trade and commerce; the State has collected the maximum tax permitted by Section 15(a) and 15(b) r/w Section 8(1) of the CST Act; the petitioners have not disposed of ginned cotton in any other manner; no purchase tax under Section 4(4) can be levied on the supposed value of cotton kapas relatable to the value of cotton seed; even after the amendment of clause (a) of Section 15, by Act No.20 of 2002 (inte .....

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in purchase tax on the supposed value of cotton kapas, is in violation of Article 286(3) of the Constitution, Sections 14 and 15 of the CST Act, and Section 4(4) of the Act; the petitioners have paid tax at the rate of 4% on the sale of cotton lint within the State; levy of purchase tax, under Section 4(4), on cotton kapas (i.e., raw cotton) in proportion to the cotton seed/cotton seed oil/cotton seed oil cake sent on consignment basis would result in a levy in excess of the ceiling of 4%/5% fix .....

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ice are two different commercial commodities taxable under two different entries; therefore purchase tax on paddy, and sales tax on rice, can be levied; husk is also a different commercial commodity under the Act; Kapas and cotton seed are two different commercial commodities taxable under two different entries; it is established from the returns, filed by the petitioners, that 100 kgs. of Kapas yields only 32 or 33 kgs of lint, and the rest is either seed or waste; as per this calculation also, .....

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of cotton, Section 14 & 15 of the CST Act will not be violated; in the instant case (cases), since the total tax paid or payable by the dealer does not exceed 4% on the total purchase or sale of cotton, it cannot be said that levy of purchase tax is in violation of Section 14 & 15 of the CST Act, as is evident from the illustration given below ( i.e., the tax payable on Cotton in W.P.No.22428 of 2013) - Purchase of Kapas from farmers 2,90,764.43 Quintals Value ₹ 86,35,68,153 Tax @ .....

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13 including levy of purchase tax & Restriction of ITC Total tax @4% if levied on purchase of Kapas Rs. 86,35,68,153 ₹ 3,45,42,726 Difference ₹ 1,99,41,713 65. Learned Special Standing Counsel would contend that, in terms of percentage, it is only 1.69% (not exceeding 4%); even after levy of purchase tax, on the proportionate value of the goods consigned, the total tax does not exceed 4% if levied on raw cotton and, therefore, Section 14 and 15 of the CST Act are not violated; an .....

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intended that there should be free flow of trade in India and certain goods, which were of special importance in inter-state trade and commerce, should not be taxed over and over again. In order to achieve this object, it was left open to Parliament to make a law on the subject. In the exercise of this constituent power under Article 286 of the Constitution, the Parliament enacted the CST Act. The amendment of Article 286 by the Constitution (6th Amendment) Act, 1956, and the enactment of the Sa .....

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he benefit of the States and is, statutorily, assigned to them. It is clear from the amendments made by the Constitution (Sixth Amendment) Act, 1956, in Article 269, and the enactment of the CST Act that CST, though levied for and collected in the name of the Central Government, is a part of the sales-tax levy imposed for the benefit of the States. (The State of Madras v. N.K. Nataraja Mudaliar AIR 1969 SC 147 ; Sterling Steels & Wires Ltd. v. State of Punjab (1980) 45 STC 438 (PH)). Article .....

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ST Act firstly specifies the declared goods and, secondly, imposes conditions and restrictions subject to which the State Governments can impose tax on the internal trade in these goods. Section 14 of the CST Act declares certain goods to be of special importance in inter-State trade or commerce. Such goods are commonly known as declared goods. (Sterling Steels & Wires Ltd.). Section 14 of the CST Act declares, among others, the following goods to be of special importance in inter-State trad .....

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ry sales-tax law of a State was required, in so far as it imposed or authorised the imposition of a tax on the sale or purchase of declared goods, to be subject to the following restrictions and conditions, namely :- (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent of the sale or purchase price thereof, and such tax shall not be leviable at more than one stage; (b) where a tax has been levied under that law in re .....

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e; and it should be refunded to persons from whom it is collected if the goods are sold in the course of inter-state trade or commerce. 70. Section 15(a) of the CST Act was amended by Act 20 of 2002 with effect from 13.05.2002 and the words and such tax shall not be levied at more than one stage, in the pre-amended provision, was omitted. Clause 146 of the notes and clauses to the Finance Bill 2002, as introduced in Parliament on 28.02.2002, noted that Section 15(a) of the CST Act was sought to .....

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hat law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof; (b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law shall be rei .....

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to in Clause (via) of Section 14, whether whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law. 71. By Section 77 of the Finance Act, 2011 the words four percent in Section 15(a) was substituted by the words five percent with effect from 08.04.2011. 72. Where the turnover of goods which, under Section 14 of the CST Act, have been declared to be of special importance in inter- State trade or commerce, are subj .....

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nvalid. (Govind Saran Ganga Saran v. Commissioner of Sales Tax AIR 1985 SC 1041 = (1985) 60 STC 1 (SC) ). The whole idea, underlying Section 15(a) of the CST Act, is that the declared goods should not, in the aggregate, suffer tax at the rate of more than four/five per cent both in intra-State and inter-State trade. (Mahendrakumari Iswarlal and Co. , Tirupattur v. Commercial Tax Officer, North Arcot AIR 1968 Madras 90 (Madras High Court)). The restriction placed by Section 15 (a) of the CST Act, .....

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vied on declared goods at one point, it could not be levied at any other subsequent stage and consequently, if declared goods had suffered purchase tax, they could not be subjected to tax again at the point of sale to the consumer. (Commissioner, Sales Tax, U.P., Lucknow v. Chokhani Co. (1982) 51 STC 195 (Allahabad HC) ; Commissioner of Sales Tax v. Nirankari Engineering, Kanpur (1982) 51 STC 195 (Allahabad HC); Bhawani Cotton Mills Ltd. v. State of Punjab [1967] 20 STC 290 at 296-297 (SC) ). Hi .....

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series of sales or purchases. The fixation of the point, in conformity with Section 15(a) of the CST Act, was left to the particular State legislature. The automatic modification of the provision in the State enactment, brought about by Article 286 (3) and Section 15, did not extend to defining the single point in the series of transactions at which the levy of tax was to be made under the State law. (Mahendrakumari Iswarlal and Co., Tirupattur). 74. The intention of Article 286(3) of the Const .....

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(3) and Section 15(a) of the CST Act, the rate of tax under Section 4(4) of the AP Act, as in the case of sale or purchase of declared goods, is limited to the rate of four/five per cent. 75. Raw cotton undergoes various processes before cloth is finally turned out. Cotton is cleaned, carded, spun into yarn, then cloth is woven, put on rolls, dyed, calendered and pressed. (J.K. Cotton Spg. & Wvg. Mills v. Sales Tax Officer (AIR 1965 SC 1310). Declared goods", in Section 14 of the CST Ac .....

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species of declared goods and cannot, therefore, be subjected to tax exceeding the rate prescribed in Section 15(a) of the CST Act on both the sale and purchase price and, prior to its amendment, at not more than one stage. (State of Punjab v. S.G.R. Cotton G. & P. Factory ((1989) 74 STC 1) ; State of Punjab v. Chandulal Kishorilal (1970) 25 STC 52 : AIR 1969 SC 1073 ). 76. Section 15(a) of the CST Act, before its amendment by Act 20 of 2002 with effect from 13.05.2002, disabled tax from bei .....

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e. In effect tax can now be levied both on the sale or purchase of cotton i.e., tax can be imposed both on the purchase of raw cotton (kapas) and again on the sale of ginned cotton i.e., cotton lint. The restriction under Section 15(a) of the CST Act is now limited only to the rate of tax which before 08.04.2011 was 4%, and is 5% thereafter. In view of Section 15(a) of the CST Act the rate of tax, both on the purchase and sale of cotton together, cannot exceed 4%/5%. 77. The fact that ginned and .....

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st in respect of the transactions relating to cotton, and then in respect of the transactions relating to yarn or cloth. In the same way a man, who buys yarn and weaves it into cloth which he sells, is not selling the commodity which he bought; he is dealing in two different types of commodities one of which he buys and other of which he sells. The person, who conducts the process of ginning, obtains cotton seed which is a separate commodity, but ginned cotton is the same as unginned cotton exce .....

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cotton lint at 4%/5%, then purchase tax under Section 4(4) cannot be imposed on raw cotton (which, after the process of ginning, has been sold as cotton lint), for it would then result in tax, exceeding 4%/5%, being levied on the sale and purchase of the very same goods. The restriction imposed by Section 15(a) of the CST Act can be better explained by way of an illustration. If, for instance, a VAT dealer purchases 1000 kgs of raw cotton at ₹ 100/- per kg, the purchase value of raw cotton .....

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nned cotton are to be treated as the very same commodity both under Section 14(ii) of the CST Act and Entry 79 of the IV Schedule to the VAT Act, tax, both on raw cotton and ginned cotton together, cannot exceed 4%. In the illustration above mentioned, as tax on the sale of ginned cotton of ₹ 4,800/- exceeds the tax payable on the entire purchase value of raw cotton of ₹ 4,000/-, no purchase tax can be levied on the purchase of raw cotton by the VAT dealer. 79. Section 14(vi-a) of th .....

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n 15(d) of the CST Act, and Entry 82 of the IV Schedule to the VAT Act, raw dhal (whole dhal) must be held to be the same commodity as finished dhal even after it is dehusked. As a result the restriction placed by Section 15(a) of the CST Act, of the tax payable under the VAT Act in respect of the sale or purchase of such goods not exceeding 4%/5% of the sale or purchase price thereof, would be attracted. Consequently purchase tax on the purchase of raw dhal (to the extent it has yielded husk) a .....

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ITC Bhadrachalam Paperboards Ltd. v. State of A.P. (1998 (6) ALD 443 ). Cotton or kapas, in its unginned or unmanufactured state, contain cotton-seeds. But it is by a manufacturing process that cotton and seed are separated, and the seeds so separated is neither cotton nor part of cotton. They are two distinct commercial goods though, before the manufacturing process, the seeds might have been a part of the cotton itself. (S.G.R. Cotton G. & P. Factory; Chandulal Kishorilal; Kotak & Co. .....

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e Act, it is not open to canvass the reasonableness or the justification of such a classification. (Kotak & Co. (1962) XIII STC 709 (APHC) ; Pithapuram Taluk Tobacco, Cigars and Soda Merchants Union v. The State of Andhra Pradesh (1958) 9 STC 723 (APHC DB). While raw cotton is declared goods under Section 14(ii), cotton seed is treated separately as declared goods under Section 14(vi)(iii) of the CST Act. Likewise, while raw cotton is listed under Entry 79 of the IV Schedule to the Act, cott .....

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ingredients of Section 15[c] of the CST Act are: (i) tax has been levied under the VAT Act on the sale or purchase of paddy which is declared goods under Section 14(1)[c] of the CST Act; (2) rice is procured from such paddy; and (3) tax is levied on the rice so procured. In such circumstances tax leviable on the procured rice must be reduced by the amount of tax levied on such paddy. Purchase tax under Section 4(4) is levied on the value of paddy to the extent it yields husk which is exempt from .....

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arose for consideration was whether cotton yarn could be subjected to tax at multiple- points, notwithstanding that it had already suffered tax once. In that case yarn, which was subjected to tax, was held in stock on 1st August, 1958, and was subjected to multiple point tax. As the yarn in question had already suffered tax in the hands of the manufacturer, the question arose whether they could be subjected to tax again, as a result of the notification issued by the State Government on 1st Augus .....

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ty till it came to be included in Section 14(ii-b) from 1st October, 1958; the restriction, imposed by Section 15(a) of the CST Act, did not operate so as to fetter the power of the State Government to impose multiple point tax in respect of the cotton yarn upto 1st October, 1958; and, as such, there arose no occasion to consider either Section 14 or Section 15 of the CST Act in that case. 83. In Rattan Lal & Co., the argument was that no machinery was provided to enable the dealer to discov .....

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e of declared goods at any other stage than the stage so mentioned. It will be seen that the matter is now in the hands of the dealer. He has to find out for himself whether he is liable to pay the tax or not. A dealer knows what he has done with his goods or is going to do with them. If he knows that he is not the last dealer having parted with the goods to another dealer or he knows that he is going to use the goods or sell them to consumers, he knows when' he is not liable to tax and when .....

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e some mistake. The law does not take into account the actions of persons who are negligent or mistaken but only of persons who act correctly, according to law. If the dealer is clear 'about his own position he is now quite able see whether he is the last purchaser liable to pay the tax or the last seller liable to pay the tax. The Act by Specifying the stage as the last purchase or sale by a dealer liable to pay the tax makes the stage quite clear and by giving an option to him not to inclu .....

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tax can be imposed both at the stage of purchase of goods, and its sale. 85. In Radhakrishna & Co., a Division bench of this Court held that the Legislature had intended to fix only a single point levy in respect of groundnuts having regard to the class of dealers which were likely to deal with these goods; the point of last purchase was before the goods either lost their identity or were sold outside the State; in both cases, tax becomes exigible only once; in cases where groundnuts were p .....

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purchase by the last miller. XI. SECTION 15 (b) OF CST ACT: ITS SCOPE: 86. It is contended, on behalf of the petitioners, that Section 15 (b) of the CST Act provides for the reimbursement in full of the State tax paid on purchase or sale of cotton (or any other declared commodity) where such goods are sold in the course of inter-state trade or commerce, and tax under the CST Act is paid; where tax has been levied under the state law on declared goods and, subsequently, such goods are sold in th .....

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le to the value of cotton seed/cotton seed oil/cotton seed oil cake sent on consignment; the petitioners, at times, purchased cotton kapas (raw cotton) or cotton lint from other registered VAT dealers under tax invoices; on such purchases, the other registered VAT dealers charged VAT; the petitioners, after purchasing from other registered VAT dealers, ginned raw cotton and derived cotton lint; the purchased cotton lint was sold locally within the State or in the course of inter-state trade and .....

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Act; the petitioners sold a part of the cotton lint in the course of inter- state trade and commerce to registered dealers, and paid the tax due u/s 8(1) of the CST Act; under Section 15 (b) once CST is paid, the tax paid under the State Act (even if it is more) must be reimbursed to the petitioner making inter-state sale; by the operation of Section 15 (b) of the CST Act, even assuming purchase tax is payable, it should be refunded; where cotton-kapas are purchased from other registered VAT de .....

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e enactment must, therefore, be reimbursed to the petitioners; when cotton lint is sold in the course of inter-state trade and commerce, Section 4(4) has no application; and retention of cotton seed, or the disposal of cotton seed, cannot be treated as retention/disposal of raw cotton. 87. Section 15(b) of the CST Act confers the right to receive refund of State tax, if any, paid in respect of declared goods. The object is that, in respect of goods which are of importance to inter- state trade, .....

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tate to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Under Section 5(1) a sale or purchase of goods shall be deemed to take place in the course of export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Under Section 5(3), notwithstanding any .....

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r Section 8(1) every dealer who, in the course of inter-state trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under the Act which shall be 2% of his turnover, or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower. Under the proviso thereto, the central government may, by notification in the official gazette, reduce th .....

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liable to pay tax under the sales tax law of the appropriate state, notwithstanding that he, in fact, may not be so liable under that law. Section 8(3)(b) stipulates that the goods, referred to in Section 8(1), shall be goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or, subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing o .....

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and thereunder, subject to the conditions in Sections 9 and Section 13 of the Act, the following shall be zero rated sales for the purposes of the Act, and shall be eligible for input tax credit (a) sale of taxable goods in the course of inter-state trade and commerce falling within the scope of Section 3 of the CST Act; and (b) sale of goods falling within the scope of Sections 5(1) and (3) of the CST Act. Taxable goods, sold in the course of inter-state trade or commerce under Section 3 of the .....

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5(b) of the CST Act are (1) tax must have been levied under the VAT Act, in respect of the sale or purchase of declared goods, inside the State; (2) such declared goods must, thereafter, have been sold in the course of inter-state trade or commerce; (3) tax must be paid under the CST Act in respect of the sale of such goods in the course of inter-state trade or commerce; (4) in such an event, the tax levied under the VAT Act is required to be reimbursed to the person making such sale in the cour .....

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goods, the requirement of Section 15(b) would, ordinarily, be satisfied. 91. While Section 15(b) is applicable only where declared goods are sold in the course of inter-state trade or commerce, Section 4(4) of the VAT Act is attracted on the purchase of taxable goods used or disposed of otherwise than by way of sale in the course of inter-State trade or commerce. The submission that Section 4(4) of the VAT Act, and Section 15(b) of the CST Act, operate in different fields is no doubt attractive .....

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can be imposed only where the goods which constitutes the input is different from the goods which constitute the output. While raw cotton can be treated as the input for cotton seed and cotton yarn, it cannot be treated as the input for cotton lint as both raw cotton and cotton lint are treated as the same commodity both under the CST Act and the VAT Act. Cotton seed, however, is treated as a commodity distinct and different from raw- cotton/cotton lint. If raw cotton is treated as the input fo .....

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ilable for being subjected to purchase tax under Section 4(4) of the VAT Act. If, in such circumstances, purchase tax were to be levied under Section 4(4) on raw cotton, it would then amount to levy of purchase tax on the very same goods which have been sold in the course of inter-state trade and commerce. In such an event, Section 15(b) of the CST Act would require the entire purchase tax, levied under Section 4(4) of the VAT Act, to be reimbursed. 92. Raw dhal (wholesome dhal) and furnished dh .....

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rchased from persons who are not dealers under the VAT Act. Cotton seed is the common input for both cotton seed oil and cotton seed de-oiled cake. Where cotton seed de-oiled cake is despatched outside the State on consignment, the proportionate purchase value of cotton seed, representing the cotton seed de-oiled cake which has been sent outside the State on consignment, can be subjected to tax under Section 4(4) of the VAT Act. XII. CAN THE ADVANCE RULING, UNDER SECTION 67 OF THE A.P. VAT ACT, .....

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dvance ruling was revised by the Commissioner of Commercial Taxes under Section 32(1) vide revision order in CCTs Ref. No.AIII/226/07 dated 29.02.2008; the revision order of the Commissioner of Commercial Taxes, setting aside the advance ruling, has been questioned in Spl. Appeal S.R. Nos.7855/2008 & 7859/2008 which are still pending before this Court; the Advance Ruling Authority is not subordinate to the Commissioner of Commercial Taxes, within the meaning of Rule 51 of the Rules; the adva .....

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ent under Sections 21(7) read with 32(5) of the Act; and non-deferment of the assessment, under Section 21(7) read with 32(5), is arbitrary and illegal. 94. As the petitioners herein have sought adjudication on the scope and extent of Section 4(4) of the Act, on the purchase of raw cotton, cotton seed, paddy, raw dhal and soyabean seed by them, we have elaborately considered all the contentions urged before us in this regard. It is this judgment, as long as it remains in force, which would bind .....

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nappropriate for us to examine this contention in the present writ proceedings. As the assessment orders are, itself, under challenge in these Writ Petitions it is wholly unnecessary for us to express any opinion on whether or not the assessing authority could or should have deferred assessment proceedings on the ground that a similar issue was pending adjudication before this Court. XIII. LIMITATION FOR PASSING AN ORDER UNDER SECTION 21(3) AND 21(5) OF THE ACT: 95. It is contended, on behalf of .....

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r affidavits; and the extended period of limitation, under Section 21(5) of the Act, would not be applicable in these cases as there is no willful evasion or any best judgement assessment referred to in the assessment orders. On the other hand, Learned Special Standing Counsel for Commercial Taxes would submit that in some cases, since there is willful evasion of tax by some of the dealers, the assessing authority has invoked his jurisdiction under Section 21(5) of the Act, and has passed assess .....

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ry dealer, registered under Section 17 of the Act, is required to submit such return or returns, along with proof of payment of tax, in such manner, within such time, and to such authority as may be prescribed. Section 20(2) stipulates that, if a return has been filed within the prescribed time and the return so filed is found to be in order, it shall be accepted as self-assessment subject to adjustment of any arithmetical error apparent on the face of the said return. Section 20(4) stipulates t .....

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re the authority is not satisfied with a return filed by the VAT dealer, or the return appears to be incorrect or incomplete, he shall assess, to the best of his judgment, within four years of the due date of the return or within four years of the date of filing of the return whichever is later. Section 21(4) empowers the prescribed authority, based on any information available or on any other basis, to conduct a detailed scrutiny of the accounts of any VAT dealer and, where any assessment as a .....

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s and, under sub- rule (1) thereof, the return to be filed by a VAT dealer, under Section 20, shall be in Form VAT 200, and shall be filed within 20 days after the end of the tax period. Under Rule 23(6)(a) if any VAT dealer, having furnished a return in Form VAT 200, finds any omission or incorrect information therein, other than as a result of an inspection or receipt of any other information or evidence by the authority prescribed, he shall submit an application in Form VAT 213 within a perio .....

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ibed authority to be incorrect or incomplete, the prescribed authority shall assess the tax payable, to be best of his judgment, in Form VAT 305 after affording a reasonable opportunity to the dealer in Form VAT 305A. The prescribed authority is required to serve upon the VAT dealer, the order of penalty, and the interest due, in Form VAT 305 and the VAT dealer is required to pay the sum within the time and manner specified in the notice. 99. The return is required to be filed, under Section 20 .....

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th, the four year period, stipulated under Section 21(3), would commence from the last date of filing the return for a particular month, and would end four years thereafter. As Rule 23(6)(a) enables a VAT dealer to submit an application in Form VAT 213 within a period of six months from the end of the relevant tax period, the limitation for making assessment under Section 21(3), in such cases, would be four years from the date of filing of such a return. The period of limitation of four years mu .....

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t, would expire four years from the due date of the return. 100. The extended period of six years, prescribed under Section 21(5) of the Act, would apply only where the dealer has committed wilful evasion of tax. As the assessment order is required under Rule 25(5), to be preceded by a notice in Form VAT 305-A, it is only if the contents of the show cause notice contain factual allegations of wilful evasion of tax, would the extended period of limitation of six years under Section 21(5) of the A .....

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ot committed wilful evasion of tax; and the extended period of limitation of six years under Section 21(5) of the Act would not apply. 101. Since the burden of proving malafide conduct lies with the Revenue, Section 21(5) of the Act finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice. In order to attract Section 21(5), it must be shown that VAT has escaped assessment by reason of wilful evasion by a VA .....

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ers of the said provision. Specific averments, finding mention in the show cause notice, is a mandatory requirement for commencement of action under Section 21(5) of the Act. In the absence of any such averments in the show-cause notice, the Revenue cannot sustain the notice or the order passed under Section 21(5) of the Act. (M/s. Vijaya Venkata Durga Oil Traders v. The Commercial Tax OfficerOrder in WP No.15413 of 2014 dated 25.09.2014, Sivalayam Street, Circle, Vijayawada I Division, Gunadala .....

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e period of limitation in terms of Section 21(5) of the Act notwithstanding that the show-cause notice does not explicitly refer to Section 21(5) and does not specifically use the words wilful evasion of tax. (M/s. Vijaya Venkata Durga Oil Traders; Uniworth Textiles Ltd.). 102. This issue can be examined from another angle. The fact or facts upon which the jurisdiction of an authority depends is a jurisdictional fact the existence of which is the sine qua non, or the condition precedent, to the .....

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sess the VAT dealer to tax, within the extended period of limitation of six years under Section 21(5) of the Act, only if the said dealer has committed wilful evasion of tax. As the fact, of commission of wilful evasion, is a jurisdictional fact the dealer is entitled to satisfy the prescribed authority, on being given the opportunity to show cause, that such jurisdictional facts are non-existent; and jurisdiction under Section 21(5) of the Act cannot be exercised. It is necessary, therefore, fo .....

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er has the opportunity to satisfy the assessing authority that he lacks jurisdiction, to assess the dealer to tax, applying the extended period of limitation. 103. We do not propose to examine whether, in each of the Writ Petitions, the assessment order or a part thereof is barred by limitation. As the assessment orders are being set aside, and remanded to the concerned authorities to pass orders afresh in accordance with law, the concerned authorities shall, in the light of what has been held h .....

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d the restriction of reimbursement due under Section 15(b) of the CST Act by applying the formula axb/c prescribed by the State Act in the context of input-tax credit, will lead to imposition of both purchase and sales tax on cotton which is a declared commodity; it will also result in reimbursement of an amount less than what is provided for under Section 15(b) of the CST Act; apart from soyabean seed purchased from farmers, which is the subject matter of levy of purchase tax under Section 4(4) .....

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ble for input-tax credit; reliance is placed by the respondents on Rule 20(7) of the Rules which prescribes the formula i.e. a x b/c, where a is said to be the total amount of input tax for common inputs for each tax rate excluding the tax paid on goods mentioned in sub-rule (2) of Rule 20 which deals with the ineligible list; soyabean deoiled cake does not find place in the ineligible list; it, being a by-product obtained while manufacturing soyabean oil, cannot be denied the benefit of input-t .....

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nsolidated return; column 3 of the Form VAT 200A specifically refers to the sum of the boxes 13A, 14A, 16A, 17A and 19A of VAT 200 return; therefore the total of all the turnovers, taxable at different rates, is to be summed up for the purpose of restricting input-tax credit; the assessing authority has not taken the turnover specified in column 16A of VAT 200 return; the authority proceeded on the wrong premise that Rule 20(6) is applicable on the ground that the petitioner has used specific in .....

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the revised input tax claim returns were filed, and the correct claim of input tax was made. 105. On the other hand, Learned Special Standing Counsel for commercial taxes would submit that Section 13 (6) of the Act provides that input tax credit, for transfer of taxable goods outside the State by any VAT dealer otherwise than by way of sale, shall be allowed for the amount of tax in excess of 4%; Rule 20 (8) of the Rules prescribes the procedure for claiming input-tax credit where a VAT dealer .....

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on lint and cotton seed; the cotton lint so obtained is sold within the state or in inter-state trade and commerce; a part of cotton seed so obtained, along with cotton seed purchased from VAT dealers, is further processed into cotton seed oil and cotton seed cake; a portion of the cotton seed, cotton seed oil and cotton seed cake were despatched outside the State on consignment; raw cotton (Kapas) and cotton seed purchased are inputs; cotton seed, cotton seed oil and cotton seed cake, derived i .....

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the Act, and the restriction of input-tax credit under Section 13 (6) and Rule 20 (8), are two different and independent acts which do not overlap; levy of purchase tax is limited to un- registered dealers (farmer) purchases, whereas the restriction of input tax credit is on VAT registered dealer purchases; and they are mutually exclusive and independent exercises covering different spheres of purchases by a VAT dealer. 106. Section 2(13) of the Act defines exempt sale to mean a sale of goods o .....

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AT dealer to another, whether directly by himself or through his agent on his behalf, on the purchase of goods in the course of business. Section 2(22) defines output tax to mean the tax paid or payable by a VAT dealer, on the sale of goods to another VAT dealer, whether by himself or through his agent or any other person. Section 2(35) defines tax invoice to mean a sale invoice containing such details as may be prescribed and issued by a VAT dealer to another VAT dealer. 107. Section 4 of the A .....

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the conditions, if any prescribed, an input-tax credit shall be allowed to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period, if such goods are for use in the business of the VAT dealer. No input tax credit shall be allowed in respect of the tax paid on the purchase of goods specified in Schedule VI. Under Section 13(3), a VAT dealer is entitled to claim (a) input-tax credit under sub-section (1), on the date the goods are .....

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dit, for transfer of taxable goods outside the State by any VAT dealer otherwise than by way of sale, shall be allowed for the amount of tax in excess of 5%. Section 14 relates to tax- invoices and requires a VAT dealer, making a sale liable to tax to another VAT dealer, to issue, at the time of sale, a tax invoice in such form as may be prescribed. 108. Rule 20 of the Rules relates to input-tax credit and, under sub-rule (6) thereof, where any VAT dealer is able to establish that specific input .....

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for a period of 12 months, ending March every year by filing a return in Form VAT 200B. Rule 20(7) stipulates that, where a VAT dealer makes taxable sales and sales of exempt goods (goods in Schedule I) for a tax period, and inputs are common for both, the amount which can be claimed as input tax credit, for the purchases of the goods at each tax rate shall be calculated by the formula a x b/c. The proviso thereto requires the VAT dealer to furnish an additional return in Form VAT 200A for each .....

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ble at 1%, 4% and for the 4% tax portion in respect of goods taxable at 12.5%, the VAT dealer shall apply the formula axb/c for each tax period. Under the proviso thereto, the VAT dealer is required to furnish an additional return in Form VAT 200A for each tax period for adjustment of input-tax credit, and also to make an adjustment for a period of 12 months ending March every year, by filing a return in Form VAT 200B. Under Rule 20(9)(a), where a VAT dealer makes sales of taxable goods, exempt .....

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of taxable goods under Section 8(a) of the Act i.e., the sale of taxable goods in the course of inter-state trade or commerce. In the present case, purchase tax is levied on goods which are used as inputs for other goods which are exempt from tax, or for goods which have been transferred on consignment or to branches of the VAT dealer outside the State otherwise than by way of sale. While the provisions of the Act must, in view of Article 286(3) of the Constitution of India, be complaint with Se .....

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not overlap, has considerable force. In any event the question, whether computation of input-tax credit in terms of Rule 20 is in violation of Sections 14 and 15 of the CST Act, must be answered on the facts and circumstances of each case. It is for the assessee to satisfy the assessing authority that computation of the eligible input-tax credit, in terms of Rule 20, is in violation of Sections 14 and 15 of the CST Act. XV: SUMMARY: 111. The conclusions afore-stated are summarised, briefly, as u .....

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s to tax every transaction either at the point of sale or purchase. Where the seller is not taxed or cannot be taxed, the purchaser is taxed. By the same reasoning, when the seller is taxed, the purchases is not taxed. If the goods are not available in the State for subsequent taxation, by reason of the circumstances mentioned in clauses (i) to (iii) of Section 4(4), then the purchaser is made liable to tax under Section 4(4). (iii). The goods purchased are referred to in Section 4(4) as taxable .....

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(iv). It is only because the goods listed in the first schedule to the Act are exempt from tax, the branch transfer or stock transfer of goods by a VAT dealer to his consignee/agent is not taxable under the Act, and such transactions attract the ingredients of clauses (i) to (iii) of Section 4(4), is the input of such goods subjected to tax under Section 4(4) of the VAT Act. (v). A farmer or an agriculturist would be a person as defined under Section 2(22) of the AP General Clauses Act and conse .....

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urist is not even, indirectly, subjected to tax under section 4(4) of the Act. (viii). Where a farmer grows raw cotton, paddy, raw dhal and soyabean seed in his land, and sells these agricultural produce to others, he is not liable to pay tax on the sale of such goods, as he is not a dealer under Section 2(10) of the Act. Purchase of such agricultural produce by a VAT dealer is in circumstances in which no tax is payable by the seller. In such circumstances tax, at 4%/5% of the purchase value of .....

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tion 4(4), is not levied on goods which are exempt from tax. It is only because the goods listed in the first schedule to the VAT Act are exempt from payment of VAT under the Act is purchase tax levied, under Section 4(4)(i) of the VAT Act, on goods which are used as inputs for those goods which are exempt from tax under the Act. (xi). Section 4(4)(i) & (ii) require that the manufactured/produced goods should have been transferred to some person otherwise than by way of sale. If the manufact .....

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as overlapping or as redundant. (xiii). The use of the word input, in clauses (i) and (ii) of Section 4(4), brings within its ambit every item which is a raw material in the widest sense, made wider by using the expression input. The purpose is to broaden the meaning of raw material by including in it even those items which could be placed in the goods to make it marketable as such. (xiv). The first proviso to Section 4(4) is not independent of the main Section, and is attracted where a common .....

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otton seed, as an input, is common both to cotton seed oil and cotton seed deoiled cake. (xvi). The first proviso to Section 4(4) is attracted when a common input is used to produce more than one goods, and when the output, or one of the outputs, cannot be subjected to tax as they attract the ingredients of clauses (i) to (iii) of Section 4(4). In such cases tax is levied on the value of the input proportionate to the value of such output/outputs. (xvii). The first proviso to Section 4(4) prescr .....

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dealer, then the proportionate purchase value of cotton seed can be subjected to tax under Section 4(4). (xix). The tax is imposed on the raw material purchased by the dealer (ie cotton seed) for, if purchase tax is levied on the value of the end product (ie oil cake), it would then be a tax imposed on the manufacture of goods which would be beyond the competence of the State Legislature. (xx). That would, however, not justify raw-cotton, which is a commodity distinct from cotton seed, being su .....

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cannot be so extended as to bring within its ambit goods whose derivatives are common inputs for other goods (outputs) which attract the ingredients of clauses (i) to (iii) of Section 4(4) of the Act. (xxiii). Where one of the outputs is dealt with in the manner specified in clauses (i) to (iii) of Section 4(4), and the other output is not, it is only the output which is dealt with in the manner specified in clauses (i) to (iii) of Section 4(4) which falls within the ambit of Section 4(4) of the .....

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ng at the proportionate value of goods under Section 4(4) of the Act. As the first proviso would apply to different goods, the proportionate value of which may vary from one to another, no uniform formula can or need be prescribed. (xxvi). The mere fact that no uniform formula is prescribed does not disable the assessing authority from giving effect to the first proviso to Section 4(4) of the Act, and in subjecting the proportionate value of the purchase price of taxable goods to tax. (xxvii). T .....

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ble turnover, it can only be considered to be procedural and not substantive. Procedural law is applicable to pending cases as no suitor can be said to have a vested right in procedure. (xxix). The CST Act firstly specifies the declared goods and, secondly, imposes conditions and restrictions subject to which the State government can impose tax on the internal trade in these goods. (xxx). Section 14 of the CST Act declares certain goods to be of special importance in inter-state trade or commerc .....

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ll be invalid. (xxxiii). The intention of Article 286(3) of the Constitution is not to destroy all charging sections in the sales tax acts of the States, which are discrepant with Section 15 of the CST Act, but to modify them in accordance with Section 15. The law of the State is declared to be subject to the restrictions and conditions contained in the law made by Parliament, and the provisions of the State Act would pro-tanto stand modified. (xxxiv). Where the turnover, of declared goods under .....

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r purchase of declared goods, is limited to the rate of four/five per cent. (xxxvi). The whole idea, underlying Section 15(a) of the CST Act, is that declared goods should not, in the aggregate, suffer tax at more than four/five per cent both in intra-state and inter-state trade. (xxxvii). Cotton, whether ginned or unginned, is treated as a single commodity or a single species of declared goods for the purpose of Section 15(a) of the CST Act. To put a commodity in such a state, that it can be mo .....

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cotton i.e., tax can be imposed both on the purchase of raw cotton (kapas) and again on the sale of ginned cotton i.e., cotton lint. (xxxix). The restriction under Section 15(a) of the CST Act is now limited only to the rate of tax which before 08.04.2011 was 4%, and is 5% thereafter. In view of Section 15(a) of the CST Act the rate of tax, both on the purchase and sale of cotton, cannot together exceed 4%/5%. (xl). If VAT is levied on cotton lint at 4%/5%, then purchase tax under Section 4(4) .....

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er the VAT Act. Consequently the VAT Act has, in its IV Schedule, listed under a common entry i.e., Entry 82 all kinds of pulses and dhals. (xlii). In view of both Section 15(d) of the CST Act, and Entry 82 of the IV Schedule to the Act, raw dhal (whole dhal) must be held to be the same commodity as finished dhal even after it is dehusked. Section 15(a) of the CST Act is attracted and, consequently, purchase tax on the purchase of raw dhal and tax of the sale of the resultant quantity of finishe .....

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process that cotton and seed are separated, and the seed so separated is neither cotton nor part of cotton. They are two distinct commercial goods though, before the manufacturing process, the seed might have been a part of cotton itself. (xlv). The restriction under Section 15(a), of the maximum rate of 4%/5% tax being imposed, would not disable tax at 4%/5% being levied on purchase of raw cotton and tax again being levied at 4%/5% on the sale of cotton seed as both Parliament and the State Leg .....

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ds, sold in the course of inter-state trade or commerce under Section 3 of the CST Act, are zero rated sales under Section 8 of the VAT Act and, consequently, no tax is levied under the VAT Act on taxable goods sold in the course of inter-state trade or commerce. (xlviii). In addition, such inter-state sales are also eligible for input tax credit under the VAT Act. The tax paid by a VAT dealer, on the purchase of goods from another VAT dealer, can be claimed as input-tax credit when the said tax .....

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constitute the input, is different from the goods which constitute the output. While raw cotton can be treated as the input for cotton seed and cotton yarn, it cannot be treated as the input for cotton lint as both raw cotton and cotton lint are treated as the same commodity both under the CST Act and the VAT Act. (li). Likewise if finished dhal is sold in the course of inter-State trade or commerce, then Section 15(b) of the CST Act would require purchase tax, levied under Section 4(4) of the .....

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plication in Form VAT 213, within a period of six months from the end of the relevant tax period, the limitation for making assessment under Section 21(3), in such cases, would be four years from the date of filing the said return. (liv). The period of limitation of four years must be computed for each tax period i.e., for each month and, unlike the APGST Act, not for an assessment year. (lv). The prescribed authority gets jurisdiction to assess the VAT dealer to tax, within the extended period .....

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hority has arrived at the tentative conclusion that the VAT dealer has committed wilful evasion of tax. (lvii). It is mandatory that the show-cause notice must contain allegations against the assessee falling within the four corners of Section 21(5). Unless the assessee is put to notice, he would have no opportunity to meet the case of the department. In the absence of any such allegations in the show-cause notice, the Revenue cannot sustain the notice or the order passed under Section 21(5) of .....

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