Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

Validity of Levy of purchase tax u/s 4 - agriculture products - whether in the nature of levy on farmers

Validity of Levy of purchase tax u/s 4 - agriculture products - whether in the nature of levy on farmers - Dated:- 26-5-2015 - In the case of M/s. K.G.F. Cottons (P) Ltd. Versus The Assistant Commissioner (CT) LTU, O/o The Dy. Commissioner (CT) , - 2015 (5) TMI 804 - ANDHRA PRADESH HIGH COURT has held that:- The contention that a farmer/agriculturist is indirectly being subjected to tax does not merit acceptance. While upholding the levy, Hon'ble High Court has summarized its decision as: (i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 goods, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ly 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 consequently, as th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ven, 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 such goods, i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 manufactured goods are .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g 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 input is used .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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) prescribes the manne .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 subjected to tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

xtended 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 Act. (xxiv). .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ortionate 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). The proviso, wh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 commerce. Such goods .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(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 Section 14 of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 more readily use .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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) cannot be impo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 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 finished dhal togethe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

otton 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 Legislature have .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 taxable goods are .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 Act on raw dha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orm 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 of limitation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ived 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 the Act. (lvii .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version