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TMI Blog2015 (6) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... s that they have paid the tax on the sale of de-husked pulses and the husk is exempted from tax as per Entry 41 of the First Schedule to the A. P. Value Added Tax Act, 2005 (for short 'VAT Act'). Now the grievance of the petitioners is that the assessing authority passed the impugned orders levying tax on the purchase value of the pulses proportionate to the value of the husk, at the rate of 4 per cent purportedly under Section 4(4)(i) of the VAT Act. 4. The petitioners in W.P.Nos.1056/2010 and 20575/2014 are involved in the purchase of raw cotton (Kapas) from agriculturists and after ginning, sell the ginned cotton i.e., cotton lint within the State as well as interstate and have paid the applicable taxes under the VAT Act. Their further claim is that the cotton seed obtained during the process of ginning is further processed and crushed for obtaining cotton oil. The cotton oil and cotton oil waste was sold within the state as well as inter state and that they paid the applicable taxes. The resultant cotton seed cake which is the bye product of crushing cotton seed, was also sold partly within the state and partly dispatched to other states on consignment transfer basis. The grie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, by necessary implication, goods the sale of which is exempt from tax under the Act. The goods so exempt - not being 'taxable goods' - are not brought to charge under Section 4(4) of the Act. (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 consequently, as the context does not otherwise provide, under Section 4(4) of the VAT Act also. (vi). 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. (vii). It is not every purchase of "taxable goods" but only such goods, which fall within the ambit of clauses (i) to (iii) of Section 4(4) and its proviso, which attracts levy of tax at the stage of its purchase. The far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to produce one or more outputs. By the use of the word 'common', the legislative intent is to tax the proportionate value of the common input to the extent one or more of the outputs attract the ingredients of clauses (i) to (iii) of Section 4(4). (xv). The first proviso to Section 4(4) requires the "input" to be "common" to one or more outputs. Paddy, as an input, is common both to rice and husk; soyabean seed, as an input, is common both to soyabean oil and soyabean deoiled cake; and cotton 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) prescribes the manner of computation of tax on goods which are charged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formula be uniformly prescribed for arriving 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). The proviso, which enables the liability under Section 4(4) to be quantified and, when quantified, to be enforced against the subject, is a machinery provision as it relates to the mode and manner in which the taxable turnover, under Section 4(4) of the Act, should be determined where a common input is used to produce goods. Courts construe machinery provisions in such a manner that a charge to tax is not defeated. (xxviii). When a provision sets out the method or formula for determining the taxable 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same thing as making a commodity marketable; the commodity remains the same and does not alter its character in any respect. Selling unginned cotton and ginned cotton are two transactions dealing with the same commodity. (xxxviii). After the amendment of Section 15(a), by Act 20 of 2002 with effect from 13.05.2002, tax under the State sales tax law can be imposed at more than one stage. Consequently, tax can 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. (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 imposed on that quantity of raw cotton which, after being ginned, is 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. (xli). Section 14(vi-a) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 inputtax credit when the said taxable goods are sold by him in the course of inter-state trade or commerce. (xlix). While Section 15(b) of the CST Act 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. (l). Tax, under Section 4(4)(i) and (ii) of the Act and its proviso, can be imposed only where the goods, which 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly evaded tax, it would suffice to extend the 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". (lix). 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 should not be exercised. It is necessary, therefore, for the prescribed authority to detail these jurisdictional facts in the show-cause notice proposing to assess the dealer to tax under Section 21(5) of the Act. (lx). Levy of purchase tax under Section 4(4) of the Vat Act, and the restriction of input-tax credit under Section 13 thereof and Rule 20 of the Rules, are two different and independent acts. (lxi). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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