TMI Blog2015 (6) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... 5668 of 2014, 4903, 4960, 4981, 6601, 6783, 6836, 7004 and 7947 of 2015 are the dall mills and are being represented by its partners. They are involved in the business of purchasing pulses viz., Bengal gram, Black gram and red gram from ryots and after milling (de-husking) the same in the mills, sell the resulted de-husked pulses and husk. The claim of the petitioners is 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 furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x under Section 4(4). (iii). The goods purchased are referred to in Section 4(4) as taxable goods , and such purchases are in circumstances in which no tax is payable by the seller. 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 qualifies the term 'goods' and excludes, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capable of being construed 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviso to Section 4(4) enables tax to be levied not on the goods which constitute the output, but on the proportionate value of the purchased goods which are used as inputs for producing other goods (outputs) where one of the goods so produced attracts the ingredients of clauses (i) to (iii) of Section 4(4) of the Act. (xxv). 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 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 used for manufacture, is almost the 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% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods, and paddy does not continue to be paddy thereafter. Rice and paddy, in ordinary parlance, are two distinct and different commodities. However, in view of Section 15(c) of the CST Act, the tax levied on the sale of rice must be reduced by the amount of purchase tax levied, under Section 4(4) of the Act, on paddy. (xlvii). Taxable goods, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 showcause notice, the Revenue cannot sustain the notice or the order passed under Section 21(5) of the Act. (lviii). If the allegations in the show-cause notice, accepted as true, show that the dealer had committed wilful evasion of tax, and the findings recorded in the assessment order establish that the assessee had wilfully 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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