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M/s. SRI RAGHAVENDRA FRIED GRAM MILL Versus THE COMMERCIAL TAX OFFICER, AND ANOTHER

2015 (6) TMI 1054 - ANDHRA PRADESH HIGH COURT

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:- in the light of the provisions under Section 4 (4) of the VAT Act and under the CST Act, in K.G.F. COTTONS(P) LTD. v . ASST. COMMR. (CT) (T AND AP) [2015 (5) TMI 804 - ANDHRA PRADESH HIGH COURT] matter remanded back. - W.P.Nos. 10567 OF 2010, 20575, 20917 AND 25668 of 2014, 4903, 4960, 4 .....

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s in W.P.Nos. 20917 and 25668 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 .....

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l 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 .....

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ase tax under Section 4(4) of the VAT Act cannot be levied. 6. It is brought to the notice of this court by both the counsel that a Division Bench of this court elaborately considering similar issued involved in the present writ petitions in the light of the provisions under Section 4 (4) of the VAT Act and under the CST Act, in K.G.F.COTTONS(P) LTD. v . ASST. COMMR. (CT) (T AND AP) passed certain directions by setting the aside the impugned orders therein, and remanding the matters to the autho .....

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construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. (ii). 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. If the goods are not available in the State for subsequent taxation, by reason of the circum .....

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ssary 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 in .....

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ble 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 farmer/agriculturist 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( .....

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bility is imposed on the purchasing VAT dealer to the extent the goods purchased by him are used/disposed of as specified in clauses (i) to (iii) of Section 4(4) of the Act. (x). Tax, under Section 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 .....

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Each transaction of purchase of goods, which is 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. (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 e .....

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ires 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 ingredient .....

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cotton seed oil or cotton seed de-oiled cake attract the ingredients of clauses (i) to (iii) of Section 4(4) of the Act, and if cotton seed is purchased by a VAT dealer from a person who is not a 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 o .....

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t the common input, of the outputs which are used or disposed of in the manner prescribed in clauses (i) to (iii) of Section 4(4), can alone be subjected to tax. (xxii). 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. (xxiii). Where one of the outputs is dealt with in the manner specified in clauses (i) to (iii) of Se .....

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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 d .....

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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 have a vested right in procedure. (xxix). The CST Act firstly specifies the declared goods and, secondly, imposes conditions and restrictions subject .....

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e CST Act places restrictions and imposes conditions which are essential to the validity of an impost by the State on such goods. If the conditions prescribed therein are not satisfied, the impost will 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 subje .....

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by an excessive rate of tax. (xxxv). As a result of Article 286 (3) of the Constitution, and Section 15(a) of the CST Act, the rate of tax under Section 4(4) of the VAT Act, as in the case of sale or 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, whe .....

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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 Sect .....

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Act stipulates that each of the pulses referred to in Section 14(vi-a), whether whole or separated and with or without husk, shall be treated as a single commodity for the purpose of levy of tax under 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 f .....

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ovisions/schedules on the ground that they are derived from the primary commodities. (xliv). Cotton kapas, in its unginned or unmanufactured state, contain cotton-seed. But it is by a manufacturing 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 .....

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wever, 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-stat .....

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ed 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 t .....

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(3), would commence from the last date of filing the return for a particular month, and would end four years thereafter. (liii). As Rule 23(6)(a) of the Rules 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 the said return. (liv). The period of limitation of four years must be computed for each t .....

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or the first time in the assessment order, that the assessee has committed wilful evasion of tax. The show cause notice should contain factual details to show the basis on which the assessing authority 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 .....

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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, the .....

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