IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY THE TWENTY SIXTH DAY OF JULY TWO THOUSAND AND SEVEN PRESENT THE HON'BLE MR JUSTICE BILAL NAZKI & THE HON'BLE MR JUSTICE S.ANANDA REDDY WRIT PETITION No.10743 of 2005 Between: M/s.ECE Industries Limited, Meters Division, Having its Officer at Ashok Marg, Sanathnagar, Hyderabad-500 018, rep.by its Vice President, Mr.B.L.Purohit ..... PETITIONER AND The Chief Engineer/Transmission, AP TRANSCO, Vidyut Soudha, Hyderabad and another .....RESPONDENTS THE HON'BLE MR JUSTICE BILAL NAZKI & THE HON'BLE MR JUSTICE S.ANANDA REDDY WRIT PETITION No.10743 of 2005 ORDER: (per Hon’ble Sri Justice S.Ananda Reddy) This writ petition is filed by the petitioner seeking a Writ of Mandamus or any other Writ to set aside the impugned letter dated 23.03.2005, issued by the 1st respondent as illegal, arbitrary, unconstitutional and consequentially to direct the 1st respondent to reimburse the differential sales tax amount of Rs.31.55 lakhs to the petitioner. 2. It is stated that the petitioner is a Company, which was formerly known as Andhra Pradesh Electrical Equipment Corporation, engaged in the business of manufacture of electrical energy meters. The petitioner is in the business for the last four decades. While so, the predecessor of the 1st respondent which is known as A.P.State Electricity Board (APSEB) had placed three purchase orders on the petitioner for the supply of energy meters during the year 1990-91. The first order is dated 03.12.1990 and the last order is dated 12.07.1991. As per the terms and conditions of the purchase orders, the price is inclusive of insurance and freight, but excluding sales tax and excise duty, which will be paid extra. For the earlier assessment years, the Department has assessed the energy meters supplied by the petitioner under Entry-8 of the first schedule to A.P.General Sales Tax (APGST) by treating the energy meters as electrical goods. The petitioner challenged the same before the appellate tribunal on the ground that the energy meters would fall under Entry-83 of the first Schedule as machinery. In view of the dispute as to the entry under which it is liable to be taxed, the petitioner while supplying the energy meters, charged sales tax at the rate of 8.99% in conformity with the orders passed by the appellate tribunal, which held that the energy meters are machinery and fall under Entry-83 of the first Schedule, while the rate of tax with reference to Entry-38 for energy meters was 14.482%. 3. It is stated that the appeals filed by the petitioners for the assessment years 1976-77, 1982-83, 1983-84, 1984-85 were allowed, but, however, against the said orders of the appellate Tribunal, the 2nd respondent/Commercial Tax Officer filed Tax Revision Cases before the High Court, which are allowed in favour of the Department, holding that electrical meters would fall under Entry-38 and not under Entry-83. The said view was also taken by the High Court in view of the amendment brought in to the Entry-38. Though the petitioner carried the matter in appeal by filing Special Leave Petition before the Apex Court, but was not successful, therefore, ultimately, the energy meters that are supplied by the petitioner to the predecessor of the 1st respondent are taxed at 14.482% under Entry-38 of the first Schedule to the APGST. 4. It is stated that as a result of the higher rate of tax levied by the Department, the 1st respondent has to reimburse an amount of Rs.31.55 lakhs. Therefore, the petitioner raised a claim for reimbursement of differential sales tax amount paid to the 2nd respondent against the 1st respondent. The petitioner made number of representations since 1997 to the predecessor as well as to the 1st respondent for reimbursement of the differential sales tax amount, in terms of the purchase orders. The 1st respondent has asked the petitioner to produce the relevant documentary proof with reference to the purchase orders as well as the assessment orders and the invoice copies. The petitioner submitted all the relevant copies pertaining to the differential sales tax claimed. 5. After number of representations, the petitioner has again requested the 1st respondent to release the differential amount, as the 1st respondent has not acted upon the representations made earlier, by enclosing all the relevant documents. The 1st respondent rejected the claim by the impugned letter dated 23.03.2005, stating that Clause-7 of the purchase order has no application to the claim, as there is no variation in the rate of taxes, after the purchase order was placed on the petitioner. It is stated that the petitioner informed the respondents by a letter dated 02.01.1991 that electrical goods would attract tax at the rate of 14.482% under Entry-38 of the first Schedule, but the petitioner has charged sales tax at the rate of 8.99% in lieu of the orders passed by the Tribunal. It was also made clear that in case any change in the payment of the sales tax at higher rate of 14.482%, the petitioner has reserved its right to submit supplementary bills. In view of the said representation already made while submitting the bills, it is not open to the respondents to reject the claim, since as per the terms of the purchase order, the entire sales tax liability would be on account of the predecessor’s account. Therefore, sought for appropriate orders. 6. A counter is filed by the 1st respondent, denying and disputing the claim of the petitioner. It is stated that as per the Clause-2 of the Purchase Order the prices are variable and exclusive of excise duty and sales tax, which will be paid extra. Accordingly, the petitioner charged 8.99% sales tax in the sale invoices issued by it and the same was paid to the petitioner, as and when the petitioner submitted sale invoices, at the time of supply of electric meters, which was paid to the department as per the said claims. 7. It is stated that the reference to Clause-7 of the Purchase Order shows that any variation up or down in excise duty or sales tax or other statutory levies introduced after placing the purchase order, shall be to Board’s account. The said clause stipulates new levies, which includes increase in the rate of tax or fresh levies. In the case of meters, which were subject matter of the said purchase order, there were no new levies. Therefore, the petitioner cannot invoke the said clause on account of his own fault. It is stated that since the dispute is in between the petitioner and the 2nd respondent, the 1st respondent is no way concerned to those affairs, even they have not made parties to the proceedings before the 2nd respondent nor even the proceedings before this court or Supreme Court. Therefore, the 1st respondent is not at all liable to pay the differential sales tax. 8. It is further stated that the present claim is based on letter dated 02.01.1991. The said letter is not part and parcel of the purchase order nor even that the petitioner has intimated the same to the respondent at the time of supply of electrical meters on various occasions. Further, it is submitted that the petitioner was aware of the correct rate of tax, but consciously quoted the lower rate to gain pecuniary benefit in the matter of evaluation of tender. Therefore, that the petitioner who has quoted sales tax at 8.99% is not entitled to claim any higher amount. It was also stated that condition No.7 has no application to the present case as there is no variation in the rate of tax, after the purchase order was placed on the petitioner, therefore, sought for dismissal of the writ petition. 9. However, subsequently, an additional counter is filed by the 1st respondent, without any leave of the Court. Since the same is on the file, it would be appropriate to refer the contentions that are raised. In the additional counter, it is stated that due to oversight certain material contentions were not mentioned, therefore, the additional counter is filed. It is stated that on 01.02.2006 the 1st respondent appeared in person before this Court as directed, and thereafter, there was an effort to settle the issue, but the talks failed. 10. It is stated that the claim of the petitioner is barred by limitation. The Supreme Court delivered the judgment long back. Even a suit is barred. The claim is purely contractual. The purchase price was paid including the sales tax as claimed in the invoices between 1990-92. It was accepted without protest. The claim is for price of goods sold. The period of limitation is prescribed under Article-14 of the Limitation Act, and it is wholly barred by limitation in 1995 itself. Even if the residuary clause is applied, there is no acknowledgment of any kind. 11. It is stated that the claim is founded upon the obligation of the Board to pay for any extra tax due by reason of the variation in the tax law. In this case, the entries in the sales tax are not amended to increase the rates prescribed. Clause-2 merely says that the sales tax will be paid extra. The company claimed price including the sales tax and the same was paid. No claim under Clause-2 survives. It is further stated that the writ petition is filed 9 years after adjudication of the tax liability. The writ petition is belated. The petitioner is guilty of latches and therefore not maintainable. It is further stated that the writ petition is misconceived. The claim is against APSEB. APSEB is ceased to exist since 1998, after the A.P.Electricity Reforms Act was enacted. The party shown as the 1st respondent is not an officer of APSEB, but an officer of A.P.TRANSCO. A.P.TRANSCO has not been made as a party and is also not a party to or successor in interest to APSEB in respect of contract which was executed and completed by 1992, more than 6 years before the formation of A.P.TRANSCO. The Writ Petition is, therefore, deserves to be dismissed. The learned counsel for the respondents also relied upon the following decisions in (1) State of Maharashtra v. Digambar[1], (2) Municipal Council, Ahmednagar v. Shah Hyder Beig[2], (3) M.K.Krishnaswamy v.Union of India[3], (4) State of Orissa v. Madan Gopal[4], (5) Sugammal v. State of Madhya Pradesh[5], (6) V.M.Salgaocar v. Board of Trustees of Port of Mormugao[6], (7) State of Orissa v. Damodar Das[7], and (8) Binod Bihari Singh v. Union of India[8] in support of the claim as to the maintainability of the writ petition. 12. An elaborate reply is filed by the petitioner to the above additional counter. The averments made in the additional counter are untenable and incorrect and the respondents are put to strict proof of all those allegations. The 1st respondent is guilty of suppression of various facts. It is stated that when the matter is pending before this Court, the 1st respondent has come forward to settle the issue with regard to differential sales tax, and accordingly, sought for time before this Court on number of occasions, informing that they are settling the issue amicably. Accordingly, the 1st respondent has called for meetings on 24.01.2006, 30.01.2006, 08.02.2006 and 13.02.2006. The petitioner has submitted entire documents pertaining to the sales tax, the amount, which was paid to the 2nd respondent. It is stated that the claim that it is barred by limitation is false. It is stated that way back on 02.01.1991 the petitioner has informed the 1st respondent that the energy meters supplied to the 1st respondent would attract sales tax at 14.482% under tariff of electrical goods, and copy of which is filed at page-51 of the material papers. However, the petitioner has taken up the issue with the Department and therefore, charged at a lower rate of 8.99% claiming that the electrical meters have to be treated as machinery which claim was even accepted by the sales tax Tribunal. Even at the time of raising invoices for payment with reference to supplies of electrical meters, it was made clear that sales tax is being claimed at 8.99%, and if there is any variation, supplementary bills would be raised for the differential amount. 13. It is stated that the Deputy Commissioner of Commercial Taxes has revised the assessment orders for the financial years 1989- 90, 1990-91 and 1991-92 and raised the demand at higher rate. These facts were brought to the notice of the predecessor of the 1st respondent by letter dated 12.03.1997, for which a response was received from the predecessor of the 1st respondent by letter dated 11.11.1999, directing the petitioner to produce relevant documents. Thereafter, the petitioner supplied the relevant proof. Even after formation of the 1st respondent AP TRANSCO, which succeeded APSEB, a communication was sent on 12.03.2003, for which the present 1st respondent also issued a letter dated 29.12.2003, again directing the petitioner to furnish the relevant documentary proof of the claim, which was furnished, and again the 1st respondent intimated the petitioner by letter dated 16.01.2004 that the matter has been referred to FA & CCA (A&E)/AP TRANSCO for furnishing the details and further action will be taken soon after receipt of the details. The petitioner again sent a letter dated 03.02.2004 reminding the claim. Likewise, number of letters were sent by the petitioner reminding the 1st respondent for payment of the differential claim. The 1st respondent after waiting for a long, gave a communication, rejecting the claim, on the ground that Clause-7 has no application. There is no other ground except the said ground for rejection. 14. In the reply, it was stated that the present 1st respondent is successor to APSEB, which was not disputed at any stage of the communications, therefore, it is not open for the 1st respondent to deny its liability on that ground. It is further stated that in the cause title, it is shown as Chief Engineer, AP TRANSCO, instead of AP TRANSCO represented by the Chief Engineer and it is only an inadvertent mistake in showing the 1st respondent in the cause title. Therefore, sought for appropriate orders. Along with the reply, the copies of communications that are issued and also the copies of the minutes that were recorded during the course of discussions for settlement, are filed along with the reply. 15. To this reply, again another counter has been filed by the respondents, reiterating what has been stated earlier and a further reply was filed by the petitioner. 16. At the time of hearing, the learned counsel for the petitioner contended that there is no dispute as to the purchase orders placed by the APSEB on the petitioner for the supply of energy meters, which was, in fact, supplied as per the terms of the purchase order. A reference to the relevant clauses of the purchase order is proper to consider the respective claims. Clause-2 of the purchase order refers to the prices, which reads: “The prices noted below are variable as per IEEMA/(PVC)/METER/N/N/1 effective from 1.7.1986 for Energy Meters with base date as on December, 1989 inclusive of freight and insurance, free at destination stores. Excise Duty and sales tax will be paid extra……” Clause-7 refers to the Penalty for late delivery, which reads: “i) General:- The delivery of materials as per the agreed schedule of delivery is the essence of the contract and no extension of time for delivery would be allowed except under recognized force majeure conditions. For Supplies made beyond the agreed delivery schedule, interest upto 15% per annum for the quantity and proportionate value so delivered would be levied and deducted from the amount payable……… Any variation up or down in Excise duty or sales tax or other statutory levies, or new levies introduced after placing of this purchase order shall be to Board’s account.” 17. Therefore, basing on the above conditions, the claim of the petitioner is that the respondent has to pay sales tax as extra over and above the price. It is stated by the petitioner that in view of the dispute as to the exact rate of taxes payable on the electrical meters, the petitioner claimed the sales tax at a lower rate, treating them as falling under Entry-83 of the first Schedule. However, it was made clear by a separate communication to the purchaser that the petitioner has been claiming the sales tax at 8.99% and if there is any variation in the rate of tax, separate supplementary bills would be raised for the differential amount. The purchaser did not dispute the communication given by the petitioner. Though the petitioner raised the disputes with the Commercial Tax Department as to the rate of tax and was even successful before the appellate Tribunal, but, however, the High Court held that the electrical meters supplied by the petitioner are liable to be taxed under Entry-38 at 14.482%. Though the petitioner even carried the matter in appeal to the Apex Court, but was not successful. As a result of the said decision of the High Court, which was confirmed by the Apex Court, the assessments were revised by the 2nd respondent, raising an additional demand, which was paid by the petitioner to the 2nd respondent. As a result of it, there was an additional claim made by the petitioner against the 1st respondent. The petitioner brought to the notice of the 1st respondent’s predecessor as early as in the year 1997, for which the petitioner was asked to produce the documentary proof which was supplied, thereafter, the matter was kept without any decision, and in fact, the petitioner was informed that the matter was under consideration and will be settled. 18. Subsequently, when the 1st respondent succeeded to the APSEB, the petitioner also made a representation as early as in the year 2003 by bringing to its notice with all the material. The 1st respondent also gave a communication to the petitioner on 29.12.2003, requesting the petitioner to furnish the relevant documentary proof. After receiving the documentary evidence, a communication was given to the petitioner by the 1st respondent dated 16.01.2004, informing the petitioner that the matter has been referred to the concerned authorities for furnishing details and further action will be taken. Thereafter, the petitioner again sent letters, reminding the claim, but, finally the impugned letter was issued, stating that Clause-7 of the purchase order has no application. 19. The contention of the petitioner is that either under Clause-2 or under Clause-7, it is entitled for differential sales tax as sales tax was to be reimbursed separately, as is specified in Clause-2 itself. What is being claimed by the petitioner is the differential sales tax on account of variation in the rate of tax, in conformity with the decision of the High Court. The stand of the respondents is that the sales tax is part of the price and what is being claimed is unpaid sale consideration, which is clearly without any basis. When the terms of the purchase order is very clear that the sales tax is separately payable by the purchaser, the same cannot be treated as part of the sale price. 20. Further, the conduct of the 1st respondent as well as its predecessor which conveyed to the petitioner that his claim was under consideration and was never denied or disputed, the rejection of the same on flimsy ground is not valid or tenable. 21. At the time of hearing, however, the respondents raised various grounds as to the maintainability of the writ petition, as well as the latches on the part of the petitioner in filing the writ petition, but the correspondence clearly shows that the petitioner was pursuing with the Department from the day when it was decided by the High Court, which was confirmed by the Apex Court, and at no point of time, the 1st respondent or its predecessor had given any communication that it is not liable to pay the differential sales tax. Though the learned counsel for the respondents relied upon number of decisions in support of his contentions as to the maintainability of the writ petition, as well as the ground of latches, those decisions have absolutely no applicatution to the facts of the present case. 22. Further, the conduct of the 1st respondent is also unfair, being a public sector undertaking in dealing with the public who are its contractors. When the representations were made by the petitioner to the respondents with regard to the claim of differential amount, the respondents communicated to the petitioner that the matter is under consideration for taking necessary action, which is evident by the communications issued by the 1st respondent AP TRANSCO and its predecessor viz. letters dated 11.11.1999, 27.12.2003 and 16.01.2004. Even during pendency of the present writ petition, representations were made before this Court that the matter would be settled between the parties, letters were issued to the petitioner fixing the meeting on 24.01.2006, 30.01.2006, 08.02.2006 and 13.02.2006 and finally it was represented that the talks had failed. In fact, even before this Court, the respondents did not represent what it had proposed to the petitioner and how to settle the claim of the petitioner. In fact, the 1st respondent was represented by his standing counsel, but, however, after hearing to some extent and after adjournments for settlement, suddenly the senior counsel was engaged and additional counters are filed, taking various pleas. 23. It is settled law that the impugned proceedings passed by the 1st respondent has to stand or fall on the ground on which it was passed, as held by the Apex Court in Mahinder Sing Gill v. Chief Election Commissioner[9]. It is not open to the respondents to supplement so as to support such an order or proceeding. The stand, as per the impugned letter, is that the claim of the petitioner would not fall under Clause-7. Even assuming that the claim of the petitioner would not fall under Clause-7, but the 1st respondent has to pay the sales tax as provided under Clause-2 itself. If there is any variation in the claim made by the petitioner initially, which was later found to be not correct and a higher rate of tax is payable, the purchaser is obligated to pay, and there is no excuse for the purchaser to claim that he would not be liable to pay tax at higher rate. Since the petitioner has claimed sales tax at a lower rate initially, which was conditional, and in fact, the position was even intimated by the purchaser by a communication to the respondent’s predecessor, which was not disputed. In view of the said situation, since higher rate of tax is payable, as is decided by this Court in the sales tax proceedings, the purchaser is obligated to reimburse to the petitioner who supplied the goods and liable to pay tax at higher rate than what was claimed. 24. Under the above circumstances, the impugned letter issued by the 1st respondent is clearly illegal and unsustainable and further the differential sales tax is payable by the purchaser as per the purchase order, and as the 1st respondent being the successor to the original purchaser, it is liable to pay the said amount. Since the said amount though was payable by the 1st respondent by way of reimbursement to the petitioner as soon as it was paid to the 2nd respondent, in pursuance of the revised assessments, but, however, failed to pay and retain the said amount by the 1st respondent. Therefore, the 1st respondent is directed to pay the differential amount of sales tax with interest at 12% p.a. to the petitioner from the date the petitioner paid to the department to the date of reimbursement. 25. The Writ Petition is, accordingly, allowed, and directed the 1st respondent to pay the amount payable to the petitioner, within a period of four weeks from the date of receipt of a copy of this order. No order as to costs. _______________ BILAL NAZKI,J _________________ S.ANANDA REDDY,J Dated:26.07.2007 Dsr [1] AIR 1995