THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.25518 of 2010 December 01, 2010 Between: M/s.Madras Cements Limited, represented by its Senior General Manager (Admn.) Mr.S.Ramaraju … Petitioner And The Commercial Tax Officer, Vijayawada Division and others ... Respondents THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.25518 of 2010 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The order of the first respondent in Form VAT 305, dated 13.9.2010 for the tax period April 2007 to March 2010 is under challenge in this writ petition as being arbitrary and illegal. The petitioner is a manufacturer and trader in cement having its corporate office at Chennai and one of its factories in Jaggayyapet in Krishna District. It manufactures ordinary Portland cement and slag cement. It is a registered dealer on the rolls of the first respondent. The first respondent issued show cause notice dated 03.6.2010 proposing to levy tax on the turnover relating to alleged purchase of lime stone and fly ash, to disallow input tax credit, and on the air- conditioners used in the plant. After the petitioner submitted its objections thereto the first respondent passed the order of the attachment dated 13.9.2010 which is impugned in this writ petition. Before this Court Sri S.Dwarakanath, learned Counsel for petitioner, would submit that the assessing authority had erred in relying on the judgment of the Supreme Court in Cooch Behar Contractors’ Association v State of West Bengal[1], and in holding that the royalty paid by the contractors, while procuring the goods, formed part of the contractual transfer price for the purpose of levy of tax. Learned Counsel would submit that the judgment in Cooch Behar1 has been overruled in State of Himachal Pradesh v Gujarat Ambuja Cement Ltd.[2]. On the question of disallowance of input tax credit, Learned Counsel would submit that all that the petitioner is required to produce is a tax invoice; failure on the part of their vendor to pay tax cannot result in their being disallowed input tax credit; and the only remedy, if any, available to the authorities is to proceed against the petitioner’s vendor for recovery of the tax due. On the question of disallowance relating to use of air-conditioners in the manufacturing plant, learned Counsel would rely on an order of the Advance Ruling Authority in M/s.Vijaya Iron Foundry Pvt. Ltd (Ruling dated 19.2.2007), which he would contend is binding on the first respondent. On the other hand Sri P.Balaji Verma, Learned Special Standing Counsel for Commercial Taxes, would fairly state that, since the assessing authority had relied on a judgment of the Supreme Court which has since been overruled, he may be permitted to pass orders afresh in accordance with law. The Supreme Court, in Gujarat Ambuja Cement Ltd.2, observed thus:- In Cooch-Behar Contractors’ Assn. v. State of W.B., (1996) 10 SCC 380, a two-Judge Bench of this Court followed State of M.P. v. Orient Paper Mills Ltd, (1977) 2 SCC 77, and held that in view of the decision of this Court in Orient Paper Mills Ltd. payment of royalty amounts to payment of price for the goods obtained from the government departments and used in the works contract. Unfortunately, the subsequent judgment of a larger Bench in State of Orissa v Titaghur Paper Mills Co. Ltd.(1980) 6 SCC 213), does not appear to have been cited. That being so, this decision does not lay down the correct position and is overruled. It is evident from the above extracted portion of the judgment in Gujarat Ambuja Cement Ltd.2 that the judgment in Cooch Behar1 has been specifically overruled in view of the subsequent judgment of a larger Bench in State of Orissa v Titaghur Paper Mills Co. Ltd.[3] and, as such, reliance placed by the assessing authority on the overruled judgment would necessitate the impugned order being set aside. The submission of the learned Counsel that, under Section 13(3) of the A.P. VAT Act, 2005 read with Rule 27 of the A.P. VAT Rules, 2005, a dealer is required only to produce the tax invoice, and cannot be denied the benefit of input tax credit merely because tax has not been paid by his vendor; and the order of the Advance Ruling Authority is binding on the assessing authority; cannot be said to be without merit. As the order of the assessing authority is being set aside on the ground that he had relied on the judgment of the Supreme Court in Cooch Behar1, which has been overruled subsequently, all the other contentions can as well be examined by the assessing authority himself. The first respondent shall, after giving the petitioner an opportunity of being heard, pass orders afresh in accordance with law at the earliest, in any event not later than two months from the date of receipt of a copy of this order. The writ petition stands disposed of accordingly. No costs. _______________ (V.V.S.RAO, J) ______________________________ (RAMESH RANGANATHAN, J) December 01, 2010 YS [1] (1996) 10 SCC 380 : (1996) 103 STC 477 (SC) [2] (2005) 6 SCC 499 : (2005) 142 STC 1 (SC) [3] (1985) 6 SCC 213