Case: Rallis India Ltd Vs. State Of Andhra Pradesh

2. Two assessment orders were passed by the C.T.O. on the date last mentioned. One of them covered the turnover of the appellant liable to tax under the Central Sales Tax Act (hereinafter referred to as the Central Act.) That turnover included a sum of Rs. 26, 61, 166 which represented the price realised on account of inter-state sale during the period April 1, 1969 to June 9, 1969. In respect of this amount the order made by the C.T.O. was :The dealers have not charged and collected Central sales tax for the period from April 1, 1969 to June 9, 1969. The turnover of Rs. 26, 61, 166.33 up to June 9, 1969 is allowed exemption in view of Section 10 of Central Sales Tax Amendment Act3. The second assessment order was passed under the A.P. Act and therein the C.T.O., while considering a sum of Rs. 54, 87, 879 being the purchase value of cotton sold during the year through inter-state sale, remarked that the appellant was entitled to exemption under the proviso to Section 6 of the A.P. Act in respect thereof. He finalised the assessment accordingly4. In the year 1972, clause (b) of Section 15 of the Central Act was amended retrospectively so as to be effective from October 1, 1958. Two years later, Section 6 of the A.P. Act was also amended and made effective from the same date. On August 21, 1974, the Deputy Commissioner (Commercial Taxes) (hereinafter called the D.C.C.T.) issued a notice to the appellant calling upon it to show cause why the exemption granted to it by the C.T.O. should not be cancelled. After receiving the appellants reply, the D.C.C.T. revised the assessment order dated April 30, 1971, passed under the A.P. Act and held that in view of the provisions of Section 6 thereof as amended in 1974 the appellant was not entitled to any exemption in respect of the purchase price (amounting to Rs. 23, 000, 57) of cotton sold by it in the course of inter-state trade for Rs. 26, 61, 166 during the period April 1, 1969 to June 8, 1969. The order of the D.C.C.T. was challenged by the appellant in an appeal which was dismissed by the Sales Tax Appellate Tribunal, Andhra Pradesh (hereinafter called the Tribunal) on August 30, 1976, mainly on the ground that Section 6 of the A.P. Act did not talk of any exemption either before or after its amendment in 1974. The appellant sought a revision of the Tribunals order by the High Court under Section 22(1) of the A.P. Act but remained unsuccessful as the High Court was of the opinion (for which it relied upon K. Vadivelu Chetty v. Commercial Tax Officer, Tirupati ((1972) 30 STR 176(AP)) and Daita Suryanarayana and Company v. State of Andhra Pradesh ((1977) 39 STC 500 (AP))   that the exemption granted by the C.T.O. was patently wrong. The High Court however granted a certificate declaring the case to be a fit one for appeal to the Supreme Court under Article 133(1)(c) of the Constitution of India read with Section 109 of theCode of Civil Procedure.

Court's reasoning:
7. As on April 30, 1971 the provisions of Section 6 of the A.P. Act laid down that if goods were sold in the course of inter-state trade or commerce and tax had been levied on the sale or purchase thereof under that Act, the dealer concerned would be entitled to refund of such tax. As on the date of assessment therefore the appellant was within its rights to claim a refund of any tax that it was liable to pay on the purchase of cotton later sold by it in the course of inter-state trade; and although the section did not talk of any exemption, all that the C.T.O. could have meant by granting the appellant exemption from the tax was that it became liable to pay a tax under the opening para of the section but as it was also entitled to a refund of such tax, the same was taken to have been paid by and refunded to it. As the section then stood therefore the assessment order was unexceptionable. This was also the position under clause (b) of Section 15 of the Central Act the language of which is practically the same as of the proviso to Section 6 of the A.P. Act8. The matter however does not end there as the amendment of Section 15 of the Central Act in 1972 and that of Section 6 of the A.P. Act in 1974 made a real difference which appears to us to be an insurmountable hurdle in the way of the appellants stand being accepted. As already stated, both the amendments were retrospective so as to be effective from October 1, 1958. That means that the law to be applied to the assessment finalised through the two orders dated April 30, 1971, by the C.T. O. was that modified by the two amendments. Of course we are here concerned only with the order of assessment made under the A.P. Act. That order would be good if it is in conformity with the provisions of the amended Section 6 of the A.P. Act but not otherwise. Under the amended section the liability to tax remained unchanged but the entitlement to refund was abolished and was substituted by a right to reimbursement of the tax which arose only if the concerned goods were later on sold in the course of inter-state trade or commerce under the Central Act and tax under that Act was paid in respect thereof. Such reimbursement would not be available merely because the goods in question had been sold in the course of inter-state trade or commerce when they were not subjected to tax under the Central Act. Admittedly no such tax was paid by the appellant in the course of inter-state trade on goods regarding the purchase of which reimbursement of the tax leviable under the A.P. Act is claimed. The proviso to Section 6 as amended in 1974 therefore is of no assistance to it9. Nor does the amended clause (b) of Section 15 of the Central Act come to the appellants aid, as the language used therein, for all practical purposes, is the same as that of the amended proviso to Section 6 of the A.P. Act and clearly means that the tax under the A.P. Act would be reimbursible only to a dealer who has paid tax under the Central Act in respect of the sale of the goods in question in the course of inter-state trade or commerceThe D.C.C.T. has done nothing more than to revise an order of the C.T.O. which has been varied only insofar as it was not in conformity with the law deemed to have been prevailing on the date of the assessment by virtue of the retrospective amendment of Section 6 of the A.P. Act. It is conceded by Mr. Desai that the exemption has to be regard as a composite order of levy plus refund. That part of it which granted a refund was illegal under the amended proviso to Section 6 of the A.P. Act inasmuch as no reimbursement was due in respect of goods on which tax under the Central Act had not been paid. The D.C.C.T. therefore had not only the power but was duty-bound to strike down the order of refund as being illegal. The order of the C.T.O. as revised by the D.C.C.T. thus is reduced to an order merely of levy of the tax due under the opening paragraph of Section 6 of the A.P. Act so that the appellant becomes liable to pay such tax. The rule can obviously be of no help to him insomuch as even if it can be construed as laying down something in favour of the appellant it cannot override the provisions of the Act under which it is fraud. No amount of argument would make a rule override or control the legislative enactment under the authority of which it comes into being and that is why the rule was amended in 1974 so as to conform to the parent statuteHowever, as he did not challenge the constitutional validity of any of the amended sections he did not pursue the matte further and we need take no further notice of it13. We might mention here that Daita Suryanarayana and Company case ((1977) 39 STC 500 (AP))   on which the High Court relied in support of the impugned judgment takes a view of the law which is in conformity with the opinion expressed above by us and we unreservedly approve of the same.