Rallis India Ltd. v. State of Andhra Pradesh

1028 A B c D E F G RALLIS lNDIA LTD: _v._ STATE OF ANDHRA PRADESH _February_ 12, 1980 [R. S. PATHAK AND A. D. KOSIIAL, JJ.] _Central Sales Tax Act 1956-Section_ 15(b _)-Scope_ _of._ On the ground that the dealers have not charged and collected Central' Sales Tax during the period !st April, 1969 to 9th June, 1969 tho Commercill<l Tax Officer, allowed exemption under section 10 of the Central Sales Tax Act in respect of certain turn-over of the appellant which included the price realised on account of inter-state sales. In respect of a second set of transactions which involved the purchase value of cotton sold during the: ye~r through inter-state sales the Commercial Tax Officer held that the appellant 'vas entitled to exemption under the proviso to section 6 of the A.P. General Sales Tax Act. In 1972 section 15(h) of the Central Act \\'as amended with retrospective effect from 1st October, 1958 and in 1974 section 6 of the State Act was amended with retrospective effect from the· same date. The Deputy Commissioner of c·ommercial Taxes revised the assessment order of the Commercial Tax Officer passed under the· State Act on the ground that in view of the provisions of section 6 as amended in 1974 the appellant was not entitled to any exemption during the above period. The Sales Tax Appellate Tribunal dismissed the ~pellant'S appeal on the view that section 6· of the State Act did not talk of any exemption either before or after its amendment in 1974. The High Court dismissed the appellant's appeal holding that the exemption granted by the C.T.O. was p<itcntly \vrong. Dismissing the Appeal, HELD: 1. Section 10 of the Central Act Vlhich inakcs no reference to any tax leviable under a State Act can be of no assistance to the appellant. Granting that the appellant did not collect any tax under the Central Act during the period in question on the ground" that no, such tax could have been levied or collected so that it becomes fully entitled to the benefit of the exemption enacted by the1 section, that \Vould only niean that central sales tax ca·nnot be charged from it in respect of sales covered by the section. No demand had been made from it for any tax Jeviable under the Central Act in respect of such sales and the appellant couid not derive any benefit from section 10 of the Central Act in the matter of its assessment under the State Act. [I033G-H] Act. [I033G-H] 2. In so far as the a-ssessment under the State Ac.:t is concerned all that the C,T.O. could have meant by granting exemption \Vas that the appellant H became liable to pay a tax under the opening para. of the section; but that since the appellant wa-s also entitled to a refund of sucll tax the same was taken to have been paid by and refunded- to it. The assessment order made# I RALLIS INDIA LTD. _v._ ANDHRA PRADESH _(Kasha!,_ _],_ ) 1029 under the proviso to section 6 of the State Act and section _15_ (b) of the A Central Act as they stood then was unexceptionable. [1034E-F] 3. Under section 6 as amended the. liability to tax rcn1ained uncht.·nged but thci entitlen1ent to refund v1as abolished and was substituted by a right to reimbur.sen1ent of the tax \\'hich arose only if the concerned goods \Vere later on sold in the course of inter-state trade under the Central Act and tax under that A.ct was paid in respect thereof. Such reiniburs.ement would not be available merely because the goods in question had been sold in the course of inter-state ttade or commerce when they \Ve1e not subjected to tax under the Central Act. No such tax was paid. The proviso to section 6 as amended in 1974 can be of no assistance to the appellant. [1035A-B] 4. The language of clau~e (b) of section 15 of,the Central Act is the same as that of the amended proviso to secti6n 6 of the State Act. It clearly means that the tax under the State Act wouJd be rei1nhursible only to at 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 commerce. [1035C-D] 5. The argun1ent that the Deputy Commissioner had no power to cancel the order of refund is fallacious. He has done nothing rnore than to revise an order of the C.T.O. which has been varied only in so far as it was not in conformity with the law deemed to have been prevailing on the da·te of the assessment by virtue of the retrospective amendment of section 6 of the State Act. The Deputy Commissioner had not only the power but was duty bound to strike down the order of refund as being illegal. [1035F-Gl _6._ Rule 27 A can be of little help to the appellant inasmuch as even if it can be constn1ed as laying down something in its favour, the rule ca-nnot override the. provisions of the Act. [1036A] _Daita Suryanarayana and Con1pany_ v. _State_ _of_ _Andlzra Pradesli_ 39 S.T.C, _500_ approved. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1897 of 1978. From the Judgment and Order dated 19-9-1977 of the Andhra Pradesh High Court in Tax Revision Pe'.iti011 No. 66/76. S. _T._ _Desai, T._ _A._ _Ra111achandra11,_ _Mrs._ _J._ _Ramachandran_ and _M._ _N._ _Tandon_ for the Appellant. _T._ S. _Krishnamoorthy Iyer,_ and _B. Parthasarthi_ for the Respondent. The Judgment of the Court was delivered by B c D E F KosHAL, J. The question which falls for determination in the G appeal by certificate granted by the High Court of Andhra Pradesh against its judgment dated the 19th September, 1977 is whether the appellant which is a limited company is not liable to make good to the State Sales Tax authorities the amount of sales tax leviable under sectio'n 6 of the Andhra Pradesh General Sales Tax Act (hereinafter referred to as the A. P. Act) in respect of the turn-over cover- H ing the purchase by th3 petitioner of cotton during the period 1-4-1969 to 8c6-1969, which turn-over had been exempted from sales tax by 1030 SUPREME COURT REPORTS [1980] 2 S.C.R. the Commercial Tax Offic-cr, No. II, Guntur (C.T.O. for short) in his assessment order dated the 30th of April, 1971. 2. Two assessment orders were passed by the C.T.O. on the date last mentioned. One of them covered the turn-over of the appellant liable to tax under the Central Sales Tax Act (heminafter referred to as the Ce:Jtral Act). That turn-over included a sum of Rs. 2(J.61,166 which represented the price realised on account of inter-state sale during the period 1-4-1969 to 9-6-1969. In respect of this amount the order made by the C.T.O. was : "The dealers have not charged and collected Cen'ral saks Tax for the period from 1-4-69 to 9-6-69. The twnover of Rs. 26,61,166.33 upto 9-6-')9 is allowed excmpc1on in view of section 10 of Central Sales Tax Amendment **Act."** The second assessment order was passed under the A.P. Ac'. and therein the C.T.O., while considering a sum of Rs. 51,87,879/- being the purchase value of cotton sold during the year through inter-state sale, remarked that the appellant was entitled to 'exemption' nnder the proviso to section 6 of the A. P. Act in respect thereof. He linalisecl the assessment accordingly. 3. In the year 1972, clause (b) of section 15 of the Central Act was amended retrospectively so as to be effective from 1st October, 1958. Two years later, section 6 of the A.P. Act was also amonded and made effective from the same date. On the 21st of August, 1974, the Deputy Commissio'ner (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 bo cancelled. After !€ceiving the appellanfs reply, the D.C.C.T. revised the assessment order dated 30th of April, 1971, passed under the A.P. Act and held that in vi·ew of the provisions of section 6 thereof as amended in 1974 the appella'nt was not entitled to any 'exemption' in respect of the purchase price (amounting to Rs. 23,00,057/-) of cotton sold by it in the course of interstate trade for Rs. 26,61,166/- during the period 1-4-1969 to 8-6-1969. The order of the D.C.C.T. was challenged by the appeallant in an appeal which was diSmissed by the Sales Tax Appellate Tribu'nal, Andhra Pradesh (hereinafter called the Tribunal) on the 30th of August, 1976, mainly on the ground that section 6 of the AP. Act did not talk of any 'exemption' either before or after its amendment in 1974. The appellant sought a revision of the Tribunal's order by the High Court nnder section 22 (I) of the A.P. Act but remained unsuccessful as the High Court was of the opinion (for I ' #### "' I **411** ' ' **A** _B_ c **D** 'E ' **F** **'G** _J_ **H** RALLIS INDIA LTD. _v._ ANDHRA PRADESH _(Koshal,_ !.) 1031 which it relied upon _Vadivelu Chetty_ v. _Commercial Tax Officer,_ _Tirupathi(')_ and _Daita Suryanarayana and Company_ v. _State_ _of_ _Andhra Pradesh(_ _[2 ]_ _)_ that the exempt>on 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 co·nstitution of India read with section 109 of the Code of Civil Procedure. 4. In ord•"r to appreciate the contentions raised on behalf of the ~I" appellant it is necessary to examill'e the various relevant legislative **i(** : provisions which are set out below : _Section_ JO _of_ _the Central Sales Tax (Amendment)_ _Act,_ 1969 _(hereinafter referred to as the_ 1969 _Act)._ "10. _Exemption from liability to pay tax in certain_ . _**cases.**_ (1) Where any sale of goods in the course of interstate trade or commerce has been effected during the period between the 10th day of November, 1961, and the 9th day of June, 1969, and the dealer effecting such sale has not collected any tax under the principal Act on the ground that no such tax could have bee·n levied or collect·ed in respect of such sale or any portion of the turn-over pelating to such sale ahd no such tax could have been J.cvied or ·collected if the amendments made in the principal Act by this Act had not bc•cn made, then, notwithstandi'ng anything contained in section 9 on the said amendments, the dealer shall not be liable to pay any tax under the principal Act, as ame'nded by this Act, in f'~spect of such sale or -such part of the turn·over velating to such sale. (2) For the purposes of sub-scction(l), the burden of proving that no tax was collected under the principal Act in respect of any sale referred to in sub-section (I) or in respect of any portion of tho turn-over relating to such sale shall be o'.n the dealer effecting such sale." _Section_ 6 _of_ _the_ _A._ _P._ _Act_ _as_ _on_ 30-4-1971 "6. _Tax in respect_ _of_ _declared_ goods-Notwithstanding anything contained in 5ection 5, the sale or purchase of declared goods by a dealer shall be liable to tax at the rate, and only at th~ point of sale or purchase, specified against (I) 50 S.T.C. 176. _(2)_ 39 S.T.C. 500. **A** **B** **c** **D** **E** **F** **G** **H** 1032 SUPREME COURT REPORTS [1980] 2 S.C.R~ A each in the Third Scheduk, on his tur"n-over of such sales or purchases for each year irrespective of the quantum of his turn-over in such gocic:!s; !lnd the tax shall be assessed, levied and collected in such manner as may be prescribed : B c D E Provided that where any such goods on which tax has been so levied are 5old in the course of inter-state trade or commerce, the tax so levied shall be refunded to such, person, in such manher and subject to such conditions as. may be prescribed." _The proviso_ _to_ _section_ 6 _o/ the_ _A._ _P._ _Act as_ _amended_ _in·_ 1974 _retrospectively_ _wi·th_ _effect from_ 1-l0-1958. "Provided that whene any such goods on which a tax has been so levied are sold in the course of inter-state trade· or commerce and tax has been paid under the Central Sales Tax Act, 1956. in respect of the sale of such goo~s in the course of inter-stat•e trade or commerce the tax so levied shall be reimbursed to the person making such sale in the course of inter-state trade or commerce, in such manner and subject to such conditions as may be prescribed." _Sub-rule_ (I) _of_ _rule 27-A of the Rules framed under_ _the A.P._ _Act as on_ 30-4-1971 "Where any tax has been levied and collected under section 6 in respect of the sale or purchase inside the State of any declared goods and such goods are subsequently sold in the course of int•er.,;tate trade or commerce, the tax so levied and collected shall be refunded to the person in the manner and subject to the conditions specified in sub-rules (2) to (4)." _Sub-rule_ (I) _of the said rule_ 27 _A after its amendment_ 1-8-1974 \ "Whef'e any lax has been levied ahd collected under G section 6 in respect of the sale or purchase inside the State of any declared goods and such goods are subsequently sold in the ccurse of inter-state trade or commerce,. the tax so levied and collected shall be reimbursed to the person in the manner and subject to the cohditions specified· iu sub-rules (2) to ( 4) : H Provided that the refund shall not IJ.o made unless the tax payable under !hoc Central Sales Tax Act 1s paid." RALLIS INDIA LTD. r. ANDHRA PRADESH _(Koshal,_ J.) 10 33 ##### _(_ _Clauses (a) and_ _(b)_ _of section_ 15 _of the Central_ _Act_ av _in force on_ 30-4-1971 "15. _Restrictions and conditions in regard_ _to_ _tax_ _011_ _sale_ _or purchase of declared goods within a_ _State-Every_ sales tax law art' a State shall, in so far as it imposes or autho rises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :(a) the tax payable under that law in respect of any sale or purchase of such goods inside the Slate shall be levied only i"n respect of the last sa1c or purchase inside the State and shall not exceed two per cent of the sale or purchase price. c (b) where a tax has be•cn levied under that law in respect of the sal•c or purchase inside the State of any declared goods and such goods are sold in the course of inter-state trade or commerce, the tax so kvied shall be refunded to such person in such manner **D•** and subject to such conditions as may be provided in any law in force in that State." _Clause (b)_ _of_ _section_ 15 _of_ _the_ _Ce11tral_ _Act as amended_ _in_ 1972 _retrospectively with effect from_ 1-10-1958 "(b) where a tax has been levied under that law in respect of the sale or purchas•c inside the State of any declared goods and such goods are sold in the course of inter-State trade or commorce, and tax has been paid under this Act in respect of tho sale of such **goods** **in** **the course of** inter-s~atc **trade** **or** **con1-** metce, the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-state trade or commerce in such manner and subject to such conditions as may be provided in any law in force i"n that State." **E** 5. Section 10 of the 1969 Act makes no reference at all to any G, tax leviable under the State Act. It concerns itself only with the tax payable under the Central Act which it calls the 'Principal Act' and sayc, that a dealer shall not be liable to pay any _such_ tax for the period between 10-11-1964 and 9-6-1969 if certaih conditions arc satisfied. Much reliance has been placed by learned counsel for the appellant on this section which, in our opinion, however, is of no aSJSistance to **H** him. It may be taken for granted that the appellant did not collect any tax uhder the Central Act on the sale of goods effected by it in B c 'D F 1034 SUPREME COURT REPORTS [1980) 2 S.C.R. the course of inter-state trade during the period 1-4-1969 to 9-6-1969 on the ground that no such tax could have been levied or collected in respect of such sale, so that it becomes fully entitled to the benefit of the exemption enacted by the section; but that would only mean that Central sales tax cannot be charged from it in respect of such sale. As it is, no demand has been made from it for any tax leviable under the Central Act in respect of such sale and we do not see how the appel;ant could benefit from the said section 10 in the matter of its assessment for the period in question under the A.P. Act. All tha:t we are concerned with is the liability of the appellant to pay "' tax on the purchase of cotton which it sold during that period in the course of into::r-state trade and that is a matter which has to be decided with reference to section 6 of the A.P. Act, rule 27-A extracted above and section 15 of the Central Act. 6. As on 30-4-1971 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 c01mnerce and tax had been levied on the sale or purchase thereof uuder 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 refund of any tax that it was liable to pay on the purchase of cotton later sold by it in the course of i"nter-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 e"ntitled to a refund of such tax, the same was tak•cn 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 Ul)Cfor 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. Act. 7. The matter however docs 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 ns to be an insur·G mountable hurdle in the way of the •appellant's stand being accepted. As already stated, both the amendments were retrospective so as ta be effective from the 1st of October, 1958. That means that the law to be applied to the assessment finalised through the two orders dated 30th of April, 1971, by the C.T.O. was that as modified by the two amendments. Of course we are here concerned only with the order of assess_:n_ ment 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 _tb_ tax ## RALLIS INDIA LTD. _v._ ANDHRA PRADESH _(Koshal,_ _!.)_ 1035 remained unchanged but the entitlement to refund was abolished and A ., 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 avaia!able merely because the goods in question had been sold in the course of in R ter-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-trade on goods regarding the purchase of which , reimbnrsement of the tax leviable under the A.P. Act is claimed. The _'.'1"_ proviso to section 6 as amended in 1974 therefore is of no assistance __.ill.._ to it. ., R ~-J 8. Nor does the amended clause (b) of section 15 of the Central c --: _1_ Act come to the appellant's 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 reimbursibk only to a dealer who has paid tax under the Central Act in respect of the sale of the goods in question m the course of inter-state trade or commerce . 9. Faced with the above situation, Mr. Desai, Learned counsel for the appellant, pressed into service a novel contention to the effect that the appellant was not asking for any reimbursement or refund, that it was the D.C.C.T. who had cancelled the order 0! refund (inherent in the 'exemption' granted by the C.T.0.) and that there was no provision authorising the D.C.C.T. to force the appellant to return any amount paid to it as a refund. The argument is obviously fallack>us. The D.C.C.T. has done nothing more than to revise an order of the C.T.O. which has been varied only in so far 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 regarded 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-hound to strike down the order of refund as being illegal. The order of the C.T.0. 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. 10. The only other argument put forward by Mr. Desai in support •f the appeal rested on the provisions of rule 27-A above extracted in D E F G H ### 1036 SUPREME COURT REPORTS [1980] 2 s.c.R. \ its un-amended form. The rule can obviously be of no help to him inasmuch as even if it can be construed as laying down something in kvour of the appellant it cannot override the provisions of the Act under which it is framed. 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 statute. ###### .· ·C 11. It may be stated that at one stage of the argument Mr. D~ai drew our attention to the fact that by reason of the amendments made in the statute law and the consequent demand by the D.C.C.T. for the refunded amount the appellant had been placed under a burden which did not fall on those who collected the Central sales tax from the purchasers and paid it to the Government because they were held entitled to refund of the tax under tke A.P. Act even though they had not paid anything out of their own pocket as tax under the Central Act. However, as he did not challenge the constitutional validity of any of the amended sections he did not pursue the matter further and we need take no further notice of it. 12. We mighl.. mention here that _Daito Suryanarayana_ _<1nd_ _Com-_ _pany's_ case (supra) on which the High Court rclied i11 support of the impugned judgment takes a v.iew of the law which is in conformity with the opinion expressed above by us and we unreservedly approve of the same. 13. In the result the appeal fails and is dismissed but with no order as to costs. _Appeal_ _dismissed._