Allowed

M/S.Indian Oil Corporation Ltd. Viskhptnm v. Comm.of Commercial Taxes Ap Hyd

Telangana HC13 Dec 2012SPLA/6/1999

Case brief

AI extract

What is this about?

The Supreme Court set aside a revisional order imposed on Indian Oil Corporation Limited by the Commissioner of Commercial Taxes. The Court held that a selling dealer cannot be penalized for the purchasing dealer's misuse of goods or false declaration, as the liability rests solely with the purchaser.

What did the court decide?

The impugned revisional order dated 13.1.1999 was set aside, and the assessment order dated 18.3.1995 was confirmed. No costs.

M/S.Indian Oil Corporation Ltd. Viskhptnm Vs Comm.of… — GST and Indirect Tax | Telangana HC (2012)

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THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE M.S. RAMACHANDRA RAO

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SPECIAL APPEAL NO.6 of 1999

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Oral Order : ( Per Sri GR, J )

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Heard the learned counsel for the petitioner and Sri P.Balaji Varma, learned Special Government Pleader for Commercial Taxes for the respondentRevenue.

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This is assessee’s appeal preferred under Section 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 (for short “the Act”), against the Revisional order dated 13.1.1999 passed by the Commissioner of Commercial Taxes, Hyderabad under Section 20(1) of the Act.

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The relevant facts are that the assessee-Indian Oil Corporation Limited, Visakhapatnam was finally assessed by the Commercial Tax Officer, Company Circle, Visakhapatnam by the order dated 30.11.1993 under the provisions of the Act on total and net turnovers of Rs.1344,92,24,740/and Rs.754,78,58,350/- respectively. Aggrieved of the assessment made by the Commercial Tax Officer, the assessee preferred appeal before the Appellate Deputy Commissioner (CT), Kakinada, who allowed the appeal and remanded the matter for de novo assessment by order dated 8.2.1995. By the order of remand the Appellate Deputy Commissioner observed that in view

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of the provisions of Section 53 read with Rules 30-A of the Andhra Pradesh General Sales Tax Rules made thereunder, the assessing authority ought not to have denied the statutory forms issued by another statutory authority; that he was obliged to accept the statutory forms; that contrary to the same tax was levied on the disputed turnover ignoring the statutory forms and therefore the order of assessment dated 30.11.1993 was liable to be set aside.

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Consequent on the Appellate Deputy Commissioner’s order on 18.3.1995 the Commercial Tax Officer concerned passed a fresh assessment order applying the concessional rate of tax and redetermined and re-computed tax liability.

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The first respondent-revisional authority-the Commissioner of Commercial Taxes, in purported exercise of power under Section 20(1) of the Act and after due process revised the consequent assessment order dated 18.3.1995 as well as the order of the Appellate Deputy Commissioner dated 8.2.1995 and inter alia ruled that where G2 certificate had been produced and the certificate does not include petroleum products among the eligible items and the material cannot be used by the purchaser company under any circumstances for the purposes mentioned under Section 5-B, the assessee would be liable for the higher rate of tax even if “G” forms were issued by the purchaser company. In such a case, apart from

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recovery of tax from the assessee, the assessing authority should inform the assessing authority of the purchaser to collect the minimum statutory penalty of 3 times the tax.

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Aggrieved by the said order, this Special Appeal is preferred by the assessee under Section 23(1) of the Act.

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It is a common ground that under Section 5-B(a) of the Act, when a dealer sells any goods to another dealer for use by the latter as raw material, component part, sub-assembly part, intermediate part and packing material in the manufacture or processing of goods inside the State, he shall be entitled to pay tax at the concessional rate stipulated therein. Rule 30-A of the Rules stipulates that every manufacturer who intends to purchase raw material having component parts etc., under Clause (a) and such goods as notified by the Government under Clause (b) of sub-section (1) of Section 5B, for use in the manufacture of any goods inside the State shall submit an application in Form G-1 to the Commercial Tax Officer concerned for registration as a manufacturer; the Commercial Tax Officer concerned on receiving the application shall, if satisfied, after making such enquiry as he considers necessary that the application is bona fide and the particulars contained therein are correct and complete, register the manufacturer and shall issue a certificate to the manufacturer in Form G-2 within 30 days from the

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date of application; and where the manufacturer has more than one place of manufacture a copy of such certificate for every place of manufacture within the State shall be issued. Sub Rule (3) of Rule 30-A of the Rules enables the Commercial Tax Officer to reject an application for grant of a certificate in Form G-2 when he is satisfied that the application is not bona fide.

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Further, sub section (2) of Section 5B of the Act stipulates that if any dealer, not having his manufacturing unit within the State purchases any goods by furnishing a declaration under the proviso to sub-section (1); or having his manufacturing unit within the State and having purchased goods by furnishing a declaration under the proviso to sub-section(1), sells such goods contrary to such declaration, the assessing authority, may after due process by order in writing impose upon him by way of penalty a sum which shall not be less than three times but which may extent to five times the amount of tax leviable on the sale of such goods so purchased.

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On an interactive analysis of the relevant provisions of Section 5B of the Act and Rule 30-A of the Rules, it is clear that whenever there is abuse by a purchasing dealer of the provisions of Section 5B or of the Form issued under Rule 30-A, such dealer would be liable to be proceeded against and subjected to heavy penalty. There is nothing in the statutory or legislative context which obliges the selling dealer, assessee-

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appellant in this case, to make detailed enquiries as to whether the person to whom the product is being vended and was issued G Form in respect of such purchase has also actually used the goods for the purposes specified under Section 5B.

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I n STATE OF MADRAS v. RADIO & ELECTRICALS LTD AND ANOTHER^[1] , a similar issue came up for consideration in the context of Form “C”. The observations of the Supreme Court clearly apply to the facts of the present case, which are extracted hereunder :

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“ The Act seeks to impose tax on transactions, amongst others, of sale and purchase in interState trade and commerce. Though the tax under the Act is levied primarily from the seller, the burden is ultimately passed on the consumers of goods because it enters into the price paid by them. Parliament with a view to reduce the burden on the consumer arising out of multiple taxation has, in respect of sales of declared goods which have special importance in inter-State trade or commerce, and other classes of goods which are purchased at an intermediate stage in the stream of trade or commerce, prescribed low rates of taxation, when transactions take place in the course of inter-State trade or commerce. Indisputably the seller can have in these

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transactions no control over the purchaser. He has to rely upon the representations made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificates : but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in Form 'C' the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. If the purchasing dealer misapplies the goods he incurs a penalty under s. 10. That penalty is incurred by the purchasing dealer and cannot be visited upon the selling dealer. The selling dealer is under the Act authorised to collect from the purchasing dealer the amount payable by him as tax on the transaction, and he can collect that amount only in the light of the declaration mentioned in the certificate in Form 'C'. He cannot hold an enquiry whether the notified authority who issued the certificate of registration acted properly, or ascertain whether the purchaser, notwithstanding the declaration, was likely to use the goods for a purpose other than the purpose mentioned in

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the certificate in Form 'C'. There is nothing in the Act or the Rules that for infraction of the law committed by the purchasing dealer by misapplication of the goods after he purchased them, or for any fraudulent misrepresentation by him, penalty may be visited upon the selling dealer.”

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Again in PREMIER ELECTRO-MECHANICAL FABRICATORS v. STATE OF MADRAS^[2] , the learned Division Bench of the Madras High Court had an occasion to consider the issue whether under the Madras General Sales Tax Act, 1959, a dealer would be entitled to the concessional rate of tax as a matter of right provided he satisfies the requisite of sub-section 3(3) of the said Act. The Madras High Court held that if the assessee would satisfy the requisites, for entitlement to the concessional rate of tax, if he complies with the two requisites namely that the goods which are the subject matter of the sale are those mentioned in First Schedule, and the sale should be to another dealer. The Court went on to add that the manner in which the seller has to satisfy the requisite is as provided in the legislation and once that is done there is no obligation on the part of the selling dealer to make further enquiries as to user of the goods sold by the purchaser and he would be automatically entitled to the concessinal rate. If the declaration turns out to be

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false, in the sense that the goods purchased have not been used as declared in the prescribed form, the purchaser is exposed to the penalties provided by section 23 and section 45(2)(e). If the purchaser were to make a false declaration or a declaration which he does not comply with, he would do so on peril of meeting the specified penalties. The Court concluded that, merely on that account, ( namely penal consequences to the purchasing dealer in case of false declaration), the selling dealer is not deprived of the concessional rate.

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In the light of the principle discussed from the decisions of the Supreme Court and the Madras High Court on substantially similar provisions as in Section 5B and Rule 30-A, we are satisfied that the exercise of revisional power by the Commissioner resulting in the impugned order dated 13.1.1999 is unsustainable. The order of the Commissioner dated 13.1.1999 is accordingly set aside. Consequently the order of the assessment dated 18.3.1995 passed by the first respondent pursuant to the order of the Appellate Deputy Commissioner dated 8.2.1995 is confirmed.

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The Special Appeal is accordingly allowed. No costs.

JUSTICE GODA

RAGHURAM

JUSTICE M.S.

RAMACHANDRA RAO

Dt; 13-12-2012 Kk