Jeevan Reddy, J.
1. Entry 10 in the Third Schedule to the Andhra Pradesh General Sales Tax Act reads as follows :
'10. Cotton yarn but not At the point of last 2 paise in the including cotton sale in the State. rupee.' yarn waste. (3010)
2. The words 'last sale' were substituted for the words 'first sale' by section 6 of Act 12 of 1971 with effect from 19th April, 1971.
3. The question in these tax revision cases is how to determine whether a sale is the last sale in the State
4. The assessment years concerned herein are 1973-74 to 1975-76. We are concerned with the position obtaining prior to the introduction of section 6-A in the A.P.G.S.T. Act by Amendment Act 49 of 1976 with effect from 1st September, 1976.
5. The Statement of Objects and Reasons appended to Act 12 of 1971, which substituted the words 'last sale' for the words 'first sale', states the object of substitution to be a benefit the weavers, master-weavers, master-weavers' co-operative societies or other recognised associations of weavers. The following paragraph brings out the object of the amendment :
'Under the Andhra Pradesh General Sales Tax Act cotton yarn is liable to tax at 2 paise in the rupee at the point of first sale in the State. With a view to encouraging the handloom industry in the State, the Government have exempted the sale of cotton yarn directly made by the manufacturers or commission agents of manufacturers or importers of such yarn to the weavers, master-weavers, master-weavers' co-operative societies or other recognised associations of weavers for consumption in their industry, from liability to tax under the the Andhra Pradesh General Sales Tax Act, by virtue of a notification under section 9. However, in actual practice the benefit of the above exemption is not fully accruing to the handloom industry, as the handloom weavers purchase cotton yarn through middlemen. In order to give effect to the above object, it is proposed to shift the point of levy of tax on the cotton yarn from the first sale to the last sale.'
6. Sri Dasaratharama Reddi, the learned counsel for the assessee, contends that this entry is unworkable and that being uncertain, it is giving rise to several practical difficulties. According to him, the entry also violates section 15 of the Central Sales Tax Act. He submits that where the tax is levied on 'last purchase', there would be no difficulty and no room for any complications as held by the Supreme Court in State of Madras v. Narayanaswami Naidu : 3SCR622 because the purchaser knows, at the time of purchase, what he is going to do with the goods. But where the taxable even is 'last sale', the dealer would have to wait and see what the purchaser from him does with the goods. He complains that a dealer, who effects a sale cannot be expected to follow up and find out whether his purchaser has consumed the cotton yarn himself or has consigned it or has exported it out of the State. He submits that the proper way of understanding and working the said entry would be hold that a dealer is liable to pay tax on the sale of cotton yarn, only where he sells to an unregistered dealer within the State or to a dealer from outside the State within the State. In other words, he says that wherever a sale has been effected in favour of a registered dealer within the State, it should be held that the sale is not taxable.
7. There is certainly a good amount of justification in the criticism levelled by Mr. Dasaratharama Reddi. An illustration would bring home the difficulties in working the entry : A, a dealer sells 100 bales of cotton yarn to B, who is a registered dealer within the State. At the time of the sale, A cannot say whether B will consume the yarn purchased by him or consign it or export it outside the State, or would the purchaser resell the same to another dealer within the State. If B consumes the goods himself or consigns it or exports it outside the State, then the sale by A to B would be the last sale and would be exigible to tax. But if B sells the same cotton yarn to another dealer within the State, then the sale by A to B would not be the last sale and would not be exigible to tax. In the normal course A would like to collect the tax from B, if he is to be made liable for sales tax, but since he cannot know for certain what the purchaser from him would do, adopting either course - collecting or omitting to collect - may well expose him to trouble. If he collects but it later turns out that his sale is not the last sale, he lays himself open to the charge of unwarranted collection of tax; if however he does not collect, but it turns out later that his sale is the last sale within the State he would have to pay the tax from his pocket and in such a case, it would be no answer to say that he has not collected the tax from his purchaser. There may be a further difficulty. B may purchase cotton yarn not only from A but from many other dealers. He may mix up the bales purchased from several persons together and of the combined stock, he may sell some bales within the State, export some bales of cotton yarn outside the State and may retain some other bales. In such a situation it would be difficult - nay, well-nigh impossible, for anybody to say whether the particular bales sold by A were sold within the State or exported or retained. These are the various likely difficulties arising from the said entry as it now stands. It is a matter for the legislature to consider and rectify.
8. Mr. J. V. Suryanarayana, the learned Government Pleader, submits that much of the difficulty is solved by the introduction of section 6-A. He submits that the department may well prescribe a particular declaration, which should be furnished by the purchaser in all such cases and that the provision for such a declaration would obviate many of the difficulties pointed out by the learned counsel for the assessee. Be that as it may, so far as the present cases are concerned, the learned Government Pleader contends, none of the difficulties envisaged by Mr. Dasaratharama Reddi arise. In these cases, it has been found as a fact, that the cotton yarn sold by the assessee has been consigned by the purchasers to their branches outside the State. In these cases, he submits, there is no difficulty in working the entry. Since the goods sold by the assessee were consigned outside the State, the petitioners are liable to pay the tax, irrespective of the fact whether they have collected the sales tax from their purchasers or not. Indeed, it is pointed out, it is not the case of petitioners that they have not collected the tax. We are inclined to give effect to this submission in the facts and circumstances of these cases, notwithstanding the defective nature of the entry as such. Indeed where the department can trace the goods and can say what happened to the cotton yarn sold by an assessee, there should be no difficulty in working the entry. The difficulties pointed out above can be avoided if the following procedure is adopted. Where a dealer who has sold certain quantity of cotton yarn claims that his transaction is exempt from sales tax on the ground that it does not constitute the last sale within the State, his contention has to be accepted, unless the department can establish that the cotton yarn sold by the assessee has been either consumed by the purchasers or consigned or exported outside the State. Unless the department can so establish, the claim of the assessee cannot be negatived. It is open to the department to adopt one of the two following courses, namely, (1) it can grant exemption in the first instance and if and when it can establish that the sale effected by the assessee is the last sale, it can revoke the exemption and claim the tax due under section 14(4) of the Act, (2) the department may choose to keep the assessment pending until it can gather the necessary information to establish that the sale effected by the assessee is the last sale and then finalise the assessment.
9. Mr. Dasaratharama Reddi then sought to contend that by following the above procedure, sale taking place in one assessment year would become taxable in the next or even a subsequent year. We are unable to see any scope for such an eventuality. Take a case, where the assessee effects the sale on 30th March, 1981, and the purchaser resells the same within the State on 2nd April, 1981. Mr. Dasaratharama Reddi says that in such a case, the sale by the assessee must be taxed not in the assessment year 1980-81 but in the assessment year 1981-82. We are unable to agree. The sale by the assessee has taken place in the assessment year 1980-81 and not in the assessment year 1981-82. The subsequent sale by the purchaser is being looked into only for the purpose of finding whether the sale, which was effected on 30th March, 1981, is the last sale or not. The inspiration for this argument appears to have been drawn by Mr. Dasaratharama Reddi from a decision of the Supreme Court in State of Madras v. Narayanaswami Naidu : 3SCR622 . There the Supreme Court was concerned with cotton and cotton seeds, which were exigible to tax at the point of last purchase. The contention of the assessee was that each assessment year is a self-contained unit under the Madras Act and that therefore what happens in the subsequent years cannot be taken into consideration for determining the taxability of any purchase inside the State of declared goods. It was argued that inasmuch as the taxable event is the last purchase in the State during the assessment year, it must be held that in respect of the stocks held at the close of the assessment year, the assessee must be held to be the last purchaser. This argument was rejected by the Supreme Court in the following words :
'It is true that section 3 and 4 speak of 'a year', i.e., the financial year, and it is only the turnover during that year that is liable to taxation in the hands of the assessee, but section 4 has to be read with the Second Schedule, and reading section 4 with the Second Schedule, it seems to us clear that a dealer is not liable to pay a tax on the purchases until the purchases acquire the quality of being the last purchases inside the State. In other words, when he files a return and declares the stock in hand, the stock in hand cannot be said to have been acquired by last purchase because he may still during the next assessment year sell it or he may consume it himself or the goods may be destroyed, etc. He would be entitled to claim before the assessing authorities that the character of acquisition of the stock in hand was undetermined; in the light of subsequent events it may or may not become the last purchase inside the State.'
10. Having said so, the Supreme Court proceeded to deal with a distinction drawn by the Madras High Court :
'The judgment under appeal draws a distinction between taxable event and a stage at which the levy of tax in the case of declared goods is subject to single point levy. This may cause confusion, and indeed, the High Court gives one illustration, which it found necessary to deal with. The illustration given is :
'One can visualise a case, for example, where goods mentioned above purchased on the 30th of March, 1960, may be exported by the purchaser himself outside the State on the 2nd of April, 1960. In that cse the goods could not be assessed in 1960-61 in the hands of the exporting purchaser, because the taxable event did not occur in that year; it could not be assessed in the hands of the seller in 1959-60 because though the taxable event occurred in that year, the single point stage was not reached in that year. One possible way of dealing with such a case is to assess it subsequently as escaped turnover.'
In our opinion, in this illustration, the assessee would be liable in the financial year 1960-61 as the purchases became the last purchases in that year.'
11. It is on the basis of the last para in the above extract, that Mr. Dasaratharama Reddi contends that on the same parity of reasoning, the sale must be deemed to have taken place in the assessment year 1981-82 in the illustration given hereinbefore. We are unable to appreciate this contention. The goods in the case before the Supreme Court were taxable at the last point of purchase. Whether a purchase made by him constitutes last purchase or not is a matter within the knowledge of and within the volition of the dealer unlike the case where the tax is leviable on the last sale within the State. Apart from that, the possibility pointed out, even if real, cannot be an argument against the procedure indicated by us, whereunder we have pleaced the burden of establishing the taxability of a transaction squarely on the shoulders of the department. No reasonable objection could be urged by the counsel for the assess against the same. On the contrary, the way out suggested for by the learned counsel virtually renders the entry meaningless; it would really amount to an amendment of the entry and not to an interpretation.
12. It is not necessary for us to consider the situations obtaining after the introduction of section 6-A, since that aspect does not arise for our consideration.
13. For the above reasons, the T.R.Cs. are dismissed. No costs. Advocate's fee Rs. 150 each.
14. Mr. Dasaratharama Reddi says that the Tribunal has remanded some cases to the Deputy Commissioner for further investigation. The investigation or the enquiry, as the case may be, shall be done in the light of the orders of the Tribunal and the principles enunciated in this decision.
15. Before parting with this case, we feel constrained to make the following observation : If the object of the 1971 amendment was to benefit the weavers, master-weavers' co-operative societies or other recognised associations of weavers, the proper course would have been to levy the tax upon the last purchase and then issue an exemption notification under section 9 of the Act exempting the weavers from the exigibility to tax. Such a course would not only have served the State's purpose but would have also helped the weavers, besides serving to remove a good amount of uncertainly pointed out above.