1. For the assessment year 1972-73, the petitioners who are dealers in jaggery, have disclosed in their statements the net turnover liable to sales tax under the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter called the Act), before the sales tax authorities at Tenali in the district of Guntur. The dealers claimed exemption of their respective turnovers representing sales of jaggery at the second point in their hands on the ground that it was purchased by them from agriculturists and resident registered dealers. The Commercial Tax Officer, the respondent herein, issued notices proposing to disallow the claim of the petitioners on the ground that they did not furnish any certificate or evidence showing the factum of payment of tax by the dealer, who effected the first sale and requiring the petitioners to submit their objections, if any, within a week. Aggrieved by the impugned notices, the petitioners have preferred these applications under Article 226 of the Constitution of India for the issuance of writs of prohibition directing the respondent to forbear from proceeding with the assessments under the Act.
2. In the common counter filed on behalf of the respondent, it is averred that the action of the assessing authority in issuing the impugned show cause notices proposing to levy sales tax on the turnovers of jaggery effected by the petitioners is valid and justified and the petitioners in order to obtain the exemption claimed by them, must prove that their sales are not first sales within the State and that their claim cannot be allowed unless they satisfy the conditions laid down under Rule 45(3)(b) of the Andhra Pradesh General Sales Tax Rules (hereinafter called the Rules) and the mere allegation that they have purchased jaggery from ryots and therefore the sales effected by them are second sales within the State would not entitle them to claim the exemption unless they produce cash memoranda or bills indicating that the ryots have either paid the tax on such sales of jaggery or would pay the tax payable on such transactions by them.
3. The principal contention of Sri P. Rama Rao, the learned counsel appearing for some of the petitioners, is that the petitioner-dealers have purchased jaggery from growers (agriculturists), who had converted sugarcane into jaggery and therefore they would become second sellers within the State entitled to exemption from payment of sales tax under Section 5(2) of the Act read with item No. 77 of the First Schedule, if they satisfactorily establish that they have purchased the jaggery from growers or resident registered dealers by adducing evidence, oral and/or documentary and the mere non-production of a certificate contemplated by Rule 45(3) (b) of the Rules would not ipso facto disentitle the dealers from claiming the exemption and therefore the impugned notices are without jurisdiction, illegal and unjust and are liable to be quashed. Mr. Dasaratharama Reddi, the learned counsel appearing for the other petitioners, added that Rule 45 (3)(b) of the Rules is unconstitutional and invalid.
4. The claim of the petitioners is resisted by the learned Government Pleader for Commercial Taxes contending, inter alia, that Rule 45(3)(b) of the Rules is valid and constitutional and the petitioners in order to earn the benefit of exemption, must produce cash bills or memoranda accompanied by the certificates of the first sellers as required by Rule 45(3)(b) and there is no merit in these writ petitions.
5. Upon the respective contentions advanced on behalf of the parties, the following questions arise for decision:
(1) Whether Rule 45(3) (b) of the Rules is unconstitutional and invalid ?
(2) Whether or not the impugned notices are without jurisdiction, illegal and liable to be quashed ?
6. In order to appreciate the respective contentions of the parties, it is necessary to refer briefly to the provisions of the Act and the Rules applicable to transactions of sale pertaining to jaggery.
7. Section 5 is the charging section whereunder tax on sales or purchases of goods is levied. Section 5(1) of the Act read with Rules 5 and 6 of the Rules deals with multi-point taxation whereas single point taxation is covered by Sub-section (2) of Section 5. Section 5(2) is applicable to transactions of goods indicated in the First Schedule. This sub-section would come into play if the ingredients thereof are satisfied notwithstanding anything contained in Sub-section (1) of Section 5. Jaggery is shown as item No. 77 of the First Schedule. Hence, the first sale of jaggery within the State alone is taxable. The present rate that governs the first sale of jaggery is 6 paise in a rupee. As jaggery is shown in the First Schedule as item 77, the second or third sales of the same jaggery, which was subjected to sales tax on the first sale, is not liable to sales tax.
8. The dealers in jaggery claimed that they have purchased the jaggery from agriculturists, who had converted sugarcane grown by them into the same and, therefore, the sales of the same jaggery effected by them in their turn to dealers within the State are not exigible to sales tax. The sales tax authorities insisted upon the production of the bills or cash memoranda containing the certificate required under Rule 45(3)(b) regarding payment of tax in respect of first sale of jaggery liable to single point tax within the State and informed the petitioner dealers that without the production of such data, the sales by them would be treated as first sales within the State making them liable to pay sales tax thereon.
9. It is well-settled that whoever seeks to claim exemption from taxation has to prove that his or her case would fall within the provisions of any section of the Act or any rule made thereunder making such exemption. That apart, Section 7-A of the Act throws the burden on the assessee-dealer to prove by independent evidence that any sale transaction which is sought to be taxed is either exempted from tax or not liable to be taxed under the provisions of the Act or the Rules made thereunder.
10. In the present case, the short question that falls for determination is whether the transactions in respect of which the petitioner-dealers are claiming exemption are second sales of jaggery within the State as pleaded by them. As pointed out earlier, the onus is on the petitioners to establish that the disputed transactions, which are sought to be taxed by the assessing authority on the assumption that they are first sales, are really second sales of jaggery within the State. This brings me to examine as to how this onus of proof can be discharged by the assessee-dealers. Whether a particular disputed transaction of sale of jaggery within the State is the first or second sale is one of fact depending upon the facts and circumstances of each case. One of the modes of proving the disputed sales to be second or third sales is by the production of cash bills or memoranda in respect of the first sale of jaggery within the State. A certificate to the effect that the same jaggery was already sold by the agriculturist to a dealer and tax, if payable, was paid either by the grower or by the first seller may be produced. The proof of the fact that the sale in question is a second sale may be established by adducing oral or documentary evidence. Where a dealer establishes that he had purchased the jaggery sold by him from an agriculturist within the State, he must be held to have discharged the onus of proof that rested on him. G. O. No. 706, Revenue, dated 15th April, 1958, exempts every grower of sugarcane who converts it into jaggery from registering himself as a dealer under Section 12(2) of the Act. A Division Bench of this Court in G. Sriramulu Naidu v. Commercial Tax Officer (1974) 2 A.P.L.J. 288 has held that by virtue of explanation II to Section 2(e) of the Act, a ryot or agriculturist who grows sugarcane on his land, converts it into jaggery and sells the same to others, is a dealer within the meaning of the Act. Therefore, where a dealer establishes that he has purchased the jaggery in question from an agriculturist within the State, he would be entitled to claim exemption from sales tax without proving any further fact in respect of the sales of the same jaggery made by him in his turn to any other dealer in the State. Hence, even if he fails or omits to produce the bill or cash memorandum or the certificate pertaining to the first sale of jaggery, he must succeed and the assessing authority is not empowered to reject his claim on the sole ground that no such bill or cash memorandum or certificate has been produced. It is not open to the assessing authority, as referred to earlier, to reject any other evidence adduced by a dealer in support of his claim that the jaggery which is sold by him to another dealer was purchased by him from a ryot or a dealer within the State.
11. The sales tax authorities seek the aid of Rule 45(3)(b) in support of their stand that the bill or cash memorandum accompanied by a certificate regarding payment of tax in respect of the first sale of jaggery must be produced by the dealer. Rule 45(1) requires every dealer whose total turnover is less than Rs. 40,000 in a year to keep and maintain a true and correct account showing particulars specified in Clauses (i) to (iii) thereof. Rule 45(2) makes it obligatory on every dealer carrying on business in goods specified in the First, Second and Third Schedules and whose total turnover exceeds Rs. 10,000 in a year, to issue a bill or cash memorandum in respect of every sale involving an amount of Rs. 5 or more and, in every other case, when demanded by the purchaser. It is pertinent to notice that this rule will not apply to an agriculturist whose turnover is less than Rs. 10,000 in a year and, therefore, such an agriculturist is not bound to issue any cash bills or memoranda. Sub-rule (3)(a) of Rule 45 indicates the method and manner of the issuance of bills or cash memoranda by the dealers. Rule 45(3)(b), which is material for our purpose, reads thus :
The bill or cash memoranda issued in the case of sales of goods liable to a single point tax shall contain the following certificate :
Certified that in respect of turnover of the goods mentioned in item (x) of this bill, the tax has been paid or is payable by me or is payable by Sri/ M/s... being the dealer who purchased them from me.
12. This sub-rule is applicable to the case of goods liable to a single point tax. This sub-rule requires a certificate to be issued by the first seller of jaggery or any other goods liable to a single point tax. In the said certificate, the first seller must state that sales tax in respect of turnover of the goods in question has been paid or is payable by him or payable by the dealer who purchased the goods from him. The bill or cash memorandum is required to be accompanied with such certificate. The use of the word 'shall' makes it obligatory on the part of the dealer to produce the same. However, it must be noted that Rule 45(3) (b) provides for one mode of proof of the sales in question being second sales of the goods in respect of which tax has already been paid once. But, nowhere it is mentioned that this is the only mode of proof and any other method of proving the fact that the sales in question are second sales of jaggery within the State and the same jaggery was already subjected to tax once is forbidden, I am unable to agree with the respondent's counsel that it prohibits any other method of proving the fact that the jaggery in question had already Suffered tax once and the disputed sales are second sales within the State. On a close and careful consideration of this rule and the relevant provisions of the Act, I am satisfied that the mere failure or omission on the part of the dealer to produce the bill or cash memorandum accompanied with the certificate as required by Rule 45(3)(b) would not ipso facto entitle the assessing authority to include such turnover in the assessment and levy tax thereon without affording a fair and reasonable opportunity to the assessee-dealer to prove his case by adducing any other evidence-oral or documentary. There may be cases of sale of jaggery by a ryot or agriculturist whose turnover is less than Rs. 10,000 in a year and who did not maintain any account. Such ryot or agriculturist might not have issued a bill or cash memorandum or the certificate as required by Rule 45(3) (b) evidencing the first sale of the jaggery in question. In such cases, it is incumbent on the assessing authority to afford a reasonable opportunity to the dealer to establish his case by adducing any other evidence. The assessing authority may examine the ryots from whom the jaggery was purchased by the dealer if their correct addresses or particulars are furnished, as the assessing authority has got ample power and jurisdiction to summon for them and examine them during the enquiry. The dealer has also in his turn a duty to co-operate with the assessing authority in furnishing the particulars pertaining to the ryots from whom he has purchased the jaggery in the first instance to enable the assessing authority to trace such persons and levy tax upon them. In the circumstances, I have no hesitation to hold that the stand taken by the assessing authority as per the impugned notices cannot be sustained.
13. I shall now deal with the submission of Mr. Dasaratharama Reddi that Rule 45(3)(b) of the Rules is invalid and ultra vires. According to him, Section 25 of the Act required only the registered dealers to maintain accounts whereas Rule 45 (3)(b) applies to all the dealers, registered or otherwise, and, therefore, it is bad as it contravenes Section 25. This submission cannot be acceded to. Section 39(2)(g) of the Act empowers the State Government to make rules to carry out the purpose of the Act and, in particular, to provide for all matters relating to the issue of bills or cash memoranda, the class or classes of dealers who should maintain counterfoils for the same and the particulars to be shown in and the manner of maintenance of such counterfoils and the time for which they should be preserved. Hence, it cannot be said that the State Government is not competent to make Rule 45(3)(b). Nor can it be said that it is unreasonable, arbitrary or discriminatory. This rule provides, as pointed out earlier, for one method of proof of the first sale of goods liable to a single point tax. I do not find any unreasonableness or arbitrariness or discrimination in this rule. Rule 45(3)(b) does not contravene Section 25. No doubt, Section 25 requires only the registered dealers to maintain accounts. It has no application to the unregistered dealers. However, Rule 45(3)(b) is applicable to all dealers, registered or otherwise. Even a ryot whose turnover is less than Rs. 10,000 in a year is a dealer if he grows sugarcane, converts it into jaggery and sells the same within the State. Hence, Rule 45(3)(b) has rightly been made applicable to all the dealers irrespective of their turnover or the category to which they belong. I have no hesitation to hold that Rule 45(3)(b) is valid and reasonable.
14. The further submission of the respondent that the writ petitions are liable to be dismissed on the ground that they are premature and it is open to the petitioners to raise all the pleas permissible to them under law before the assessing authority is devoid of any merits. On a perusal of the impugned notices, I am satisfied that the assessing authority has already arrived at a conclusion that without the production of the bills or cash memoranda or certificates as required by Rule 45(3)(b), the turnovers pertaining to such disputed sales must be taxed. That view of the assessing authority is illegal and erroneous for the reasons stated above.
15. In the result, the impugned notices must be and are hereby quashed as they are illegal and violative of the principles of natural justice. The assessing authority has to now determine afresh the question whether the transactions in dispute are second sales of jaggery within the State as contended by the dealers or first sales, after affording reasonable opportunity to the petitioner-dealers to establish their plea by any evidence, oral or documentary. The writ petitions are allowed but in the circumstances there will be no order as to costs. Advocate's fee Rs. 75 in each.