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Munaga Singaraiah Sreshty and Sons Vs. State of Andhra Pradesh - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case NumberTax Revision Case Nos. 38 and 39 of 1976
Judge
Reported in[1977]40STC89(AP)
AppellantMunaga Singaraiah Sreshty and Sons
RespondentState of Andhra Pradesh
Appellant AdvocateS. Dasaratharama Reddi and ;S.R. Ashok, Advs.
Respondent AdvocateThe Government Pleader for Commercial Taxes
DispositionPetition allowed
Excerpt:
- maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter......b.j. divan, c.j.1. the assessee, in both these cases, is the same and both these tax revision cases are filed by one and the same partnership firm. t. r. c. no. 38 of 1976 arises out of assessment to sales tax in connection with the assessment year 1968-69, whereas t. r. c. no. 39 of 1976 arises out of the assessment of sales tax for the assessment year 1969-70. since common questions of fact and law arise in both these cases, we dispose of both these cases by this common judgment.2. the assessee is a partnership concern dealing in oil-engines and parts, electrical goods, automobile parts, radio parts and oils at cuddapah. the assessee-firm filed its return for the assessment year 1968-69 in form a disclosing a gross turnover of rs. 12,02,204.67 and a net turnover of rs. 8,19,312.76. the.....
Judgment:

B.J. Divan, C.J.

1. The assessee, in both these cases, is the same and both these tax revision cases are filed by one and the same partnership firm. T. R. C. No. 38 of 1976 arises out of assessment to sales tax in connection with the assessment year 1968-69, whereas T. R. C. No. 39 of 1976 arises out of the assessment of sales tax for the assessment year 1969-70. Since common questions of fact and law arise in both these cases, we dispose of both these cases by this common judgment.

2. The assessee is a partnership concern dealing in oil-engines and parts, electrical goods, automobile parts, radio parts and oils at Cuddapah. The assessee-firm filed its return for the assessment year 1968-69 in form A disclosing a gross turnover of Rs. 12,02,204.67 and a net turnover of Rs. 8,19,312.76. The main question which arises in T. R. C. No. 38 of 1976 is regarding one item out of the disputed turnover aggregating to Rs. 1,57,584.74. Out of that amount, an amount of Rs. 1,01,464.50 relates to the sales of rubber beltings.

3. Similarly, for the assessment year 1969-70, the assessee-firm filed a return in form A disclosing a gross turnover of Rs. 12,12,928.98 and a net turnover of Rs. 7,85,984.22. For the assessment year, the only dispute was regarding the turnover of Rs. 87,319.22 representing the sales of rubber beltings. The assessee has been contending in both these cases that rubber beltings are cotton fabrics as appearing and denned in entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act (hereinafter referred to as 'the Act') and hence entitled to exemption and it is also relying on a circular issued by the Board of Revenue (Commercial Taxes), Andhra Pradesh, being circular dated 8th December, 1969. The assessee also relies on a subsequent notification issued by the Government of Andhra Pradesh in G. O. Ms. No. 559, Revenue (S) Department, dated 19th May, 1976, granting exemption, inter alia, to transmission beltings and conveyor beltings in case the fabric content therein is not less than 40 per cent and this exemption was granted for the period 8th December, 1969, to 31st January, 1973.

4. The learned counsel for the petitioner sought to raise the following questions of law :

(1) On the facts and in the circumstances of the case, whether the Sales Tax Appellate Tribunal was justified in holding that the transmission beltings are not textiles within the meaning of entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act especially when the fabric contents of it is more than 40 per cent ?

(2) Whether the Tribunal was justified in holding that the instructions issued by the Board of Revenue, Government of Andhra Pradesh, in Ref. No. 2334/67 dated 8th December, 1969, clarifying the position of law as to the taxability of certain goods specified therein, is (sic) on the sales tax authorities ?

(3) Whether the interpretation placed by the Tribunal on the decision reported in G. Ramaswamy v. State of Andhra Pradesh [1973] 32 S.T.C. 309 is correct ?

5. In order to appreciate the rival contentions, it is necessary to refer to a few provisions of the Act. under Section 8 of the Act, subject to such restrictions and conditions as may be prescribed, including conditions as to licences and licence fees, a dealer who deals in the goods specified in the Fourth Schedule shall be exempt from tax under the Act in respect of such goods. Sub-section (1) of Section 9 states that the State Government may, by notification in the Andhra Pradesh Gazette, make any exemption or reduction in rate in respect of any tax payable under the Act on the sale or purchase of any specified class of goods at all points or at any specified point or points in the series of sales or purchases by successive dealers or by any specified class of persons, in regard to the whole or any part of their turnover. under Sub-section (2) of the said section, any exemption from tax or reduction in the rate of tax notified under Sub-section (1) may extend to the whole of the State or to any specified area or areas mentioned therein and may be subject to such restrictions and conditions as may be specified in the notification, including conditions as to licences and licence fees. under Sub-section (2) of Section 42 of the Act, power to remove difficulties has been conferred on the State Government. Sub-section (1) of the said section deals with removal of difficulties that may arise consequent on the transition to the said provisions from the corresponding provisions of the Act in force immediately before the commencement of the Andhra Pradesh General Sales Tax Act, 1957. This power is to be exercised by the State Government by an order in the Andhra Pradesh Gazette making such provisions as appear to them to be necessary or expedient for removing the difficulties. Sub-section (2) of Section 42 is relevant for the purpose of this judgment and it reads :

If any difficulty arises in giving effect to the provisions of this Act (otherwise than in relation to the transition from the provisions of the corresponding Act in force before the commencement of this Act) the State Government may, by order make such provisions, not inconsistent with the purposes of this Act, as appear to them to be necessary or expedient for removing the difficulty.

6. Fourth Schedule to the Act sets out the list of goods exempted from tax under Section 8. At the relevant time, entry 5 read as follows : 'All varieties of textiles, viz., cotton, woollen or silken including rayon, art silk, or nylon, whether manufactured by handloom, powerloom or otherwise.' Subsequently, i. e., during the period with which we are not concerned in this case, the Fourth Schedule to the Act was amended by an Amendment Act of 1970 with effect from 27th April, 1970. As a result of this amendment of 1970, item 5 was substituted by the new entry, which reads as follows : 'Cotton fabrics, rayon or artificial silk fabrics and woollen fabrics.' A new entry 5A has been added as 'Handloom cloth' and an explanation has been added to the schedule, which reads : 'The expressions in items 5, 6 and 7 shall have the same meanings assigned to them in the Additional Duties of Excise (Goods of Special Importance) Act, 1957.' It must be pointed out that, so far as the two cases before us are concerned, the provisions of the Amendment Act of 1970 do not apply ; but we have referred to these provisions merely with a view to point out what the legislature has done by the Amendment Act of 1970.

7. On 8th December, 1969, the Board of Revenue (Commercial Taxes), Andhra Pradesh, issued a circular to all the assessing authorities. At the commencement of this circular, the Board listed out documents which were read and considered. Item No. 3 is the letter of the Government of India bearing No. F. No. 1(6) ST/65 and item No. 5 is a letter of the Government of Andhra Pradesh referred to as Memo No. 3404/S/65-40 dated 13th August, 1969, which reads as follows :

The Board of Revenue (Commercial Taxes) is informed that the Government accept the clarification given by the Government of India in their letter first cited in regard to the levy of sales tax on P. V. C. fabrics. It is therefore requested to issue suitable instructions to the subordinate offices to adhere to the ruling given by the Government of India in the matter and furnish a copy of the instructions to Government.

8. The circular of the Board of Revenue (Commercial Taxes) dated 8th December, 1969, reads as follows:

The Board has issued instructions in its reference 1st cited that steps should be taken to revise the orders of subordinate officers in cases where sales of rexine were not subjected to tax in view of the clarification referred to therein issued by the Government of India that mackintosh and rexine cloth are products of subsequent operations and are not normally subjected to excise duty.

Subsequently, the Board has issued the following instructions to the subordinate officers in its reference 2nd cited.

9. Then the Board of Revenue sets out the three varieties of cloth and then the circular proceeds:

The Government of India have clarified in their letter 3rd cited (copy enclosed) that if the weight of the fabric content of leather cloth, rexine or mackintosh is not less than 40 per cent, it continues to be a fabric for all purposes and the levy of sales tax thereon would not be proper and that if the weight of the fabric contents of the finished products, viz., leather cloth, rexine or mackintosh, is less than 40 per cent, the finished product ceases to be a fabric and that there would be no objection to tax being charged even though the base material already suffered additional duty of excise. They have informed in their letter 4th cited (copy enclosed) that the Collector of Central Excise might be consulted where any doubt is experienced in determining the fabric content of any commodity. The State Government have in the reference 5th cited accepted the above clarification of the Government of India (copy enclosed).

10. Then the circular proceeds to set out a list of items, which, at the date of the circular, were liable to tax but would fall to be exempted from the sales tax payable under the Act by virtue of the above clarification if the fabric content therein is not less than 40 per cent and item 1 in the list of items is transmission beltings and conveyor beltings. The last portion of the circular says : 'The clarification issued by the Government of India in their letter 3rd cited supersedes the clarifications issued by the Board in its references 1st and 2nd cited. The assessing authorities are requested to adopt the ruling given by the Government of India in the matter.

11. In Hind Engineering Co. v. Commissioner of Sales Tax [1973] 31 S.T.C. 115, P. D. Desai, J., delivering the judgment of the Division Bench of the Gujarat High Court, has set out, at page 123 of the Reports, the manufacturing process of rubber beltings thus :

The fabric (cloth) is first passed through a drying machine and while still warm is passed through the middle and bottom rolls of a calender machine consisting of three bowls (rolls) revolving in opposite directions and the middle roll runs faster than the bottom roll thus producing friction. The rubber compound is fed between the top and the middle rolls from the other side of the machine. The fabric (cloth) thus gets rubberised on one side and for the other side, the process is repeated.

12. In the instant case, M/s. Goodyear India Limited have, by their certificate dated 4th July, 1972, certified that the transmission belting of Goodyear make supplied to the assessee contains not less than 40 per cent cotton fabric. The question mainly argued before us is whether in the light of the circular of the Board of Revenue, dated 8th December, 1969, for the assessment years under consideration, the assessee-firm is entitled to exemption for its turnover of rubber beltings, so far as the whole of the assessment years 1968-69 and 1969-70 are concerned. The learned Government Pleader has fairly stated that at least as regards the period from 8th December, 1969, to the end of the year 1969-70, the transmission beltings under consideration before us would be exempt from sales tax if the fabric content therein is not less than 40 per cent and he says this because of the notification issued in G. O. Ms. No. 559, Revenue (S) Department, dated 19th May, 1976. He, however, contends that this notification of 19th May, 1976, applies only for the period 8th December, 1969, to the end of the assessment year 1969-70 and not to the assessment year 1968-69 and the assessment year 1969-70 up to 8th December, 1969.

13. In Natesam Pillai v. Deputy Commercial Tax Officer [1971] 28 S.T.C. 517, Ramaprasada Rao, J., of the Madras High Court, sitting singly, was dealing with a writ petition where certain benefit was claimed on the ground of Article 14 of the Constitution. It must be borne in mind that that case was by way of a writ petition under Article 226 of the Constitution and did not come before the court by way of a tax revision case or by way of reference. In that case, the learned single Judge of the Madras High Court held :

If administrative orders are issued by the executive and if such orders have an impinge on civil rights and if such rights, which flow from such executive instructions, are not respected by the executives themselves, then courts exercising jurisdiction under Article 226 of the Constitution can extend their arms and correct such an apparent error in the non-implementation of such administrative orders.

14. It was further held:

Executive instructions which confer a certain benefit to a dealer and relieve him from the burden of taxation have to be liberally interpreted. Formalities prescribed by statute are no doubt to be observed but they could be pressed into service only up to a certain limit or stage. Article 14 of the Constitution has to be observed even in cases where courts are concerned with the interpretation of executive instructions.

15. In the case before the Madras High Court, the effect of the particular Government order was that dealers in plantain, who were not assessed to income-tax, were not liable to sales tax. The petitioner was a dealer in plantain and he was not liable to income-tax, but he was assessed to sales tax. The petitioner's appeals to the Appellate Assistant Commissioner and the Tribunal having been unsuccessful, he approached the Board for relief, which was also negatived. Thereafter, he filed a writ petition in the High Court to quash the assessment proceedings on the ground that he had been discriminated against, as others similarly placed had gained exemption under the Government order. The High Court allowed the writ petition on the ground that the attitude of the Government in not having exercised its executive power consistent with its own executive instructions in the Government order bespoke of discrimination and its order was violative of Article 14.

16. This judgment in Natesam Pillai's case [1971] 28 S.T.C. 517 cannot help the petitioner in the instant case, inasmuch as it is based on Article 14 of the Constitution, in view of the Presidential Order declaring emergency, which has been in force and, hence, we do not rely upon that case. It must also be borne in mind that, in Natesam Pillai's case [1971] 28 S.T.C. 517, the Madras High Court was dealing with a petition under Article 226 of the Constitution and not with a case by way of tax revision or reference under the provisions of the sales tax law.

17. In Ramaswamy v. State of Andhra Pradesh [1973] 32 S.T.C. 309, a Division Bench of this High Court consisting of Gopal Rao Ekbote, C. J. and one of us (Chennakesav Reddy, J.) dealt with the problem of a circular issued by the Board of Revenue. At page 313 of the Reports, Gopal Rao Ekbote, C. J., observed as follows:

One of the most significant aids of construction in determining the meaning of a tax provision is the administrative interpretation given to it by the agency that is responsible for its administration and enforcement. The authority for such interpretation is usually traced to three distinct sources. One of the sources is the interpretation given by the administrative agency or its officers appearing in less formal rulings such as the departmental rulings and the like. Such interpretation, it is true, is formal, or unauthoritative administrative construction. Nevertheless the courts have given weight to it in the construction of doubtful language. It may be that since such rulings or communications are made without the authority, care and deliberation with which ordinarily interpretative rules are promulgated, their efficacy is reduced. The courts, however, in interpreting a word used in a statute may have regard to the interpretation placed by those who are presumed to be acquainted with the economic significance of the tax in question. It is true that these interpretations given by the authorities have no force of law nor are they binding upon the courts. Nevertheless they may serve as a tool of construction of some words used in the statute.

18. In State of Orissa v. D. Sahu & Sons A.I.R. 1976 S.C. 1561, the question as to what effect should be given to the interpretation placed upon certain words and the notification issued by the Government of India came up for consideration before the Supreme Court. In paragraph 12 at page 1564 of the Reports (page 586 of 37 S.T.C.), Goswami, J., speaking for the court, observed :

It is true the High Court has rightly observed that the aforesaid notification of the Government of India has no statutory force and, as such, is not binding on the Sales Tax Officer. It cannot, however, be denied that the Ministry of Finance, Department of Economic Affairs, is intimately conversant not only with the policy of legislation for the purpose of implementation of the provisions of the Central Act but is also familiar with the nature and quality of the commodities as also their use from time to time. If, therefore, such an authority issued a notification including certain commodities under the head of 'oil-seeds', as defined under the Central Act, it cannot be said that the Tribunal and the High Court were not right in preferring such an opinion of the Government as good evidence for its conclusion, to the opinions relied upon by the Andhra Pradesh High Court on which great reliance has been placed by the appellant.

19. It is thus clear from the decision of the Division Bench of this High Court in Ramaswamy v. State of Andhra Pradesh [1973] 32 S.T.C. 309 and of the Supreme Court in State of Orissa v. D. Sahu & Sons A.I.R. 1976 S.C. 1561, apart from anything else, that the interpretation placed by the Government of Andhra Pradesh and the Board of Revenue following the clarification of the Government of India, in its letter of 15th October, 1968, will have a considerable weight so far as the present case is concerned.

20. It must be pointed out that, according to the strict dictionary meaning, a fabric is something which briefly refers to a substance which is woven. In Encyclopaedia Britannica, 15th Edition, Volume 18, at page 170, it is pointed out that 'the term textile, derived from the Latin texere ('to weave'), originally applied only to woven fabrics, is now a general term for fibres, yarns and other materials that can be made into fabrics and for fabrics produced by interlacing or any other construction method'. Similarly, in Corpus Juris Secundum, Volume 86, at page 654, 'textile' has been defined as a noun, as 'a fabric which is or may be woven ; a fabric made by weaving, a woven fabric, or a material suitable for weaving; textile material. As an adjective of, or pertaining to, weaving or woven fabrics ; such as may be woven ; manufactured by weaving; as, wool is a textile fabric ; cloth is a textile fabric'. Ordinarily, therefore, a rubber belting produced by the process which we have indicated above, would not be a fabric much less a textile fabric, which would fall within the description of 'all varieties of textiles'. In Hind Engineering Co. v. Commissioner of Sales Tax [1973] 31 S.T.C. 115, a Division Bench of the Gujarat High Court was concerned with the definition of 'cotton fabrics' as defined by item 19 in the First Schedule to the Central Excises and Salt Act, 1944 and thus the Division Bench was concerned with the provisions similar to the provisions in the Andhra Pradesh General Sales Tax Act after its amendment by Act of 1970 at least so far as item 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act is concerned. Therefore, that decision is not of much assistance to us in deciding the question whether rubber belting falls within the description of 'all varieties of textiles' or not.

21. In State of Tamil Nadu v. East India Rubber Works [1974] 33 S.T.C. 399, a Division Bench of the Madras High Court was concerned with an entry in the Tamil Nadu General Sales Tax Act, 1959, where the wording was 'all varieties of textiles' and it was held by the Division Bench that 'the legislature has used the words 'all varieties' for the purpose of bringing within the ambit of the expression 'all varieties of textiles' provided they satisfy the basic requirement that they are 'textiles'. As the word 'textiles' has not been defined in the Act, it must be interpreted according to its ordinary or popular sense, the sense in which the words are commonly understood in ordinary parlance and not in its primary or technical sense'. It was further held that 'waterproof cloth, such as rexine, P. V. C. cloth, rubberised or synthetic waterproof fabrics, etc., made with cloth as base, are not textiles falling within item 4 of Schedule III of the Tamil Nadu General Sales Tax Act, 1959, inasmuch as the processed articles have different properties and characteristics and are intended for different use and in commercial circles they are treated as entirely different from cloth or textile'. At page 403 of the Reports it was emphasised that the expression 'textiles' usually refers to clothes or fabrics made by weaving, knitting, netting or braiding and classified according to their component fibres such as silk, wool, cotton, linen and such synthetic fibres as rayon, nylon, etc. The essence of textiles consists in the basic process of spinning and weaving. It was further pointed out that 'though the base cloth is woven and, therefore, a textile, the superimposition of rubber or P. V. C. solution makes it a different article of commerce such as rexine, P. V. C. cloth and rubberised or waterproof cloth'. We respectfully agree with these observations of the learned Judges of the Madras High Court and it is obvious that, if the matter were not covered by the circular of the Board of Revenue dated 8th December, 1969, the rubberised belting of the type, with which we are dealing in the instant case, would not be falling within the description of 'all varieties of textiles'.

22. In Saifuddin Ebrahimbhai Vadnagarwalla v. Assistant Commissioner of Commercial Taxes [1976] 38 S.T.C. 463, a learned single Judge of the Calcutta High Court was dealing with rubberised cotton fabrics obtained by mixing cotton and rubber by a manufacturing process and the learned Judge held that ' 'rubberised cotton fabrics' obtained by mixing cotton and rubber by a manufacturing process came within the meaning of the expression 'cotton fabrics' as defined by Rule 3(28) of the Bengal Sales Tax Rules, 1941 and were, therefore, exempt from sales tax during the period from January, 1970, to 6th April, 1975'. At page 470, the learned single Judge pointed out that the expression 'cotton fabrics' as defined by item 19 of the First Schedule to the Central Excises and Salt Act, 1944, has been incorporated in the definition of 'cotton fabrics' as provided under Rule 3(28) of the Bengal Sales Tax Rules, 1941. He further observed that whatever be the meaning of 'cotton fabrics' in the said Act of 1944, the same would attach to the definition of 'cotton fabrics' as provided by the Bengal Sales Tax Rules, 1941. He distinguished the case of Hind Engineering Co. v. Commissioner of Sales Tax [1973] 31 S.T.C 115 on the ground that, on the facts of the case before him, the Gujarat case [1973] 31 S.T.C 115 was not applicable and he held that rubberised cotton fabrics were cotton fabrics for the purpose of the Bengal Sales Tax Rules, 1941.

23. With respect, we are unable to accept the reasoning of the learned single Judge of the Calcutta High Court and we would rather prefer to base our conclusion on the fact of the circular dated 8th December, 1969, than on the interpretation of the words 'all varieties of textiles' occurring in item 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, as it stood at the relevant time.

24. It is true, as the learned Government Pleader has pointed out before us, that the doctrine of estoppel by representation, which was set out by the Supreme Court in Union of India v. Anglo-Afghan Agencies A.I.R. 1968 S.C. 718 and was reiterated by the Supreme Court in the subsequent cases of Century Spinning and Manufacturing Co. v. Ulhasnagar Municipality A.I.R. 1971 S.C. 1021 and Union of India v. K. P. Joseph A.I.R. 1973 S.C. 303 would not strictly apply to the instant case.

25. In the latest decision of the Supreme Court in Excise Commissioner, U. P. v. Ram Kumar A.I.R. 1976 S.C. 2237, the scope of the doctrine of estoppel has been explained. Jaswant Singh, J., speaking for the Court, has pointed out that the observations of Lord Denning in Robertson v. Minister of Pensions [1949] 1 K.B. 227 were not approved by the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. [1951] A.C. 837. It must be pointed out that in the decision in Union of India v. Anglo-Afghan Agencies A.I.R. 1968 S.C. 718, reliance was placed on the observations of Lord Denning in Robertson v. Minister of Pensions [1949] 1 K.B. 227. In paragraph 23, at page 2242, Jaswant Singh, J., cited with approval the following passage from the decision of the High Court of Jammu and Kashmir in Malhotra & Sons v. Union of India A.I.R. 1976 J. & K. 41:

The courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its Governmental, public or sovereign capacity.

26. Jaswant Singh, J., also pointed out that in Assistant Custodian, Evacuee Property v. Brij Kishore Agarwala A.I.R. 1974 S.C. 2325, it was held by the Supreme Court that the Evacuee Department was not bound by the reply given by the Assistant Custodian to the first respondent's enquiry that the property in question was not an evacuee property. It is, therefore, clear that, if the statement on behalf of the Government is made by the Board of Revenue on its own, as was the case before Chinnappa Reddy and Madhava Reddy, JJ., in Kashmir House v. Deputy Commissioner of Commercial Taxes [1971] 28 S.T.C. 297, or is made by a Commercial Tax Officer, i. e., without the full backing of the State Government itself, the statement made either by the Board of Revenue or the Commercial Tax Officer, or any lesser authority of the Government will not be binding on the State Government at any subsequent stage in view of the decision of the Supreme Court in Excise Commissioner, U. P. v. Ram Kumar A.I.R. 1976 S.C. 2237. In view of the authoritative pronouncement of the Supreme Court in Excise Commissioner, U. P. v. Ram Kumar A.I.R. 1976 S.C. 2237, it is not necessary for us to refer to the case of B. Subrahmanyam & Co. v. State of Andhra Pradesh (1974) 2 An. W.R. 228, decided by a Division Bench of this Court consisting of Gopal Rao Ekbote, C. J. and Lakshmaiah, J.

27. It is true, as the learned Government Pleader pointed out, that in Kashmir House v. Deputy Commissioner of Commercial Taxes [1971] 28 S.T.C. 297, a Division Bench of this High Court consisting of Chinnappa Reddy and Madhava Reddy, JJ., held that, if the Board of Revenue chooses to advise dealers on the question whether a commodity is declared goods or not, it is not doing so in pursuance of any authority conferred under the Act, but would be acting entirely outside its statutory powers and that, if the Board makes any representation to dealers or if it issues any instructions in the matter to the assessing authorities then too it would be acting outside the Act and no one would be bound by the representation or instructions. However, in the instant case, we are not concerned with any action taken by the Board of Revenue on its own or by a lesser authority like the Assistant Custodian of Evacuee Property before the Supreme Court in Assistant Custodian, Evacuee Property v. Brij Kishore Agarwala A.I.R. 1974 S.C. 2325. We are concerned with the acceptance by the State Government itself of the clarification issued by the Government of India in their letter dated 15th October, 1968. It is clear on the contents of the circular of the Board of Revenue dated 8th December, 1969, that the Board of Revenue was acting at the instance of the State Government because, as we have quoted from the letter of the Government of Andhra Pradesh dated 13th August, 1969, the Government of Andhra Pradesh accepted the clarification given by the Government of India in their letter dated 15th October, 1968 and it was at the instance of the Government of Andhra Pradesh that the Board of Revenue issued suitable instructions to the subordinate officers to adopt the ruling given by the Government of India in the matter. It was under these circumstances that the instructions set out in the circular dated 8th December, 1969, came to be issued by the Board of Revenue to all the assessing authorities, so that the ruling given by the Government of India might be adopted and the Board of Revenue pointed out that, inter alia, transmission beltings and conveyor beltings, which were otherwise liable to tax, would fall to be exempted from the tax payable under the Andhra Pradesh General Sales Tax Act by virtue of the clarification issued by the Government of India in their letter of 15th October, 1968, if the fabric content therein is not less than 40 per cent. It is, therefore, clear that no question of the doctrine of estoppel would arise in the instant case and we are not concerned with the application of the doctrine of estoppel. The main question is whether it is open now to any taxing authorities to go contrary to the acceptance by the State Government of the clarification issued by the Government of India in their letter of 15th October, 1968. The learned Government Pleader is right when he contends that the letter issued by the State Government on 13th August, 1969, is not any exemption from tax under Section 8 of the Act, because Section 8 refers to the goods specified in the Fourth Schedule to the Act. under Section 9, the State Government has been given the power to make exemptions by notification in the Andhra Pradesh Gazette and, in the instant case, the letter of 13th August, 1969, cannot be said to have been issued by the State Government in exercise of its power under Section 9 of the Act.

28. However, under Section 42(2) of the Act, the State Government has the power to make, by an order, such provisions not inconsistent with the purposes of the Act as appear to them to be necessary or expedient for removing difficulties, provided that the difficulty arises in giving effect to the provisions of the Act otherwise than in relation to the transition from the provisions of the corresponding Act in force before the commencement of the Andhra Pradesh General Sales Tax Act, 1957. In our opinion, the letter of the Government of Andhra Pradesh dated 13th August, 1969, is covered by the provisions of Section 42(2), because by an order, the State Government has made provisions not inconsistent with the purposes of the Andhra Pradesh General Sales Tax Act to remove the difficulty, which would otherwise arise because of the provisions of the Central Excises and Salt Act, 1944. The Government of India, in their letter dated 15th October, 1968, has pointed out that, if the weight of the fabric content of leather cloth, rexine or mackintosh is not less than 40 per cent it will continue to be a fabric for all purposes and the levy of sales tax thereon would not be proper. It was in pursuance of this clarification from the Government of India that the letter of 13th August, 1969, adopting that clarification was issued by the State Government and the Board of Revenue (Commercial Taxes) was directed to issue suitable instructions to the subordinate officers to adopt the ruling given by the Government of India. Thus, the letter of 13th August, 1969, was issued in exercise of the powers of the State Government under Section 42(2) of the Act and the Board of Revenue merely acted as a conduit pipe to convey the views of the State Government to all subordinate officers. We are merely concerned, in the instant case, with the effect of this circular of 8th December, 1969, issued by the Board of Revenue. No question of doctrine of estoppel arises in this case, because we are not holding the State Government bound by any representation made by it; but it is obvious that, in view of the decision of the State Government set out in the letter of 13th August, 1969 and conveyed to all the Sales Tax Officers by the instructions of the Board of Revenue issued in its circular dated 8th December, 1969, it is not open to any sales tax authority in the State of Andhra Pradesh to levy tax on transmission beltings and conveyor beltings, if the fabric content there in is not less than 40 per cent by weight. It is obvious that, so long as the adoption of the clarification of the Government of India by the State Government of Andhra Pradesh is in existence-and nothing is pointed out that the State Government has issued any contrary directions subsequently withdrawing that adoption of the clarification of the Government of India- all the sales tax authorities in the State of Andhra Pradesh were bound to follow the instructions of the Board of Revenue conveying the decision of the State Government about the adoption of the clarification of the Government of India set out in the letter dated 15th October, 1968. It is, therefore, clear that, in view of the factual position, that the cotton fabric content of the transmission belting or rubber belting under consideration was not less than 40 per cent by weight, as certified by the Goodyear India Limited, the manufacturers, the rubber beltings under consideration in each of these two tax revision cases was exempt under entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, in view of the clarification of the Government of India in their letter of 15th October, 1968, as adopted by the State Government in its letter of 13th August, 1969. Under these circumstances, the conclusion reached by the Tribunal in each of these two cases was not correct. It must be held that the rubber belting under consideration was exempt from sales tax for the assessment years 1968-69 and 1969-70.

29. A faint attempt was made by the learned Government Pleader to argue that the effect of the circular of the Board of Revenue should be given only from 8th December, 1969 and not from any prior date. We are unable to accept the contention, because what the Government of India in its clarification, what the Government of Andhra Pradesh in adoption of that clarification and what the Board of Revenue in its circular dated 8th December, 1969, were doing was to interpret the meaning of the words 'all varieties of textiles' so far as the sales tax authorities of the State of Andhra Pradesh were concerned. In this view of the matter, it is obvious that the circular of 8th December, 1969, would apply to all years and all assessment proceedings and for the period even prior to December, 1969. This last contention of the learned Government Pleader must, therefore, be rejected.

30. Under these circumstances, these two revision petitions under Section 22(1) of the Andhra Pradesh General Sales Tax Act are allowed and the questions of law raised in these tax revision cases are answered as follows:

Question No. (1): In the negative, i. e., in favour of the assessee and against the State of Andhra Pradesh.

Question No. (2): In the negative.

Question No. (3) : Not answered in view of the discussion set out herein above.

31. The respondent in each of these tax revision cases will pay the costs of the petitioner. Advocate's fee Rs. 250 in each.


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