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Sree Lakshmi Narayana Jewellers and ors. Vs. Commercial Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtAndhra Pradesh High Court
Decided On
Case Number Writ Petition No. 434 of 1978
Judge
Reported in[1979]43STC115(AP)
AppellantSree Lakshmi Narayana Jewellers and ors.
RespondentCommercial Tax Officer and anr.
Appellant Advocate S. Dasaratharama Reddi and ; S.R. Ashok, Advs.
Respondent Advocate The Government Pleader for Commercial Taxes
DispositionPetition dismissed
Excerpt:
.....for the government to declare ghee as product of livestock for the purpose of regulating its purchase and sale, in any notified market area. [per p.s. narayana, j,(dissenting)]if livestock or agricultural produce and the categories thereof had been specified in the statute itself by appending in the schedule or otherwise, that would stand on a different footing from the present provisions of the act which contemplate the issuance of notifications in accordance with the procedure ordained by the provisions specified supra. in view of the clear definition of the livestock and products of livestock, the ghee being derivative of butter or cream, if the language employed in definition to be taken as they stand, the only conclusion would be is that the ghee would not fall within ambit of..........(iii) such purchase is either from 'a registered dealer or from any other person' ; (iv) the goods purchased' are 'goods, the sale or purchase of which is liable to tax under the act' ; (v). such purchase is 'in circumstances in which no tax is payable under section 3, 4 or 5, as the case may be' ; and (vi) the dealer either-(a) consumes such goods in the manufacture of other goods for sale or otherwise or (b) despatches all such goods in any manner other than by way of sale in the state or (c) despatches them to a place outside the state except as a direct result of sale or purchase in the course of inter-state trade or commerce. all the ingredients referred to by the learned judges in that case are present in section 6-a of the act.8. as has been adverted to above, the object of.....
Judgment:

Obul Reddi, C.J.

1. The petitioners, a jewellers' firm known as 'Sree Lakshmi Narayana Jewellers', Proddatur, and others, filed this petition under Article 226 of the Constitution of India to issue a writ in the nature of mandamus directing the respondents to forbear from applying Section 6-A of the Andhra Pradesh General Sales Tax Act, for brevity 'the Act', in respect of the purchase of gold and silver ornaments consumed in the manufacture of standard gold and silver bars sold by the petitioners.

2. Mr. Dasaratharama Reddi, the learned counsel appearing for the petitioners, raised two contentions : (1) that Clause (ii) of Section 6-A cannot be applied to the petitioners as the purchases of gold and silver jewellery were made by them from non-dealers, and (2) that the turnover under Section 6-A cannot be taxed under Section 5-A of the Act. To determine the two questions raised by the learned counsel, we may state the relevant facts.

3. The petitioners are dealers in gold, silver and jewellery. These items are taxable at the first sale point as per entry 20 of the First Schedule to the Act. The petitioners purchase gold and silver ornaments from persons who are not dealers within the meaning of that expression ; and after purchase, they take the ornaments to Bombay for refining in the Mint of the Government of India and converting the same into silver and gold bars. The petitioners then sell the standard bars to the bullion dealers in Bombay who issue purchase invoices. On the ground that the purchases were made from persons who are not dealers, it is contended that Section 6-A which has been introduced into the Act with effect from 1st September, 1976, is not applicable. We may, therefore, read Section 6-A :

6-A. Levy of tax on turnover relating to purchase of certain goods.-? Every dealer, who in the course of business-

(i) purchases any goods (the sale or purchase of which is liable to tax under this Act) from a registered dealer in circumstances in which no tax is payable under Section 5 or under Section 6, as the case may be, or

(ii) purchases any goods (the sale or purchase of which is liable to tax under this Act) from a person other than a registered dealer, and

(a) either consumes such goods in the manufacture of other goods for sale or otherwise, or

(b) disposes of such goods in any manner other than by way of sale in the State, or

(c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce,

shall pay tax on the turnover relating to purchase aforesaid at the same rate at which but for the existence of the aforementioned circumstances, the tax would have been leviable on such goods under Section 5 or Section 6.

4. In the counter-affidavit filed on behalf of the respondents, it is stated that the test whether Section 6-A(2) is applicable or not, is to see whether the transactions are taxable transactions. Even if the sales by persons to the petitioners are not taxable in the hands of the sellers as they are not dealers, since the goods are taxable goods, the petitioners are liable to pay the purchase tax under Section 6-A(ii).

5. Mr. Dasaratharama Reddi, the learned counsel for the petitioners, sought to point out that the omission of the words 'in circumstances in which no tax is payable under Section 5 or under Section 6, as the case may be', in Clause (ii) of Section 6-A is very significant. It is his case that the legislature, if it intended to bring within the taxing net purchases from persons other than a registered dealer, would not have chosen to omit those words which occur in Clause (i). The question, therefore, is whether the omission of the words referred to supra makes any difference in so far as the turnover relating to purchase of goods from a person other than a registered dealer is concerned. The scheme of Section 6-A has, therefore, to be seen. If it is an integrated scheme, then the fact that certain words which occur in Clause (i) do not occur in Clause (ii) makes no difference. The legislative intent in inserting Section 6-A has, therefore, to be seen.

6. Section 6-A has been introduced in order to see that there is no evasion of tax by dealers who purchase goods either from a registered dealer or from a person who is not a registered dealer. Where a dealer purchases goods the sale or purchase of which is exigible to tax, whether from a dealer or a non-dealer, the turnover relating to such purchases is liable to tax at the same rate at which the tax would have been leviable on such goods either under Section 5 or under Section 6. The argument of the learned counsel is that the circumstances under which tax is leviable is not stated in Clause (ii) of Section 6-A. It would appear to us that instead of clubbing both clauses (i) and (ii) together, the legislature has advisedly split the provisions into two clauses and that is why the disjunctive 'or' has been used in Clause (i).

7. The requirements to attract Clause (ii) are stated in Sub-clauses (a), (b) and (c). If a dealer consumes such goods in the manufacture of other goods for sale or otherwise, or disposes of such goods in any manner other than by way of sale in the State, or despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, such transactions, either sales or purchases, would attract the tax which would have been leviable on the goods sold or purchased under, Section 5 or Section 6 of the Act. The learned counsel sought to rely upon the distinction in the phraseology used in Section 7-A of the Madras General Sales Tax Act and Section 5-A of the Kerala General Sales Tax Act, which correspond to Section 6-A of the Act. Both in Section 7-A of the Madras Act and Section 5-A of the Kerala Act, the two clauses, i.e., clauses (i) and (ii), which appear in Section 6-A of the Andhra Pradesh General Sales Tax Act, are put in one sub-section. There too, i.e., both in the Madras Act and in the Kerala Act, the legislature made its intention very clear by stating that where a dealer purchases goods from a registered dealer or from any other person, the sale or purchase of which is leviable to tax, he shall pay tax on such turnover at the rates mentioned in some other provisions of the Act. Section 7-A of the Madras Act came to be construed by the Supreme Court in State of Tamil Nadu v. Kandaswami [1975] 36 S.T.C. 191 (S.C.). Section 7-A, according to the learned Judges, could be invoked if the ingredients mentioned in the section are cumulatively satisfied. The ingredients are: (i) the person who purchases the goods is a dealer ; (ii) the purchase is made by him in the course of his business; (iii) such purchase is either from 'a registered dealer or from any other person' ; (iv) the goods purchased' are 'goods, the sale or purchase of which is liable to tax under the Act' ; (v). such purchase is 'in circumstances in which no tax is payable under Section 3, 4 or 5, as the case may be' ; and (vi) the dealer either-(a) consumes such goods in the manufacture of other goods for sale or otherwise or (b) despatches all such goods in any manner other than by way of sale in the State or (c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce. All the ingredients referred to by the learned Judges in that case are present in Section 6-A of the Act.

8. As has been adverted to above, the object of enacting Section 6-A is to plug the loopholes in the other provisions relating to taxation and prevent evasion of tax. Therefor(r), in construing such a provision, a construction which would defeat the very object of the legislation should not be given. If more than one construction is possible, the construction which preserves its workability and efficacy has to be preferred to the one which would render it stale or sterlie. While considering the scheme of Section 6-A, the section as a whole has to be read. Clause (ii) of Section 6-A cannot be read in isolation, as Clause (ii) is made specifially applicable to non-dealers. While Clause (i) covers registered dealers, Clause (ii) covers persons who are not registered dealers. If the factors or the ingredients referred to in Section 6-A are present, then the tax liability of a dealer is attracted whether he makes purchases from dealers or persons who are not registered dealers. The facts of this case would show that the petitioners purchased the goods in question, i.e., jewellery, from persons other than registered dealers and, with the authority of the Central Excise Department, got them refined at the Government Mint at Bombay and sold the standard bars thus obtained to the dealers in Bombay. Therefore, Section 6-A(ii)(c) is attracted.

9. As regards the other contention of the learned counsel that in any event the turnover under Section 6-A cannot be taxed under Section 5-A, we have only to invite his attention to the decision of a Division Bench of this Court in A.S. Ramachandra Rao and Co. v. State of A.P. [1969] 24 S.T.C. 133. In that case, a question arose whether Section 5-A was a charging section with regard to additional levy or whether it was merely an ancillary provision. The learned Judges, dealing with that question, observed :

The fixation of a rate in Section 5 or the fixation of an additional rate under Section 5-A cannot, in our opinion, alter the character or nature of the tax that is imposed under either of the sections. Section 5-A itself makes it clear that the additional tax is imposed only on every dealer who is liable to pay the tax under Section 5. It is not disputed before us that under Section 5, a dealer has to pay tax only on the sales or purchases in one year and it is the very same sales or purchases that are sought to be taxed with the additional rate under Section 5-A.... In ascertaining the true nature and character of the additional tax under Section 5-A it is legitimate as well as necessary that both the sections should be read together in order to ascertain the true character of the tax sought to be imposed. We are satisfied that the tax sought to be imposed under Section 5 as well as the additional tax sought to be imposed under Section 5-A partake of the same character, viz., a tax on the sale of goods or purchase falling within entry 54 of List II.

10. We are in entire agreement with the view expressed by the learned Judges in that case. We, therefore, hold that the turnover in question is liable to tax under Section 5-A of the Act. The writ petition fails and is accordingly dismissed with costs. Advocate's fee Rs. 200.


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