Andhra Pradesh Concrete Pipe Manufacturing Association and Another vs Chief Engineer, Rural Water Supply, Hyderguda and Others

Jagannadha Rao, J.—This writ petition is filed by the Andhra Pradesh Concrete Pipe Manufacturing Association, Bhavanipuram, Vijayawada and Tribunal Cement Pipe Industry, Raghupatipet, Kalwakurti mandal. The petitioners seek to issue of a writ of mandamus requiring the Commissioner of Commercial Taxes (respondent 3) to amend the instructions issued by him to the Chief Engineer, Public Health Department, Hyderabad by his letter dated March 28, 1990 (in L. Dis. No. A4/3904/89) so as to bring the same in conformity with the judgment of the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. G.S. Pai and Co., .

It is stated in the writ petition that the members of the 1st petitioner association are manufacturers of reinforced cement concrete pipes also known as R.C.C. pipes and asbestos cement pressure pipes (ACP pipes). The members of the said association are all said to be registered dealers under the provisions of the A.P. General Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. It is further stated that the Chief Engineer, Rural Water Supply, Hyderabad (respondent 1) and the Chief Engineer, Public Health Department, Hyderabad (respondent 2), invite tenders for the purpose of execution of rate contracts, the petitioners supply the abovesaid type of pipes. These pipes are required for use by the Panchayatraj Department and the Public Health Department of the State Government. Whenever the abovesaid dealers sell these pipes to the said departments, the sales tax paid on the said sales is also included in the bill and the abovesaid departments directly pay the amount of sales tax to the Government although normally the liability to pay the sales tax is upon the said dealers. As a matter of practice, the same is allowed to be included in the bill and the sales tax component is paid by the said departments directly to the Government. In so far as the above type of pipes are concerned, it has been the contention of the Sales Tax Department that the concerned sales are liable to tax under entry 102 of Schedule I of the Act under the heading "Water supply and sanitary fittings" and that the rate of tax would be 9 per cent apart from additional tax and surcharge. On the other hand, it has been the contention of the dealers that these pipes do not fall under the said entry 102 but that they should be charged for a lesser rate of tax as general goods u/s 5(1) of Andhra Pradesh General Sales Tax Act (hereinafter called "the Act"). The dealers have been contending that the abovesaid sales of pipes to the said two departments of Government are covered by the decision of the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. G.S. Pai and Co., , above referred to. It is stated that in several cases the dealers had to approach the Sales Tax Appellate Tribunal for obtaining the relief. As things stood thus, the 3rd respondent has issued a clarification dated March 28, 1990, to the 1st respondent in reply to a letter by the latter dated November 20, 1989, stating that the various items mentioned in his letter in column 2 are exigible to the sale tax mentioned in column 3. The two items which are relevant for purposes of the present writ petition are those at serial Nos. 3 and 4 of the said letter of the Commissioner. Serial No. 3 referred to reinforced cement concrete pipes (RCC pipes/hume pipes) and serial No. 4 referred to asbestos cement pressure pipes. The note underneath the table contained in the letter states that the rate of tax for sales of the pipes in serial Nos. 3 and 4 will be 9 per cent apart from additional tax and surcharge because the Chief Engineer, Rural Water Supply had specifically stated that the purpose for which the pipes are used was for "water supply schemes in rural areas."

It is argued for the petitioners by Sri Ravi that even though the Chief Engineer concerned had clarified in his letter dated November 20, 1989, that the supplies by these dealers of the above type of tubes are meant for use in "rural water supply schemes"'' the Commissioner (CT) has given a wrong clarification to the Chief Engineering stating that these tubes fall under the category of "water and sanitary fittings" in entry 102 of Schedule I to the Act and that, thereby, the Chief Engineers are including in the sale amount, an amount towards sales tax in excess of the rate u/s 5(1) of the Act and that this cannot be permitted. On the other hand, it is argued by the Government Pleader, Sri M. Ramaiah that the clarification issued by the Commissioner (CT) is based upon the Government Memo No. 884/CT-II-1/87-2 dated November 7, 1987 and that the judgment of the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. G.S. Pai and Co., supports the clarification issued by the Commissioner rather than the petitioners'' case. It is, in fact stated in the counter that even as per the abovesaid judgment, pipes which are not taken "underground" for supply of water, still fall within the words "water and sanitary fittings" in entry 102 of Schedule I. It is also argued that this Court should not decide this question at this stage when the Act provides adequate remedies for ascertainment of the facts.

Normally, this Court does not decide hypothetical questions. But here, the petitioners contend that the Commissioner''s wrong clarification to the Chief Engineer will only compel the petitioners to resort to the taxation authorities on this question and that the Commissioner cannot interpret the Supreme Court decision as being in favour of the Revenue when, in fact, it is in favour of the petitioners. Having considered the submission of the Government Pleader and having also considered the grievance of the petitioners arising out of the impugned clarification of the Commissioner (CT), we propose to deal with the matter to the extent necessary.

For the purpose of the decision in this writ petition, it is assumed that "pipes" in serial Nos. 3 and 4 of the Commissioner''s letter, are used only for purposes of "rural water supply schemes" and are not used for purposes of any building nor as "attached or auxiliary to the building or part of it".

As already stated, entry 102 of Schedule I to the Act, on which the 3rd respondent relies, permits a levy of 9 per cent of tax (apart from additional tax and surcharge) on "water supply and sanitary fittings". The petitioners contend that pipes which, as clarified by the Chief Engineer, are exclusively meant for "rural water supply schemes" do not fall within the above entry but fall under the head of general goods in section 5(1) and are exigible to a lesser rate of tax.

The words "water supply and sanitary fittings" have, as already stated, come up for consideration before the Supreme Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. G.S. Pai and Co., . That case came up in appeal from the decision of the Kerala High Court. So far as the words "sanitary fittings" are concerned, it was pointed out that those words had been construed in an earlier decision of the Supreme Court in State of Uttar Pradesh and Others Vs. Indian Hume Pipe Co. Ltd., . Pipes which are used for purposes of lavatories, urinals or bath-rooms fall under this limited category. So far as pipes used for conveying water such as the G.I. pipes are concerned, it was pointed out in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. G.S. Pai and Co., , that, if the G.I. pipes were heavy and intended to be laid underground for carrying supply of water from one place to another, they would obviously not be "sanitary fittings". However, it was argued for the Revenue in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam Vs. G.S. Pai and Co., , that even if these heavy G.I. pipes did not come under the heading "sanitary fittings" they would still fall under the heading "water supply .... fittings". This contention was rejected by the Supreme Court holding that the use of the word "fittings" suggested that the expression was intended to refer to articles or things which are fitted or fixed to the floor or walls of a building and it may, in a given case, include even articles or materials fitted or fixed outside, provided they could be considered as "attached or auxiliary" to the building or part of it, such as, for example, a pipe taking faecal matter from the commode to the septic tank, but

"...... they cannot include pipes laid underground for carrying water supply .... they do not include heavy pipes which are laid underground as mains for carrying water supply from one area or place to another."

The Supreme Court said as above while dealing with the heavy G.I. pipes in that case.

In our view, the Supreme Court did not lay down any proposition that if the pipes were not taken "underground" they would fall within the meaning of the words "water .... fittings". While explaining the meaning of the said words they merely referred, as a matter of illustration, to pipes laid underground for carrying water from one area or place to another, and said that such pipes will not fall within the said expression. Unfortunately, the Commissioner (CT), in his impugned letter has wrongly assumed that according to the Supreme Court, pipes which carry water from one area or place to another must have been laid underground for being treated outside the expression "water... fittings". In our view, the said assumption is incorrect.

The Supreme Court, in our view, has held in the abovesaid case that, the words "water supply ......... fittings" take their colour in the context of the words "sanitary fittings", that the word "fittings" suggested that it was referable to articles or things which are fitted or fixed to the floor or walls of a building and the said word may, in a given case, include even article or materials fitted or fixed outside, provided they could be considered as "attached or auxiliary" to the building or part of it. The Supreme Court categorically pointed out that the entire expression "water supply and sanitary fittings" is one single expression and the words "water supply ....... fittings" must receive colour from the immediately following words "sanitary fittings". In our view, just as pipes laid underground for carrying water from one area or place to another cannot fall within the meaning of the words "water fittings", pipes meant for carrying water from one place to another whether laid underground or overground will still fall outside the meaning of the said words. The test is whether the pipes could be considered to be "fittings" of a house, inside or outside, or whether they are "attached or auxiliary" to the building or part of it. To say that though pipes carry water, as part of rural water supply scheme, from one area to another, such pipes not being laid underground, will not fall within the meaning of the words "water fitting" is, in our opinion, contrary to the ratio of the Supreme Court judgment.

We are, therefore, of the view that the letter dated March 28, 1990 of the Commissioner (CT) addressed to the Chief Engineer (Rural Water Supply), Hyderabad, in so far as it relates to items at serial Nos. 3 and 4, has misinterpreted the decision of the Supreme Court. We have, therefore, set at rest any misunderstanding as to the scope and applicability of the Supreme Court judgment.

We may, however, add that if any part of the pipes falling under serial Nos. 3 and 4 of the said letter of the Commissioner dated March 28, 1990 are used as "water or sanitary fittings" in respect of any building, as explained in detail above, it will be open to the concerned authorities to apply entry 102 of Schedule I to the Act, to that extent.

The writ petition is disposed of accordingly. In the circumstances, there will be no order as to costs. Advocate''s fee Rs. 250.