Andhra Pradesh Industrial Infrastructure Corporation Limited vs State of Andhra Pradesh

Syed Shah Mohammed Quadri, J.—This tax revision case is filed by the assessee against the order of the Sales Tax Appellant Tribunal in T.A. No. 366 of 1984 dated April 29, 1988.

Taxability of the following three items, is in dispute :

Water charges : Rs. 5,59,271 2. Cost of ridges and covers : Rs. 66,219.79 3. Cost of tender schedules : Rs. 73,883.14

These three item are held to the taxable by Tribunal.

In so far as the first two items are concerned, it is contended by Sri Srinivasa Reddy, the learned counsel for the petitioner, that supply of water and of ridges and covers, is in the nature of service and not in the nature of sales, therefore, it does not attract the liability to sales tax. "Sale" is defined in section 2(n) of the Andhra Pradesh General Sales Tax Act, 1957 (for short "the Act"). The definition of "sale" in so far as it is relevant for our purpose may be extracted hereunder :

"(n) ''sale'' with all its grammatical variations and cognate expressions means every transfer of the property in goods whether as such goods or in any other form in pursuance of a contract or otherwise by one person to another in the course of trade or business, for cash, or for deferred payment, or for any other valuable consideration or in the supply or distribution of goods by a society (including a co-operative society), club, firm or association to its members, but does not include a mortgage, hypothecation or pledge of, or charge on goods."

The essence of the definition is every transfer of property in goods by one person to another in the course of trade or business, the transfer may be for cash or for deferred payment or for any other valuable consideration. This definition includes supply or distribution of goods by a society including a cooperative society, club, firm or association to its members, but does not include mortgage, hypothecation or pledge of, or charge on goods, within the meaning of sale. So, what has to be seen here is whether there has been transfer of property in goods or supply of goods from the petitioner-assessee to its members. If there is such a transfer of property, then, it falls within the meaning of "sale".

The petitioner-assessee is an A.P. Government undertaking. Its business is planning and promotion of industrial projects, programmes and development of infrastructural facilities for industries and factories. It is also to be noted that the memorandum of association of the petitioner includes purchases and sales of goods as one of the objects. Admittedly, in this case, the petitioner-assessee purchased water and sold the same to the allottees of the industrial estate; therefore, there is a sale of water by the petitioner-assessee. So also supply of ridges and covers and bends for consideration after purchasing the same, would amount to "sale". Therefore, the turnover of these two items would attract the sales tax. In this connection, we may refer to a decision of the Division Bench of this Court in The Chittoor Co-operative Sugars Limited Vs. The State of Andhra Pradesh, . In that case, the co-operative society was supplying diesel to the lorries of its contractors from its petrol bunk at cost price without charging any profit. On the question whether such supplies would attract levy of sales tax, it was held by a Division Bench of this Court that inasmuch as the assessee was under no obligation to supply the diesel under the agreement entered into by it with the lorry contractors, the supply of diesel to such lorries by the assessee, even though at cost price, amounted to "sale" which was subject to sales tax. The ratio of the decision applies on all fours to the sales of the abovesaid items in this case. Following that judgment, we hold that the Tribunal was right in its conclusion that the supply of the items 1 and 2 amounted to sale and was taxable.

In so far as the third item is concerned, the turnover thereof represents the cost of tender schedules supplied by the petitioner-assessee to the intending allottees. The allottees were bound to apply on the tender schedules supplied by the petitioner-assessee. Therefore, there was a corresponding obligation on the part of the petitioner-assessee to supply the tender schedules. The learned Government Pleader, however, contends that supply of tender schedules was incidental to business and, as such, the turnover in that regard is taxable. In support of his contention, he relied on the decision of this Court in Andhra Prabha Private Ltd. Vs. The State of Andhra Pradesh, . There the question was whether the assessee was liable to pay tax on the turnover relating to the sales of back number of copies of newspapers which remained unsold. Following (sic) the judgment of this Court in State of Andhra Pradesh Vs. Andhra Pradesh Housing Board, , it was held in Andhra Prabha Private Ltd. Vs. The State of Andhra Pradesh, that since the main activity of the assessee was business, incidental or ancillary transactions would also constitute business and the turnover would be exigible to tax. We are unable to agree with the contention of the learned Government Pleader as in the instant case, we have already pointed out, that the memorandum of association of the assessee provides for purchases and sales of goods as one of the objects of the petitioner-assessee and the supply of tender schedules, in our view, cannot be said to be incidental or ancillary activity of the business of the petitioner, because the petitioner was not carrying on the business in the sale or purchase of tender schedules. In the State of Andhra Pradesh Vs. Andhra Pradesh Housing Board, , relied on (sic) in Andhra Prabha Private Ltd. Vs. The State of Andhra Pradesh, one of the questions that fell for consideration was, whether the sale of tender forms would attract the liability to sales tax. A Division Bench of this Court held that having regard to the objects of the Housing Board, it could not be regarded as a dealer carrying on business in unused applications or tender forms. The Bench relied on another judgment of this Court in Board of Trustees of the Visakhapatnam Port Trust Vs. Commercial Tax Officer and Another, where a similar question arose for consideration. The question was whether the sales of documents when the tenders were invited, were incidental to the business of the Port Trust. The Bench took the view that the charging of fees for the supply of tender forms and tender specifications would not amount to carrying on business in that commodity even within the widest meaning of the term "business". Applying that ratio, it was held in State of Andhra Pradesh Vs. Andhra Pradesh Housing Board, that the sale of tender forms does not attract the liability to sales tax. Following the abovesaid judgments, we hold that the cost of the tender schedules is not exigible to sales tax. The order of the Tribunal revision taking contrary view is, therefore, set aside. The tax revision case is partly allowed, but in the circumstances, without costs.

Petition partly allowed.