Auric Engineering Private Limited vs Commissioner of Commercial Taxes, Andhra Pradesh

P. Vbnkmarama Reddi, J.—This appeal u/s 23(1) of the Andhra Pradesh General Sales Tax Act, 1957 (for short, "the Act"), arises out of the order passed by the Commissioner of Commercial Taxes exercising suo motu revisional powers u/s 20(1) of the Act. In respect of the assessment year 1982-83, the appellant was assessed to tax on a net turnover of Rs. 34,86,710 relating to the first sales of general engineering goods, capacitors and laminations used in electrical fans, which were covered by declarations in form "G1" issued u/s 5-B of the Act read with rule 30-A of the Andhra Pradesh General Sales Tax Rules. It is not in dispute that these goods were sold to the manufacturers of electrical fans, who in turn utilised them as components. The turnover was subjected to tax by the assessing authority at the rate of 4 per cent. The assessing authority did not levy additional tax or surcharge in respect of that particular turnover. The Commissioner of Commercial Taxes by the impugned order dated July 16, 1990, revised the assessment in the interest of revenue and imposed additional tax u/s 5-A and surcharge u/s 6-B of the Act. The Commissioner took the view that even in regard to the turnover pertaining to sales of component parts falling u/s 5-B, the additional tax and surcharge is attracted. It is the correctness of this view that is questioned in this appeal before us.

Section 5-B(1) of the Andhra Pradesh General Sales Tax Act, as it stood at the relevant point of time, reads as follows :

"Section 5-B : Levy of concessional tax in respect of component parts. - (1) Notwithstanding anything in this Act, every dealer shall pay, in respect of any sale of goods specified in a scheme published by the State Government by notification to another for use by the latter as component part of any other goods specified in the said scheme, which he intends to manufacture inside the State for sale in the State or in the course of inter-State trade or commerce, a tax, at such rate not exceeding four paise in the rupee as may be specified in the said scheme on the turnover relating to such sale :

Provided that the provisions of this section shall not apply to any sale unless the dealer selling the goods furnished to the assessing authority in the prescribed manner a declaration duly filled in and signed by the dealer to whom the goods are sold containing the prescribed particulars in the prescribed form obtained from the prescribed authority on payment of prescribed fee."

It is also necessary to extract the relevant portion of section 5-A of the A.P. General Sales Tax Act as it then stood and it reads as follows :

"5-A. Levy of additional tax on turnover. - Every dealer who is liable to pay tax u/s 5 shall, in addition to the tax payable under that section, pay for each year a tax at the rate of one-half paise on every rupee of his turnover liable to tax, if his total turnover for that year is rupees three lakhs or more."

Section 5-B of the Act, as the marginal heading to the section shows, provides for levy of concessional tax in respect of certain component parts used in the manufacture of specified finished products within the State. As observed by a Division Bench of this Court in State of Andhra Pradesh v. Buywell Corporation [1995] 98 STC 29 "the intendment of the Legislature is to provide concessional rate of tax on the sale of the components of any goods specified in the scheme for providing an incentive to the manufacturer to manufacture those goods in the State for sale either in the State or for the sale in the course of inter-State trade or commerce. It is this intention that has kept away from the surcharge the turnover of sale or purchase of the goods". Section 5-B, as rightly pointed out by the Division Bench, starts with a non obstante clause which discloses the key to understand the intention behind this provision. The idea is to provide incentive to the manufacturers producing goods within the State and incidentally manufacturers of component parts thereof. This objective is accomplished by providing concessional rate of 4 per cent maximum. A plain reading of section 5-B of the Act coupled with the purpose and objective of this provision makes it clear that the tax leviable u/s 5-B of the Act is at a maximum of 4 per cent. If the basic rate is 4 per cent or more, there is no scope to add additional tax or any other tax thereto. If we approach from the standpoint of section 5-A also, the same conclusion should follow. The opening words of section 5-A "every dealer who is liable to pay tax u/s 5" are significant. It is only in respect of transactions of sale or purchase exigible to tax u/s 5, that section 5-A is attracted. Section 5-B of the Act being an independent and special charging section in regard to component parts of the description specified in that section, the liability to pay tax does not arise u/s 5 of the Act. In other words, section 5-B of the Act shall not be mixed up with section 5 of the Act. If so, section 5-A is not attracted to the turnover u/s 5-B at all. For this reason also, the view taken by the Commissioner of Commercial Taxes cannot be sustained.

Then, we come to the question of surcharge. As far as this point is concerned, it is squarely covered by the Division Bench judgment aforementioned. In fact, the Commissioner of Commercial Taxes referred to an order of the Sales Tax Appellate Tribunal in T.A. No. 37 of 1984 and declined to follow the view taken by the Tribunal on the ground that the department filed T.R.C. No. 126 of 1987 against that order in this Court. It is that very case which came up for hearing before the Division Bench and decided against the Revenue. This is what the learned Judges held in the concluding para :

"......... A combined reading of sections 5-B and 6-B, in our view, leads to the conclusion that concessional rates of tax provided in provisions other than section 5-B, would form basis for levy of surcharge and they would be included within the expression ''tax under this Act'', and the concessional tax contemplated u/s 5-B shall not be exigible to surcharge u/s 6-B. In this view of the matter, we do not find any illegality in the order of the Tribunal."

The Division Bench of this Court has, as already stated, stressed on the non obstante clause and the intention of the Legislature. We are in agreement with the aforesaid view expressed by the Division Bench.

For the above reasons, this appeal is allowed and the impugned order of the Commissioner of Commercial Taxes is set aside. No costs.

Appeal allowed.