Harayana Steel Industries vs Govt. of A.P. and Others

Syed Shah Mohammed Quadri, J.—The petitioner is a company registered under the Companies Act. It is manufacturing M.S. re-rolling products, M.S. rounds, flats, angles and squares etc. by process of re-rolling by utilising iron scrap. For the assessment year 1989-90 sales-tax was assessed under the Andhra Pradesh General Sales Tax Act, 1957 (for short "the Act"). The order of the assessment was revised by the Deputy Commissioner and that order of revision is the subject matter of an appeal before the Sales-tax Appellate Tribunal. For the assessment year 1991-92 against the order of assessment the petitioner had filed an appeal before the Appellate Deputy Commissioner of Commercial Taxes and that appeal is pending. In regard to stay of recovery of the sales-tax for the said two years the petitioner has approached the Joint Commissioner and the Deputy Commissioner respectively and the said petitions are pending before the said authorities. While so, the petitioner filed this Writ Petition challenging the constitutional validity of entry 2-A (i) and (ii) of Schedule III of the Act introduced by Act 4 of 1989 by bifurcating entry 2 into 2 (i) to (ix) and (xi) to (xvi) thus deleting item 2(x) and adding 2-A (i) and (ii) by the said Act 4 of 1989, as ultra vires the State Legislature and viola tive of Article 286(3) of the Constitution and also inconsistent with Sections 14 and 15(a) of the Central Sales-Tax Act, 1956.

Mr. A.T.M. Rangaramanujam, the learned Counsel for the petitioner, submits that u/s 14 of the Central Sales Tax-Act, certain goods have been specified as of special importance in inter-State trade or commerce; Clause (iv) of the said section declares iron and steel and the other goods enumerated therein as declared goods, but in Schedule II of the APGST Act the State Legislature has bifurcated those items into two categories by adding 2-A by Act 4 of 1989 with effect from 15-2-1989 which is violative of Section 15 of the Central Sales-Tax Act.

It would be necessary to read here Section 15 of the Central Sales Tax Act which is in the following terms insofar as it is relevant for our purpose:

"15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State:

Every sales tax law of State shall, insofar as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:-

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;

(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State".

What is contemplated by Clause (a) of Section 15 is tha in respect of the declared goods the sales-tax of a State will be subject to the following two conditions, viz., (i) that the tax payable under the State law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof; and (ii) that such tax shall not be levied at more than one stage. Addition of entry 2-A (i) and (ii) in Schedule III by the State Legislature with effect from February, 1994 brings about a change with respect to the point of taxation of sales-tax from Sale to the point of purchase. Here we may notice entry 2(x) which was deleted and entry 2-A (i) and (ii) which is inserted by Act 4 of 1989.

Entry 2(x) which was omitted by Act No. 4 of 1989.

------------------------------------------------------------------------ SI. Description of goods Point of Rate of No. levy tax ------------------------------------------------------------------------ XX XX XX 2. Iron and steel, that is to say - (x) steel melting scrap in all forms At the point 4 paise in including steel skull, turnings of first sale the rupee and borings; in the State ------------------------------------------------------------------------ Entry 2-A which was inserted by Act No. 4 of l989

------------------------------------------------------------------------ 2-A. Iron and steel scrap, that is to say - When purchased 4 paise in (i) iron scrap, cast-iron scrap, by an electric arc the rupee runner scrap and iron skull furnace unit or scrap. an induction (ii) Steel melting scrap in all forms furnace unit in including steel skull, turnings the state at the and borings. point of purchase by such unit and by such unit and in all other cases at the point of purchase by the last dealer who buys in the State ------------------------------------------------------------------------

A plain reading of these entries shows that sales tax on those items was earlier levied at the point of first sale in the State and in view of the amended provision, tax is levied when the goods enumerated in the entry are purchased by an electric arc furnace unit or an induction furnace unit in the State at the point of purchase by such unit and in all other cases at the point of purchase by the last dealer who buys in the State. The rate of tax remain at 4% and there is no change in it. It need not be emphasized that the Sales-Tax can be either at the point of sale or at the point of purchase. Section 15 of the Central Sales-Tax Act also permits levy of tax either at sale point or at purchase point, subject, of course, to the limitations indicated above. Merely because the State Legislature has made taxability of certain items, at point of purchase, the entry does not become either ultra vires the power of the Legislature or contrary to Section 15 of the Central Sales-Tax Act. In this view of the matter, we do not find any merit in the Writ Petition to sustain the challenge regarding the validity of Item 2-A of Schedule III of the Act inserted by Act 4 of 1989.

It is needless to point out that dismissal of this Writ Petition does not preclude the petitioner from pursuing its remedy before the Joint Commissioner.

Subject to the above observations, the writ petition is dismissed. No costs.