Virat Crane Industries Limited vs Commercial Tax Officer and Others

Syed Shah Mohammed Quadri, J.—The petitioner, challenging the validity of the Government Memo No. 37289/CT-1/95-4, dated January 23, 1996 and also the consequential notice issued by the first respondent-Commercial Tax Officer, Patnam Bazar, Guntur, in G.I. No. 1486/94-95, dated February 8, 1996, prays for a writ of certiorari to call for the records relating to the said memo and notice and to quash the same.

The petitioner is a company registered under the Indian Companies Act, 1956. It is engaged in the business of manufacturing and marketing "gutka and fruit masala". The petitioner (for short, "the company") is the registered dealer under the Andhra Pradesh General Sales Tax Act, 1957 (for short, "the Act"). For the assessment year 1993-94, the assessment proceedings were completed by exempting a turnover of Rs. 14,67,383 relating to the sale of "gutka", which was exempted from the sales tax. It appears that in exercise of the power u/s 42A of the Act, the Commissioner of Commercial Taxes, Second respondent herein, issued a circular No. A. 1(1)3202/92, dated October 26, 1994 clarifying the position that "gutka" would have to be treated as a tobacco product falling under entry 7A of the Fourth Schedule to the Act. It may be noted that in exercise of the power vested u/s 40 of the Act, the Governor of Andhra Pradesh amended the First Schedule adding entries Nos. 193 and 194. Here, we are concerned with the entry No. 194. The Governor of Andhra Pradesh also omitted item (i) of entry No. 7-A together with columns (1) and (2) in Fourth Schedule to the Act. Though the orders were issued in G.O.Ms. No. 83, Revenue (CT II) Department, dated January 23, 1996, the Principal Secretary to the Government, third respondent herein, has issued Memorandum No. 37289/CT-1/95-4 on the same day, i.e., January 23, 1996, withdrawing the clarification issued by the Commissioner on October 26, 1994 referred to above. In view of the memorandum of the Government, the first respondent issued show cause notice to the company in G.I. No. 1486/94-95 dated February 8, 1996, calling upon the company to file its objections as to why the sales of "Pan masala/gutka" should not be provisionally assessed as being taxable at the rates mentioned under the Seventh Schedule to the Act. It is the validity of the said memorandum of the Government dated January 23, 1996 and the notice issued by the first respondent dated February 8, 1996 that is assailed in this writ petition.

Sri S. Krishna Murthy, the learned counsel appearing for the petitioner-company, very extraneously contends that the turnover of sales of "gutka" cannot be taxed for the assessment year 1994-95 and the exemption cannot be withdrawn retrospectively. He submits that the impugned memorandum of the Government cannot have any retrospective effect and that the show cause notice issued by the first respondent is wholly illegal and therefore, the tax cannot be provisionally assessed.

In our view, the writ petition is somewhat premature. The impugned notice issued by the first respondent is only a show cause notice calling upon the company to file its objections within seven days of the receipt of the notice. The question whether the impugned memorandum of the Government dated January 23, 1996 has any retrospective effect and further what is the effect of insertion of entry No. 194 in the First Schedule to the Act are yet to be determined by the first respondent. We, therefore, do not propose to express any opinion on those aspects.

We may, however, refer to one submission made by the learned counsel for the petitioner-company, which was very vehemently contended before us relying upon the decision in Filterco and Another Vs. Commissioner of Sales Tax, Madhya Pradesh and Another, . In the said case, u/s 42-B(1) of the Madhya Pradesh General Sales Tax Act, 1958, which corresponds to section 42-A of the A.P. General Sales Tax Act, 1957, the Commissioner of Sales Tax, Madhya Pradesh, issued a circular in respect of 26 samples of "felt" of varying hardness, density and thickness produced before him. Having given an opportunity of being heard to the appellants therein, the Commissioner held that the expression "cloth" in item 6 of Schedule I to the Madhya Pradesh Sales Tax Act would make in nonwoven material inclusive of "felt", pliability was an essential attribute of "cloth" and only those varieties of felt manufactured by the appellants which satisfied the test of pliability could be legitimately classified as "cloth". Applying that test, the Commissioner held that only five out of 26 specimens could be classified as "cloth" and granted exemption from tax under that Act opining that 21 samples would be taxable at the rate of 10 per cent. That order of the Commissioner was questioned in the writ petition before the Madhya Pradesh High Court. The writ petition was dismissed by the High Court on the ground that the Commissioner''s order was not binding on the appellate authorities under the Act, who could examine the question afresh and if the appellants were aggrieved, they could thereafter ask for a reference u/s 44 to the High Court and thus, the appellants therein had an alternative remedy. Then the assessee-dealer carried the matter to the Supreme Court. Their Lordships of the Supreme Court took the view that the order of the Commissioner was clearly binding on the assessing authority u/s 42-B(2) of the Act and though it was open to the appellants to urge their contentions before the appellate authority, the Appellate Assistant Commissioner, but that would be a mere exercise in futility when a superior officer, the Commissioner, had already passed a well-considered order in exercise of its statutory jurisdiction u/s 42-B(1). It was also pointed out that a substantial portion of tax had to be deposited before an appeal or revision could be filed, and held that the High Court should have decided the petition.

In our view, the said decision has no application to the facts of the present case, as obviously the Government in this case have not decided the issue as to whether the withdrawal of the clarification issued by the Commissioner had retrospective effect or not and also the question as to what is the effect of insertion of entry No. 194 in the First Schedule to the Act with regard to the taxability of the goods in question for the assessment year 1994-95. The very purpose of issuing show cause notice to the petitioner-company by the first respondent is to give it an opportunity to explain its stand and it is for the company to file its objections.

In view of the above discussion, at this stage, in our view, it would not be appropriate to pronounce upon the merits of the case. In our view, the writ petition is premature and it is accordingly dismissed at the admission stage. However, we leave it open to the petitioner-company to file its objections to the show cause notice within ten days from today taking all pleas open to it in law including the pleas raised in this writ petition. If such an application is filed within the period specified above, the first respondent shall consider the same and pass appropriate orders in accordance with law. Subject to the above observation the writ petition is dismissed.

Writ petition dismissed.