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Andhra Pradesh High Court
Judges : C.SRIRAMULU, P.CHENNAKESAVA REDDY
Nandanam Construction Company - Appellant
Versus
Assistant Commissioner (Intelligence) No.IV, Hyderabad - Respondent
Decided On : 08-24-82
SECTION 6-A OF ANDHRA PRADESH GENERAL SALES TAX ACT, 1957 - SCOPE AND AMBIT - CONSTITUTIONAL VALIDITY - CONDITIONS FOR INVOKING THE PROVISIONS OF SECTION 6-A - INTERPRETATION OF CLAUSE (A) OF SUB-SECTION (II) OF SECTION 6-A - WHETHER THE GOODS PURCHASED ARE CONSUMED IN THE MANUFACTURE OF OTHER GOODS FOR SALE OR OTHERWISE - MEANING OF 'CONSUMED' - CONFLICTING DECISIONS OF THE SUPREME COURT - DOCTRINE OF PRECEDENTS - APPLICATION OF THE LATER DECISION.
Fact of the Case:
The petitioners, a partnership firm, are builders of ownership flats in Hyderabad. They purchase building materials such as sand, bricks, granite, and metal from persons other than registered dealers. The Assistant Commissioner of Commercial Taxes issued a notice to the petitioners to appear before him with all their accounts relating to the purchase of raw materials effected by them commencing from 1/04/1977. The petitioners challenged the jurisdiction of the respondent-Assistant Commissioner to assess them under the Act.
Finding of the Court:
The court held that the petitioners are 'dealers' within the meaning of section 2(1)(e) of the Act, as they purchase building materials such as bricks, granite, etc., from unregistered dealers in connection with their main business of construction and sale of flats. However, the court held that the petitioners are not liable to tax under section 6-A(ii)(a) of the Act as the goods purchased are not consumed in the manufacture of other goods for sale. The court relied on the Supreme Court decision in Pio Food Packers [1980] 46 STC 63 (SC) and held that to attract the provisions of section 6-A(ii)(a), there must be consumption of the original goods for the purpose of manufacture.
Issues: 1. Whether the petitioners are 'dealers' within the meaning of section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, 1957? 2. Whether the petitioners are liable to tax under section 6-A(ii)(a) of the Act?
Ratio Decidendi: 1. The court held that the petitioners are 'dealers' within the meaning of section 2(1)(e) of the Act, as they purchase building materials such as bricks, granite, etc., from unregistered dealers in connection with their main business of construction and sale of flats. The court relied on the definition of 'dealer' in section 2(1)(e) read with section 2(1)(bbb)(ii) of the Act, which includes 'any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern'. 2. The court held that the petitioners are not liable to tax under section 6-A(ii)(a) of the Act as the goods purchased are not consumed in the manufacture of other goods for sale. The court relied on the Supreme Court decision in Pio Food Packers [1980] 46 STC 63 (SC) and held that to attract the provisions of section 6-A(ii)(a), there must be consumption of the original goods for the purpose of manufacture.
Final Decision: The writ petitions were allowed, and the notices issued to the petitioners were quashed. The court declined to grant leave to appeal to the Supreme Court as it found that no substantial question of law of general importance which requires to be decided by the Supreme Court is involved in these cases.
( 1 ) IN these writ petitions, the constitutional validity as well as the scope and ambit of section 6-A of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the Act"), fall for consideration.
( 2 ) THE facts and circumstances giving rise to the question in one of the cases may be broadly stated to get a proper perspective of the question. We shall take up the facts in W. P. No. 2036 of 1982.
( 3 ) THE petitioners, M/s. Nandanam Construction Company, are a partnership firm. They are builders of ownership flats in Hyderabad. They buy building materials such as sand, bricks, granite and metal from persons other than registered dealers. Iron, steel, cement, hardware goods, timber, electrical goods, etc. , purchased from registered dealers have suffered tax at the first sale, while the purchases of building materials such as sand, bricks, etc. , from unregistered dealers have not suffered tax.
( 4 ) WHILE so, the Assistant Commissioner of Commercial Taxes, Enforcement, issued a notice to the petitioners on 19/01/1982, to appear before him with all their accounts relating to purchase of raw materials effected by them commencing from 1/04/1977. The petitioners sent a reply to the Assistant Commissioner on 2/02/1982, informing him that they do not trade in any goods but they construct and sell flats, that they are not registered dealers and that section 6-A of the Act cannot be invoked to assess the petitioners under the Act. After receipt of the reply, the Assistant Commissioner issued a notice on 16/03/1982, under section 28 of the Act directing the petitioners to file the details relating to purchase of raw materials effected by them for the period commencing from 1/04/1977 and also to produce all books of account and purchase bills for the above period on 22/03/1982. Summons in form IX for production of accounts and purchase invoices on the aforesaid date for the years 1977-78 to 1980-81 as prescribed under rule 56 of the A. P. G. S. T. Rules, 1957, were also enclosed and the petitioners were threatened with launching of prosecution for failure to comply with the summons. Aggrieved against the said notice and the threat of prosecution for failure to comply with the summons, the petitioners have approached this Court under article 226 of the Constitution of India questioning the jurisdiction of the respondent-Assistant Commissioner to assess the petitioners under the Act.
( 5 ) THE learned counsel for the petitioners, Mr. S. Dasaratharama Reddi, firstly submits that section 6-A of the Act makes an intentional discrimination between unregistered dealers or non-dealers and registered dealers. He complains that the intention of the legislature to check evasion of tax on transaction between unregistered dealers and registered dealers is not effectuated by the express language of the section and therefore the provisions of section 6-A are violative of article 14 of the Constitution.
( 6 ) THIS contention need not detain us long since the very same contention and already been considered and repelled by a Division Bench of this Court consisting of Alladi Kuppuswami, C. J. , and Seetharam Reddy, J. , in Hindustan Milkfood Manufacturers Ltd. v. State of Andhra Pradesh [1982] 51 STC 1. Seetharam Reddy, J. , speaking for the court observed :"the differential treatment of purchases from registered dealers and persons other than registered dealers is reasonable and has a rational relation to the object of taxation. It is well-settled that courts admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play of legislative discretion in the matter of classification in regard to tax legislation. "
( 7 ) WE entirely agree with the opinion of the learned Judges in that regard.
( 8 ) THEN there remains a more formidable contention that the conditions requisite for invoking the provisions of section 6-A of the Act to assess the petitioners are not satisfied. It is,
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