Transactions covered by section 5-E of the Andhra Pradesh General Sales Tax Act, 1957 are inter-State transactions falling within the ambit of section 3(a) of the Central Sales Tax Act, 1956.

The judgment of the Court was delivered by

M. N. RAO, J. - In this batch of six cases, the common question for consideration concern the application of section 5-E of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as "the Act") to the hire transaction of M/s. I.T.C. Classic Finance and Services Ltd., Secunderabad - the appellant in Spl. Appeal No. 1 of 1995 and the petitioner in the other five write petitions. We are, therefore, inclined to dispose of all the six cases by this common judgment.

M/s. Classic Finance and Services Ltd. (hereinafter referred to as "the assessee") is a limited company incorporated under the Companies Act, 1956, with its registered office at 5/2, Russel Street and branch office at No. 31, Sarojini Devi Road, Secunderabad. The assessee is registered dealer under the Andhra Pradesh General Sales Tax Act and the Central Sales Tax Act. It ia a finance company. It hires machinery, plant and equipment to different parties for rent. It purchases goods according to the specifications of the customers and instructs the supplier/manufacturer to consign the goods directly to the customer, who takes the same on hire.

During the assessment year 1988-89, the total receipts of the assessee towards rentals received came to Rs. 1,23,48,118 and in respect of the entire turnover, the assessee claimed exemption on the ground that the same was not exigible to tax under section 5-E of the Act since such an assessment would be violative of the provisions of article 286 of the Constitution of India read with section 4 of the Central Sales Tax Act and section 38 of the Act relying upon the ruling of the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370. The assessing authority-the Commercial Tax Officer, S.D. Road Circle, Secunderabad-rejected the claim of the assessee on the view that "the dealer received the lease amounts as against outside assets leased out in Andhra Pradesh. The assets received from outside the State did not suffer tax under the APGST Act. Hence their claim of exemption is not considered". After giving exemption to a turnover of Rs. 83,28,954, which represented local purchases from registered dealers, the assessing authority brought to tax the balance of the turnover of Rs. 40,19,164. The entire turnover subjected to tax represent rentals received and receivable by the assessee against assets purchased from outside the State of Andhra Pradesh and leased out in the State of Andhra Pradesh. This turnover was classified under two heads by the assessing authority : (i) rentals receivable and received against the asset purchased outside the State and leased out in Andhra Pradesh (collected at Hyderabad); and (ii) rentals received against the assets moved from outside the State and leased out in Andhra Pradesh.

Aggrieved by that, the assessee carried the matter in appeal to the Appellate Deputy Commissioner, Commercial Taxes, who, by his order dated April 27, 1994, in Appeal No. B/57/93-94, relying upon the decisions of the Supreme Court in Builders Association of India [1989] 73 STC 370 and Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 accepted the contentions raised on behalf of the assessee that the goods have been purchased from outside the State in pursuance of a completed contract of lease and the goods have directly moved from outside the State to the lessee and granted relief in respect of a turnover of Rs. 26,78,987 in regard to which "the authorised representative placed evidence" and dismissed the appeal in respect of the balance of the turnover - Rs. 9,89,702 for which no evidence could be produced.

The Commissioner of Commercial Taxes felt that the view taken by the Appellate Deputy Commissioner "was prejudicial to the interests of the Revenue" in the light of the judgment of the Bombay High Court in 20th Century Finance Corporation Limited v. State of Maharashtra [1989] 75 STC 217. A show cause notice was, therefo