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G. Ramanujulu Naidu, Y. Bhaskara Rao, JJ.
DELUX WINES
Versus
STATE OF ANDHRA PRADESH.
Writ Petition Nos. 14730, 15973, 15972, 15299, 15307, 15311, 15974, 15975, 15976, 15981 and 18364 of 1988
Decided On: 31-03-1990
SALES TAX - Andhra Pradesh General Sales Tax Act, 1957 - Section 2(1)(s)(ii) and 14-B - Vires, scope and ambit - Retrospective effect - Levy of tax on turnover determined on the basis of prevailing market prices - Validity - Whether violative of Articles 14, 19(1)(g) and 301 of the Constitution of India.
Fact of the Case:
The petitioners, dealers in Indian made foreign liquor, challenged the show cause notices issued by the Commercial Tax Officer proposing to reopen the assessment for the assessment year 1985-86 and determining the alleged escaped turnover at Rs. 38,77,207. The petitioners contended that sections 2(1)(s)(ii) and 14-B of the Andhra Pradesh General Sales Tax Act, 1957, which enabled the assessing authorities to reassess the turnover submitted by a dealer where prices charged by the dealer were found to be abnormally low compared to the prevailing market prices, were substantive provisions which affected the vested rights of the assesses and were, therefore, prospective in their operation and effective from 1st July, 1985, the date when they were brought into the statute book.
Finding of the Court:
The Court held that sections 2(1)(s)(ii) and 14-B of the Andhra Pradesh General Sales Tax Act, 1957, as incorporated by the Amendment Act 18 of 1985, were only prospective and the transactions relatable to the period prior to 1st July, 1985, could not be assessed or reassessed or revised by the Commercial Tax authorities by invoking section 14-B of the Act on the ground that prices charged by the assessees were less than the prevailing market prices of the goods charged by the other dealers. The Court also declared that section 2(1)(s)(ii) and section 14-B of the Andhra Pradesh General Sales Tax Act, 1957, as incorporated by the Amendment Act 18 of 1985, must be read down by not giving effect to the said provisions until and unless the legislature prescribes guidelines for exercising the power conferred thereunder and defines the expressions "prevailing market prices" and "abnormally low" occurring in section 14-B of the Act.
Issues: 1. Whether sections 2(1)(s)(ii) and 14-B of the Andhra Pradesh General Sales Tax Act, 1957, were retrospective in operation and could be applied to transactions prior to 1st July, 1985? 2. Whether sections 2(1)(s)(ii) and 14-B of the Andhra Pradesh General Sales Tax Act, 1957, were violative of Articles 14, 19(1)(g) and 301 of the Constitution of India?
Ratio Decidendi: 1. Substantive provisions affecting the vested rights of the assesses can only be given prospective effect unless the legislature expressly or by implication intended otherwise. 2. Sections 2(1)(s)(ii) and 14-B of the Andhra Pradesh General Sales Tax Act, 1957, were substantive in nature and could be involved only in respect of the transactions relatable to the period subsequent to 1st July, 1985 and not for the period anterior thereto. 3. The expressions "prevailing market prices" and "abnormally low" employed in section 14-B(1) of the Act were so vague and uncertain that there was abundant scope for abuse of the power conferred thereunder by the assessing authority. 4. Sections 2(1)(s)(ii) and 14-B(1) of the Act, if literally construed, tended to be violative of articles 14, 19(1)(g) and 301 of the Constitution of India and the two provisions were therefore liable to be struck down.
Final Decision: The impugned notices issued by the respondent-authorities in all the writ petitions were quashed and the respondent-authorities were restrained from reopening the the assessments on the ground of variation between the prices charged by the assessees and the alleged prevailing market prices. The writ petitions were accordingly allowed.
The judgment of the Court was delivered by
G. RAMANUJULU NAIDU, J. - As common questions of law are involved in this batch of writ petitions, the same can be disposed of together. The main question that arises for consideration in the batch of writ petitions is - the vires, scope and ambit of section 2(1)(s)(ii) and section 14-B of the Andhra Pradesh General Sales Tax, 1957, hereinafter referred to as "the Act".
The petitioners in all the writ petitions are dealers carrying on the business in the products of Indian made foreign liquor. W.P. No. 14730 of 1988 relates to the assessment year 1984-85. W.P. No. 15973 of 1988 relates to the assessment year 1983-84. W.P. No. 15972 of 1988 relates to the assessment years 1983-84 and 1984-85. W.P. No. 15299 of 1988 relates to the assessment year 1985-86. W.P. No. 15307 of 1988 relates to the assessment year 1985-86. W.P. No. 15311 of 1988 relates to the assessment year 1985-86. W.P. No. 15974 of 1988 relates to the assessment years 1984-85 and 1985-86. W.P. No. 15975 of 1988 relates to the the assessment years 1984-85 and 1985-86. W.P. No. 15975 of 1988 relates to the assessment years 1984-85 and 1985-86. W.P. No. 15976 of 1988 relates to the assessment years 1984-85 and 1985-86. W.P. No. 15981 and 1988 relates to the assessment year 1985-86. W.P. No. 18364 of 1988 relates to the assessment year 1985-86.
As facts in all the cases are almost identical, we take up for consideration the facts in Writ Petition No. 18364 of 1988.
Writ Petition No. 18364 of 1988 is filed by M/s. Vinayaka Wines, Nellore, a firm engaged in the business of distribution of I.M.F.L. (Indian made foreign Liquor) products of McDowell Company Limited at Nellore assailing the show cause notice dated 10th October, 1988, issued under section 14(4) read with section 14-B of the Act by the Commercial Tax Officer-II, Nellore, proposing to reopen the assessment made for the assessment year 1985-86 and determining the alleged escaped turnover at Rs. 38,77,207. For the said assessment year, the assessee returned a net turnover of Rs. 1,67,14,347 and claimed exemption on a turnover of Rs. 2,85,08,541. Completing the assessment, the Commercial Tax Officer-II, Nellore, by his order dated 12th May, 1987, determined the net turnover at Rs. 1,83,40,949, after due verification of the books of accounts of the assessee maintained in the regular course of business. While so, the impugned notice was issued alleging that the prices charged by the petitioner for his products were low when compared to the prevailing market prices charged by other dealers in the market for similar products and that no dealer would sell fast moving liquor at lesser value when the market value was high. So alleging, the Commercial Tax Officer-II, Nellore, proposed to determine the difference between the sale price charged by the petitioner and the alleged prevailing market price charged by similarly placed dealers as "escaped turnover" and proposed to assess the same to sales tax. The alleged escaped turnover was accordingly determined at Rs. 38,77,207. From the statement enclosed to the show cause notice, it is evident that the Commercial Tax Officer adopted the rates charged by M/s. Deluxe Wines and Sreerama Wine Corporation, two other dealers carrying on the same business at Hyderabad, as the prevailing market prices and determined the difference between the prices charged by the said dealers and the prices charged by the petitioner, as escaped turnover.
Indian made foreign liquor is taxable under section 5(2)(d) read with the Sixth Schedule to the Act, which reads as follows :
"SIXTH SCHEDULE
Goods in respect of which tax is livable under section 5(2)(d)
(added by Act No. 11 of 1984, with effect from 8-7-1983).
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Sl. Description Point of levy Rate of tax
No. of goods
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