A manufacturer is entitled to set-off tax on turnover if the only raw material used falls under the specified government order relating to it.

THE HON’BLE SRI JUSTICE P.SAM KOSHY AND THE HON’BLE SRI JUSTICE SUDDALA CHALAPATHI RAO TREVC.No.202 of 2009 O R D E R: (Per the Hon’ble Sri Justice Suddala Chalapathi Rao)

The present Tax Revision Case is filed assailing the orders of the Sales Tax Appellate Tribunal, Hyderabad(AP) (for short ‘the STAT’), in TA.No.12 of 2008, dt.05.05.2009.

2. Heard Sri T.Chaitanya Kiran, learned Assistant Government Pleader for State Tax appearing for the petitioner/Revenue. None appeared for the respondent/assessee, though notices were served.

3. The brief facts of the case are that, the respondent/assessee is the Dealer on the Rolls of the Commercial Tax Officer, Suryapet; that the respondent/assessee is the manufacturer of Thermocole sheets. Though the respondent/assessee entitled for setoff under G.O.Ms.No.574, dt.09.06.1987, issued under the provisions of APGST Act , (for short ‘the Act’) on the turnover of ‘Thermocole’, the assessing authority vide its order, dt.27.05.2002 denied setoff. Aggrieved by the same, the respondent/assessee filed an appeal before the Appellate Deputy Commissioner(CT), Hyderabad Rural Division, Hyderabad vide Appeal No.N/207/2002-2003. The said authority vide its order dt.21.12.2002 allowed the appeal filed by the respondent/assessee, however, the Additional Commissioner(CT)(Legal), revised the said order passed by the Appellate Deputy Commissioner(CT), Hyderabad, Rural Division, holding that the respondent/assessee is not entitled for setoff on the turnover under G.O.Ms.No.574, dt.09.06.1987, confirming the order of assessment passed by the Assessing Authority i.e., Commercial Tax Officer, Suryapet, dt.27.05.2002.

4. The respondent/assessee assailing the orders passed by the Additional Commissioner (CT) (Legal) vide CCT’s Ref.L.III(f)/2231/2004, dt.10.10.2006, filed appeal before the STAT, AP., Hyderabad in TA.No.12 of 2008, by raising the following substantial questions of law:

“1. Whether the assessee is eligible to avail the benefit of setoff under G.O.Ms.No.574, dt.09.06.1987?

2. Whether G.O.Ms.No.574, dt.09.06.1987 is applicable for the commodity ‘Thermocole’, which falls under VII Schedule of the Act?”

5. The main contention of the respondent/assessee is that, it is a manufacturer of ‘Thermocole sheets’ and it had purchased raw-

material ‘polystyrene’ from registered dealers and manufactured finished product ‘Thermocole sheet’, and as ‘polystyrene’ is the only raw-material used in the manufacture of ‘Thermocole’, the respondent/assessee was eligible for setoff of tax on the turnover in pursuance of G.O.Ms.No.574, dt.09.06.1987.

6. It is further contended that the Additional Commissioner of Commercial Taxes, AP., Hyderabad, without considering the same, under erroneous views and facts revised the orders passed by the Appellate Deputy Commissioner(CT), Hyderabad, only on the ground that the respondent/assessee never claimed setoff for any of the previous assessment years and the respondent/assessee has not filed any evidence to show that except polystyrene, no other material was used in the manufacturing process.

7. The learned STAT, which is the fact finding appellate authority, by appreciating the factual issues of manufacturing of Thermocole, held that ‘polystyrene’ is the only raw-material used in the manufacture of ‘Thermocole’ and as the said raw-material was purchased from the registered dealers, the respondent/assessee was entitled to set-off under the GO.Ms.No.574, dt.09.05.1987, and thus, allowed the underlying appeal, thereby directing the Assessing Authority to grant set-off on the turnover to the respondent/assessee under G.O.Ms.No.574, dt.09.06.1987.

8. Aggrieved thereby, the present Tax Revision Case is preferred by the petitioner/Revenue

9. Learned Assistant Government Ple