Paperboards Ltd. & Anr Vs. The Government of Andhra Pradesh & Ors
 INSC 383 (4
Bharucha, K. Venkataswami K. Venkataswami, J.
appellants moved the High Court of Andhra Pradesh under Article 226 of the
Constitution of India for the issuance of a Writ of Mandamus to declare the
action of the respondents in demanding and collecting sales tax from them on
the royalty and extraction charges paid for the supply of bamboo and hardwood
to them from the forest for the period 1978-79 onwards as illegal, hull and
void and for a consequential relief of refund of the taxes so collected from
admitted facts are that the appellants entered into an agreement on 27.3.1978
with the State Government for supply of bamboo and hardwood from the Government
forest on certain terms and conditions. The Sales Tax Department demanded and
collected sales tax upon the value of the bamboo and hardwood removed by the
appellants from the forest. Under the State sales Tax Act, during the relevant
period the commodity (bamboo and hardwood) was exigible to tax at the first
sale and as such the forest Department, who was a dealer, was liable to pay the
sales tax. However, under the agreement mentioned above, the appellants
undertook to reimburse the Forest Department the amount of sales tax payable on
the supply of bamboo and hardwood. Both the appellants and the Revenue were
under a mistaken impression that the supply of bamboo and hardwood from the
Government forest under an agreement was exigible to tax.
Co. Ltd. & Anr., etc. [1985 (suppl.) SCC 280] held that such supply of
bamboo from the Government forest was not exigible to tax. It was on that basis
the appellants moved the High Court for the relief set out above.
High Court by the judgment under appeal held that no sales tax was payable by
the appellants on the royalty and extraction charges payable by them under the
Agreement entered into with the State for supply of bamboo and hardwood with
effect from 1.11.85. However, the High Court declined to grant the refund of
sales tax already collected for the period 27.3.78 to 31.10.85. The High Court,
for denying the refund, was of the view that the manufacturer (appellants) is
presumed to have passed on the burden of tax to the consumer unless there are
clear allegations and proof to the contrary. In the absence of such allegations
and proof, the appellants must be deemed to have passed on the burden of tax to
the consumers, which would disentitle them from seeking refund of the sales tax
by the judgment of the High Court denying the relief of refund, the present
appeal has been filed by the appellants.
learned counsel appearing for the appellants submitted that the High Court was
not right in presuming that the appellants must have passed on the burden of
tax to the consumers. He invited our attention to the case of the respondents
advanced before the High Court. The High Court has observed thus:- "He
(the Government Pleader) submits that in the case of this petitioner the demand
is not upon the petitioner upon the Forest Department as seller of the goods.
submits that according to the definition of the dealer, the Forest Department
is also a dealer.
submits that both bamboo and hardwood are placed in the first schedule to the
A.P. General Sales Tax Act which means that the tax is payable at the point of
first sale in the State." In the the light of the above case of the
Revenue as put forward before the High Court, it is the contention of the
learned counsel for the appellants that the question of passing on the tax
burden to the consumers would not arise in this case. According to the learned
counsel, in view of the above stand taken by the Revenue before the High Court
the relief of refund ought to have been allowed.
Ram Kumar, learned counsel appearing for the respondents, placing reliance on
the judgment of this court [(1997) 5 SCC 536] submitted that unless the
appellants moved the appropriate forum to set aside the assessments already
made for collecting the sales tax, the question of refund will not arise. In
any case, learned counsel submitted that the refund cannot be ordered for more
than three years preceding the filing of the writ petition.
have seen that the appellants sought a declaration that the tax demanded and
collected on the transactions in question for the period from 1978-79 onwards
was illegal, null and void. The High Court in the light of the decision of this
court in Titaghur Paper Mills Co. Ltd. (supra), held that the transactions in
question were not exigible to tax.
refund was, however, denied on the ground that the appellants must be deemed to
have passed on the liability to the consumer.
find that the High Court was not right in so presuming in the light of the case
put forward by the Government pleader as extracted above. The appellants have reumbursed
a tax liability which was on the Forest Department and the appellants have
consumed the goods for manufacturing paper boards, etc. Therefore, the question
of the appellants passing on the tax liability to the consumer, on the facts of
this case, would not arise. Consequently, the appellants are entitled for
refund of the tax collected from them, not for the entire period but for the
period commencing three years prior to the date of filling of the Writ
appeal is accordingly allowed with no order as to costs.