M/S.
Shakthi Seeds Pvt. Ltd. Vs. Dy. Commnr. (Ct) & Anr. [2007] Insc 672 (30 May 2007)
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH
PANTA
Dr. ARIJIT PASAYAT, J.
1. Challenge in this appeal is to the
judgment of a Division Bench of the Andhra Pradesh High Court dismissing the
Revision Petition filed by the appellant under Section 22(1) of the Andhra
Pradesh General Sales Tax Act, 1957 (in short the 'Act'). Before the High Court
challenge was to the order passed by the Sales Tax Appellate Tribunal, Andhra
Pradesh (in short the 'Tribunal').
2. Background facts in a nutshell are
as follows:
M/s. Shakthi Seeds (P) Ltd., the
appellant herein, is a private limited company and they are dealers in
agricultural seeds, chillies, paddy, sun-flower and other crops. It is an
assessee and a registered dealer under the Act. The Commercial Tax Officer,
Hyderguda Circle, Hyderabad, framed final assessment orders in respect of the
turnovers for the assessment year 1992-93 granting benefit of G.O.Ms. No. 604,
Rev (S), dated 9.4.1981 and G.O.Ms. No. 129 Rev(CT II), dated 14.2.1989.
However, the Deputy Commissioner (CT), Abids Division, Hyderabad, on scrutiny of
the assessment finalised by the Commercial Tax Officer vide his proceedings
dated 16.12.1993 noticed that the appellant after purchasing chillies, paddy and
sun-flower from unregistered dealers, sold those goods as "certified and
truthfully labelled seeds" and on that basis claimed exemption in terms of
G.O.No. 604 Revenue (S), dated 9.4.1981. He, therefore, proceeded to revise the
assessment order and proposed tax on those items as the appellant effected
purchase from unregistered dealers and therefore they are liable to tax as first
purchasers within the State of Andhra Pradesh. Before the Deputy Commissioner
(CT), the appellant contended that they are entitled to exemption in terms of
G.O.Ms. No 604 dated 9.4.1981 treating the seeds as truthfully labelled and
certified seeds. In support of their contention, they have also placed reliance
on the decision in the case of Gururaj Seeds (P) Ltd., v. State of Andhra
Pradesh & Ors. (18 APSTJ 46). The Deputy Commissioner (CT), disallowed the claim
of the appellant and revised the assessment order framed by the Commercial Tax
Officer, Hyderguda, Hyderabad. Then the matter was carried before the Tribunal
by the appellant. The Tribunal opining that in order to claim exemption in terms
of G.O.Ms. No 604 dated 9.4.1981, the claimant should establish and prove that
the seeds in question are certified seeds as well as truthfully labelled seeds
and that the appellant-dealer has failed to adduce any satisfactory material and
evidence to establish these two conditions for grant of exemption in terms of
G.O.Ms. No. 604, dismissed the appeal by its order dated 13.3.2000. The order of
the Tribunal was challenged before the High Court by a revision petition on the
ground that view taken by the Tribunal that both the conditions should co-exist
for getting exemption under G.O.Ms. No. 604 is on a misreading of the G.O.Ms.
Tribunal's view completely ignores the clarification issued by the Government
vide its Memorandum No. 13630/CT-II(2)/89-19, dated 26.4.1994.
By the said office Memorandum, the
Government had directed the Commercial Tax Departmental Authorities to note that
both the certified seeds and/or truthfully labelled seeds are entitled for
exemption from tax in terms of GOMs. No. 604 dated 9.4.1981. In that context, it
was submitted that the department could not have required the appellant-dealer
to produce evidence as regards accuracy or veracity of the declaration regarding
the labelling.
3. In support of the appeal, learned
counsel for the appellant reiterated its stand before the High Court.
4. Learned counsel for the respondent
on the other hand supported the findings of the authorities, Tribunal and the
High Court.
5. The reasoning of the Tribunal
related to certified and truthfully labelled seeds reads as follows:
"Regarding treatment with fungicides,
it has to be stated that not all fungicides treated are certified and truthfully
labelled seeds.
Because, even ordinary and high
quality pure seeds are also treated with fungicides by some persons to prevent
loss of seeds and future seedlings from such seeds because of the fungal
infection of the said seeds of the seeding purpose. Besides there is prohibition
to use the said treated seeds for edible purpose also after certain periods
after which there is no residual effect of such fungicides."
6. In reply to the show cause notice
issued the appellant had clarified its stand as follows:
"In this regard, we would like to
bring to your kind notice, that we have purchased processed chilli seed, Paddy
seed and Sunflower seed from farmers, and not chillies, paddy or sunflower
commodities. The above cited seeds namely Chillis seed, paddy seed and Sunflower
seed have been processed, treated with fungicides and packed by us using packing
material and sold under our brand name of "Shakthi" as truthfully labelled
seeds.
Moreover the said seeds were meant for
agricultural purpose only and not for food, feed or oil purpose, since they were
treated with fungicides. All seeds are first purchased only from the farmers who
are unregistered dealers."
7. There was no consideration of these
aspects as apparently the High Court has lost sight of the substance of the
clarification.
8. The G.O.Ms. No. 604 dated 9.4.1981
reads as follows:
"In exercise of powers conferred by
sub-section (1) of Section 9 of the Andhra Pradesh General Sales Tax Act, 1957 (A.P.
Act 6 of 1957) the Governor of Andhra Pradesh hereby exempts from the Tax
payable under the said Act the sales or purchases of all varieties of certified
and truthfully labelled seeds for agricultural purposes.
Sales of certified and truthfully
labelled seeds in the course of inter-State trade of Commerce Exemption from
CST".
9. The Clarification Memorandum No.
13630/CT-II(2)/89- 19 dated 26.4.1994 reads as follows:
"In the G.O.Ms. No. 604 Revenue (s)
Department dated 9.4.81, the Government issued orders exempting from the tax
payable under the A.P.G.S.T.Act the Sales or Purchases of all varieties of
certified and truthfully labelled seeds for agricultural purposes. In the
G.O.second read above, a similar order was issued under the C.S.T. Act in
respect of the above goods sold in the course of interstate trade also.
The A.P. Seed Growers Merchants and
Nurserymen Association, Hyderabad, National Seeds Corporation, New Delhi and
Peddireddy Thimmaredy Farm Foundation, Hyderabad have now represented to the
Government that even though the exemption granted in the above G.Os. are
applicable to both the categories of seeds viz. certified seeds and or
truthfully labelled seeds some of the assessing authorities are insisting that
the seeds should be certified as well as truthfully labelled to become eligible
for grant of exemption. Hence they requested the Government to issue
clarification in the matter to remove the ambiguity.
The Government has examined the matter
in consultation with the Agriculture and Co-operation Department and they hereby
clarify that both "certified seeds and/or truthfully labelled seeds" are exempt
from tax as per the orders issued in G.O.Ms. No. 604 Revenue (s) Department
dated 9.4.81 and G.O.Ms. No. 129 Revenue (CT-II) Department dated 14.2.89 as
they are two types of seeds sold for Agricultural purposes."
10. Rule 7 of the Seeds Rules, 1968
(in short the 'Rules') reads as follows:
"Rule 7. Responsibility for marking or
labeling When seed of a notified kind or variety is offered for sale under
Sec.7 each container shall be marked or labelled in the manner hereinafter
specified. The person whose name appears on the mark or label shall be
responsible for the accuracy of the information required to appear on the mark
or label so long as seed is contained in the unopened original container:
Provided, however, that such person
shall not be responsible for the accuracy of the statement appearing on the mark
or label if the seed is removed from the original unopened container, or he
shall not be responsible for the accuracy of the germination statement beyond
the date of validity indicated on the mark or label".
11. The Clarification Memorandum dated
26.4.1994 clarified that two alternatives are available i.e. either certified or
truthfully labelled. 'Certified seeds' is defined in Section 9 of the Seeds Act,
1966 (in short the 'Seeds Act'). Reference in this context also may be made to
the Rule 2(e) of the Rules dealing with certified seeds.
12. Learned counsel for the appellant
conceded that there was no claim by the appellant about sale of certified seeds.
Rule 7 deals with marking or labelling.
13. It appears that Tribunal proceeded
on the basis that the seeds were required to be certified and truthfully
labelled for the purpose of eligibility for exemption. In reality, as clearly
stated in the clarificatory memorandum they are alternatives.
14. The High Court also proceeded on
the same basis overlooking the clarificatory memorandum
15. In the circumstances, it would be
appropriate for the Tribunal to examine the factual aspect, keeping in view the
clarificatory memorandum providing alternatives. The parties shall be free to
lead fresh evidence. The appellant shall produce evidence to show that the seeds
were truthfully labelled. It cannot be said that the authorities cannot require
the dealer to satisfy the requirement that the seeds were truthfully labelled.
There is no such blanket protection. In order to be satisfied about the
acceptability of the claim, they can require the assessee to justify the claim
and that it is entitled to the exemption.
16. The appeal is accordingly allowed
with no orders as to costs.
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