State
of Andhra Pradesh & Anr Vs. M/S Concap Capacitors,Balanagar, Hyderabad &
Ors [2007] Insc 1081 (12 October 2007)
C.K.
Thakker & Altamas Kabir
ARISING
OUT OF SPECIAL LEAVE PETITION (C) NO. 13207 OF 2006 C.K. THAKKER, J.
1.
Leave granted.
2.
This appeal is filed by the State of Andhra Pradesh & Anr.
(Revenue for short) against common judgment and order dated August 31, 2005 in several Revisions. By the
impugned order, the High Court allowed Tax Revision Cases (TRC) filed by
manufacturers, dealers and traders (assessee for short) and held that
Capacitors is one of the items of electronic goods or
components, taxable at a concessional rate of tax under the Andhra Pradesh
General Sales Tax Act, 1957 (hereinafter referred to as the State
Act) as also under the Central Sales Tax Act, 1956 (hereinafter referred
to as the Central Act).
3. To
appreciate the issue raised by the Revenue, few relevant facts may be stated.
4. The
respondents in this appeal are manufacturers, dealers or traders of electronic
goods, components and materials. They are duly registered under the State Act
as well as Central Act. Their claim was that Capacitors, manufactured by them,
was exigible to tax at a concessional rate as electronic goods in
terms of various Government Orders issued from time to time and not as
electric goods subject to higher tax. It was their case that the
Assessing Authorities had taken conflicting views in different cases. In some
cases, while making assessment orders, they accepted the case of
manufacturers/dealers/traders treating Capacitors as electronic goods
and levied concessional rate of tax; while in other cases, the Assessing
Authorities negatived such claim as to concessional rate of tax and ordered to
levy Capacitors as electric goods. Where the Assessing Authorities
had decided against the assessee, the assessee challenged the action before the
Tribunal and where the issue was decided by the Authorities in favour of assessee,
the Revenue had challenged such decision. All the matters were, therefore,
placed before the Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad. The Tribunal considered the rival
contentions of the parties as also provisions of the State Act and Central Act
and various G.O.Ms. and observed that the item in question i.e. Capacitors did
not operate on electronic principle and could not be considered as
electronic goods or component for the purpose of concessional rate of
tax. It, therefore, remanded the cases to the Assessing Authorities to pass
fresh assessment orders giving opportunity to the assessee to produce any
material to show that they sold Capacitors which could be said to be
electronic goods.
5.
Being aggrieved by the orders passed by the Tribunal, the assessee approached
the High Court of Andhra Pradesh by filing Revisions. The High Court, on
consideration of relevant provisions of law as also various G.O.Ms. and
referring to several decisions, held that from the relevant material, it was
clearly established that Capacitors would fall under the category of
electronic goods and the Tribunal was wrong in upholding the
contention of Revenue that the item could not be said to be electronic goods.
The High Court also held that in G.O.Ms. issued by the Revenue from time to
time, various items were expressly specified and Capacitors was one of them. In
view of specific mention of the item, the Revenue was bound to grant benefit to
the assessee of concessional rate of tax and the Tribunal was not justified in
considering the question on the basis of operating principle.
The
said process could have been undertaken by the Tribunal had there not been a
specific mention of the item and the question was required to be decided on
general principle and practice. But once there was a list of electronic items
prepared by the Electronic Commission and G.O.Ms. referred to those items
wherein Capacitors was included, only thing the Tribunal required to
do was to ascertain whether the item found place in the list or not. Once the
item is included in the list, no further inquiry could have been undertaken.
Accordingly,
all Revisions were allowed and the issue was answered in favour of the assessee.
6. The
Revenue has challenged in this Court the decision of the High Court. On July 31, 2006 delay was condoned and notice was
issued. Affidavits in reply and rejoinder were thereafter filed and the matters
were placed for final disposal.
7. We
have heard learned counsel for the parties.
8. The
learned counsel for the Revenue challenged the decision of the High Court. He
submitted that the High Court was not at all justified in interfering with the
order passed by the Tribunal. He urged that a finding of fact was recorded by
the Tribunal which was final and could not have been interfered with
by the High Court in Revisions. It was also submitted that the Tribunal, in any
case, had remanded the matter and it was thus not a final order which
could have been disturbed by the High Court. If the assessee was in a position
to convince the Authorities that he was entitled to concessional rate of tax,
the Authorities would have decided the case in his favour. The High Court was,
therefore, not right in entertaining and allowing Revisions.
The
counsel submitted that where a particular item is subject to payment of tax and
the case of the assessee is that he is not liable to pay tax or is liable to
pay tax at a concessional rate, the burden is on him to establish such case as
it is an exception to the general rule.
Such
provisions of lawprimary or delegated must be construed strictly. It was also
argued that the Tribunal was wholly justified in considering the question on
operating principle. The Tribunal noted that so far as
Capacitors is concerned, it did not operate as electronic
goods but as electric goods.
Such
approach which was real and practical, could not have been objected by the assessee
and the High Court could not have commented the basis on which the Tribunal
proceeded to consider the matter. Finally, it was submitted that in certain
cases, assessee (manufacturers/ dealers/distributors/traders) had collected the
amount of tax at higher rates from the customers. Thus, on the one hand, the assessee
contended that the item was subject to payment of concessional rate of tax and
on the other hand, it collected the tax at higher rate from customers. The assessee
thus would retain the amount collected from customers towards tax.
This
cannot be allowed to be done as it would amount to unjust enrichment
by the assessee.
To
that extent, therefore, in any case, the assessee is liable to pay the amount
to the Revenue. On all these grounds, it was submitted that the appeals deserve
to be allowed by setting aside the order passed by the High Court and by
restoring the order of the Tribunal.
9.
Learned counsel for the assessee, on the other hand, supported the order passed
by the High Court. It was submitted that no error of law can be said to have
been committed by the High Court in deciding the matters and these are not fit
cases to entertain appeals under the discretionary jurisdiction of this Court
under Article 136 of the Constitution. It was also submitted that it was clear
from the provisions of law that Capacitors could be said to be
electronic goods and subject to payment of tax at a concessional rate.
In several cases, such view was taken by the Assessing Authorities. Since in
some cases, a different view was struck, G.O.Ms. were required to be issued by
the Authorities. Such amendments / instructions / communications were
declaratory in nature and obviously, therefore, they were applicable with
retrospective effect; i.e. not only to transactions subsequent to the issue of
notification but even to prior transactions. Capacitors, hence, must
be treated as an item covered by the entry electronic goods and
subject to payment of tax at a concessional rate. It was also submitted that concessional
rate has been granted on the item in question so as to ensure industrial growth
in the State. A provision which has been intended for a laudable object of
industrial development, must be liberally construed. And, even if two views are
possible, the view favourable to the assessee should be adopted. When the High
Court has taken such view, this Court may not interfere with it under Article
136 of the Constitution. It was also submitted that the High Court was wholly
justified in criticizing the approach adopted by the Tribunal. The High Court
was right in holding that operating principle or user test
would apply to those cases where there is no express mention of a particular
item in the notification or G.O.Ms. But once the item is specified in the list,
there should not be further inquiry and the assessee would be entitled to concessional
rate of tax on the basis of such entry. In the case on hand, several items were
specifically mentioned in various G.O.Ms. Capacitors, admittedly, was
one of them. In view of the said position, the Tribunal exceeded its
jurisdiction in applying operating principle or functioning
of the item and the High Court was right in criticizing it. The High Court was
also constrained to observe that though the point was concluded by a decision
of the High Court in earlier cases, the Tribunal sought to distinguish the said
decision on the grounds not permissible in law. The counsel, therefore,
submitted that no case has been made out by the Revenue to interfere with the
order of the High Court and the appeal deserves to be dismissed.
10. We
have given anxious consideration to the rival contentions of the parties. The
question which is raised before us and which was raised before the Tribunal as
well as before the High Court was as to whether the item Capacitors
is electronic goods or electric goods. In this connection,
our attention was invited by the learned counsel for the parties to the
provisions of the State Act as also of the Central Act. The learned counsel for
the assessee also referred to G.O.Ms. No. 520, dated July 20, 1998, issued under the State Act and
G.O. Ms. No. 521 issued under the Central Act. The relevant part of G.O. Ms.
No. 520 reads thus:
(2)
For the purpose of this notification, the term electronic goods means
electronic systems, instruments, appliances, apparatus, equipment operating on
electronic principles and all types of electronic components, parts and
materials and includes
(i) consumer
electronics;
(ii) electronic
test and measuring instruments;
(iii) medical
electronic equipment,
(iv) electronic
analytical instruments;
(v) electronic
equipment / instruments for nuclear, geo-scientific and other special
applications;
(vi) electronic
process control equipment;
(vii) power
electronic equipment;
(viii)
electronic industrial automation and control equipment;
(ix) electronic
data processing systems and electronic office equipment;
(x) electronic
broadcasting equipment;
(xi) electronic
communication equipment and
(xii) electronic
aerospace and defence equipment
11.
G.O. Ms. No. 521 issued under Central Act is in pari materia to G.O. Ms. No.
520.
12. On
June 1, 1989, Memo No.23718/ CT.II.2/89 was issued by the Principal Secretary
to Government of Andhra Pradesh, Revenue (CT-II) Department, inviting the
attention of the Commissioner of Commercial Taxes to the reference cited in the
said Memo and informing him that the Government had decided that the list of
electronic items prepared by the Electronic Commission should be followed for
the purpose of concessional rate of tax on electronic goods ordered in G.O.Ms.Nos.
520 and 521. The Commissioner was requested to issue necessary instructions to
subordinate officers under Section 42A of the State Act.
13.
Pursuant to the above Memo, a Circular was issued by the Commissioner of
Commercial Taxes on July
13, 1989 which is also
relevant and reads thus:
Office
of the Commissioner of Commercial Taxes Andhra Pradesh: Hyderabad Dated
13.07.1989 Ref. A1/1240/88 M.V. NATARAJAN, I.A.S., COMMISSIONER OF COMMERCIAL
TAXES C I R C U L A R Sub : APGST Act & CST Act Reduction in the rate of
tax on Electronic goods Reg.
Ref:1. G.O.Ms.No. 520 Rev dt. 20.07.1988.
2. G.O.Ms.No.
521 Rev dt. 20.07.1988.
3.
Govt. Memo No.23718/CT.11.2./89 dated 01.06.1989 It is informed that vide G.O.s
first and second cited, Government were pleased to reduce the rate of tax to 2 paise
on Electronic goods with effect from 1.7.1988 mentioning a broad classification
of electronic goods such as Consumer Electronics, Electronic test and measuring
instruments, General Electronic Equipment etc.
Several
representations have been received from the dealers requesting to clarify the
specific items which falls under the classification, mentioned in the G.O.
first cited, a copy of the Government Memo, third cited is enclosed along with
a copy of the list prepared by the Electronic Commission duly authenticated.
2. The
Assessing authorities are requested to take action accordingly.
3.
This reference may please be acknowledged to next authority.
Sd/-
M.V. NATARAJAN COMMISSIONER OF COMMERCIAL TAXES (emphasis supplied)
14. A
list of electronic items prepared by the Electronic Commission was also produced
before the Tribunal as well as before the High Court and before us. Item
No.13.0 relates to Electronic Components under which at Item No.13.39
is shown Plastic Film Capacitors.
15.
Thus, from the above G.O.Ms. and Circular issued by the Commissioner, it is
clear that in pursuance of several representations received from Dealers
requesting to clarify the specific items falling under electronic
goods that the Classification Memo was issued by the Government and the
Circular by the Commissioner on the basis of the list prepared by the
Electronic Commission. The said list expressly contained an item
Capacitors. In view of specific reference to Capacitors, in
our opinion, the High Court was right in relying on the said item and in
holding that Capacitors could be said to be electronic
goods and was covered by a concessional rate of tax under the Act.
16.
The learned counsel for the assessee stated that on the basis of the list
prepared by Electronic Commission, concessional rate of tax was recovered on
items mentioned in the list. A similar question came up for consideration
before the High Court of Andhra Pradesh in State of Andhra Pradesh v. Amara
Raja Batteries, [1998 (111) STC 664 (AP)].
There,
the Court was concerned with NICD Batteries. The Court considered G.O.Ms. 520
and 521 and item No. 13.93 of the list (Other batteries) declared by
Electronic Commission and held that it was entitled to concessional rate of
tax.
17.
The Court observed:
Since
according to the list prepared by the Electronics Commission, the batteries are
electronic components and since the electronic components are one of the items
which are eligible for concessional rate of duty and since the clarification in
the list prepared by the Electronics Commission is treated as part of the G.O.
the batteries manufactured by the assessee are eligible for concessional rate
of duty under G.O. Ms. No. 520, Revenue dated July 20, 1988 and G.O. Ms. No.
521 Revenue dated July 20, 1988 issued under the A.P. General Sales Tax Act and
also Central Sales Tax Act.
18. It
appears that the Revenue challenged the decision of the High Court by filing
Civil Appeal Nos. 723-25 of 1999, but a three Judge Bench of this Court
dismissed them on March 21, 2001 observing that there was no good reason
to interfere with the order under appeal.
19.
Once again, the issue came up for consideration before the same Court in India
Extrusion v. Commission of Commercial Taxes, A.P., Hyderabad, (2001) 124 STC
474. In India Extrusion, the Court was considering the item of Cable
Joining Kits. Relying on G.O.Ms.Nos. 520 and 521 and taking recourse to
the list of electronic goods prepared by Electronic Commission, the High Court
held that it could be said to be electronic goods and was subject to
levy at the concessional rate of tax. The Revenue accepted the judgment and had
not challenged the said decision.
20.
The High Court, in our opinion, was right in observing that when the Electronic
Commission had prepared a list which contained the item Capacitors,
it had to be accepted by the Revenue and tax can be levied only on the basis of
such classification. The High Court was, therefore, right when it stated:
The
contention of the learned Counsel for the petitioners is that when the
Government has issued clarificatory memo with reference to G.O. Ms. Nos. 520
and 521, adopting the list prepared by the Electronics Commission for the
purpose of concessional rate of tax as electronic items or electronic
components, the same holds good even for the subsequent notifications, as there
was no material variation in the contents of the subsequent Government Orders
except variation in the rate of tax.
But,
on the other hand, the contention of the department is that unless a particular
item operates on electronic principle the same would not be considered as
"electronic goods" or component for the purpose of concessional rate
of tax. We are unable to accept the said contention of the Revenue on the first
principle.
If a
particular item of goods or component, part or material is not specified in the
list either in the Government Order or in the list of electronic items that are
prepared by the Electronics Commission, then only the question would arise for
consideration whether a particular item can be treated as an electronic goods
or component or material, depending upon its operating principle, but not
otherwise.
Admittedly,
the list of electronic items prepared by the Electronics Commission shows that
there are as many as 16 sub-headings under which various items that are listed
or specified. In the present case, we are concerned with "plastic film
capacitors". The said item finds place under the sub-heading
"electronic components." In the list of items prepared by the
Electronics Commission the plastic film capacitors is specified at 13.39.
Similarly, there are other capacitors such as paper capacitors at 13.38,
ceramic capacitors at 13.42, and mica capacitors at 13.43. Therefore, it is
clear that the item in question is clearly specified as one of the electronic items
contained in the list prepared by the Electronics Commission. In fact, when
similar issue came up for consideration before this Court in Amara Raja
Batteries, [1998] 111 STC 664, while considering G.O. Ms. Nos. 520 and 521,
referred and relied upon the list prepared by the Electronics Commission as was
ordered to be adopted by the Government by its memo dated June 1, 1989. As batteries,
which fell for consideration, was found under item 13.93, the division Bench
accepted the claim of the assessee and upheld the decision of the Tribunal
where the Tribunal allowed the claim of the assessee treating the batteries as
electronic component. But, however, this decision was distinguished by the
Tribunal in the impugned orders on unsustainable grounds.
(emphasis
supplied)
21. To
us, the High Court was also right in indicating that when the item has been
specifically included in the list prepared by Electronic Commission, the
Tribunal could not have applied functional test, operating
principle or user test. A limited inquiry which was required to
be made by the Tribunal was whether the item had been included in the list
prepared by the Electronic Commission. If any item is included in the said
list, it has to be treated as such and tax has to be levied on that basis. But
if the item is not included in the list, it is open to the Tribunal to consider
its placement on the basis of functional test as to whether such item
could be said to be electronic goods. The item Capacitors
has been expressly included in the list prepared by the Electronic Commission
and hence it was not open to the Tribunal to apply operating
principle or user test and the High Court was wholly justified
in interfering with the order passed by the Tribunal.
22.
The learned counsel for the assessee also urged that the underlying object of
granting concessional rate of tax to Capacitors was industrial development.
Relying on Commissioner of Income Tax, Amritsar v. Straw Board Manufacturing
Co. Ltd., (1989) Supp (2) SCC 523, Commissioner of Sales Tax v. Industrial Coal
Enterprises, (1999) 2 SCC 607 and Collector of Central Excise, Meerut v. Maruti
Foam (P) Ltd., (2004) 6 SCC 722, it was urged that whenever a concession has
been granted so as to bring about industrial expansion and growth, the
provision must be liberally construed. In view of the fact, however, that
according to us, item relating to Capacitors has been expressly
included in the list prepared by Electronic Commission, it is not necessary for
us to enter into larger question as, in our judgment, the assessee had rightly
succeeded and the High Court was justified in allowing Revisions.
23.
The learned counsel for the Revenue, no doubt, submitted that the Tribunal
merely remanded the matter to the Authorities to decide them in accordance with
law and the High Court ought not to have interfered with the order. In our
opinion, however, the submission is ill-founded. As rightly held by the High
Court, the Authorities were required to proceed on the basis of list prepared by
Electronic Commission. Since the Electronic Commission included
Capacitors as one of the items, it was not open to the Tribunal to
enter into the question as to the functions to be performed by Capacitors and
to remit the matter to decide as to whether it would be covered by the item
electronic goods or electric goods. Hence, though the
matter was remanded, the High Court was justified in interfering with the said
order as it was not open to the Tribunal to pass such order.
24.
Finally, it was submitted that some of the manufacturers, dealers and traders
had collected the tax at the higher rate from their customers and now they are
seeking relief from the Court to pay tax at concessional rate. If the
contention of the assessees is upheld and they will be allowed to pay tax at a concessional
rate, they would thereby unjustly enrich themselves inasmuch as on one hand
they had collected much more amount towards tax and will now pay lesser amount
of tax to the Government. No assessee can be allowed unjust
enrichment. Where an assessee is not entitled to a particular benefit, he
cannot be permitted to retain such benefit. [vide Mafatlal Industries Ltd. v.
Union of India, (1997) 5 SCC 536].
25. In
the affidavit in reply, the allegation has been emphatically denied by the assessee.
It was the case of the assessee that the allegation was factually incorrect
that the assessees had collected tax at a higher rate and they now want to pay
tax at a concessional rate. But in view of assertion by the Revenue and denial
by the assessee, it would be appropriate if we do not enter into the said
question by granting liberty to the Revenue to consider the question
independently.
26.
We, therefore, hold that the item Capacitors is subject to payment of
tax at a concessional rate. The order passed by the High Court, to that extent
is, therefore, upheld.
It is,
however, made clear that if any assessee had collected an amount at a higher
rate of tax from its customers than the concessional rate as held by us, it is
open to the Revenue to take appropriate proceedings in accordance with law for
the recovery of such amount. The excess amount, if any, recovered by any assessee
towards tax shall have to be paid by such assessee to the Government.
27.
For the foregoing reasons, the appeal deserves to be disposed of and is
accordingly disposed of subject to the observations made by us hereinabove. On
the facts and in the circumstances of the case, however, there shall be no
order as to costs.
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