M/S Andhra Agencies Vs.
State of A.P. [2008] INSC 1968 (18 November 2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6694 OF 2008 (Arising
out of SLP (C) No. 21538 of 2006) M/s. Andhra Agencies ....Appellant Versus
State of A.P. ....Respondent
Dr. ARIJIT PASAYAT,
J.
1.
Leave
granted.
2.
Challenge
in this appeal is to the judgment of the Division Bench of the Andhra Pradesh
High Court dismissing the Revision Petitions and special appeals filed by
several assessees under Section 22(1) (so far as the revisions are concerned)
and Section 23(1) (so far as the appeals are concerned) of the Andhra Pradesh
General Sales Tax, 1957 (in short the `Act'). The basic issues involved are the
same.
For different
assessment years, orders were passed by exercising revisional power by the
Commissioner of Sales Tax. In some cases Deputy Commissioner exercised
revisional power. The issue involved was whether the value representing the
credit notes issued by the manufacturers to the distributors were to be
included in the taxable turnover. All the assessees involved were carrying
business in liquor as distributors of the brand manufactured by M/s. Shaw
Wallace & Co. Ltd. And M/s. Vinadale Distilleries (P) Ltd., Hyderabad. For
the relevant assessment years, sales tax was leviable on the first and last
sale of the total sales affected. At the same time as per the proviso to
Schedule VI the intermediate dealers are taxable on the differential turnover
i.e. the intermediate dealers are entitled for exclusion of the turnover which
had already suffered tax. The assessees in question are intermediate dealers
which are liable to tax only on the differential turnover i.e. after excluding
the turnover which had already suffered tax. It is the case of the assessees
that they used to purchase various brands of liquor from the two manufacturers
who are the first sellers and who are liable to be taxed on the total turnover
in so far as their sales are concerned. After the sales were affected by the
dealers in question they have declared the differential turnover i.e. the
difference between the purchase price and the sales price which was subjected
to tax by the assessing officer. However, it came to light that the assessees
had received periodical credit notes representing the discount i.e. either
annual discount or quarterly discount from the manufacturers. It was the stand
of the Revenue that they were not taken into account while making assessment
though they were entered in the books of accounts. These facts came to light
subsequently when the task force of the department verified the books of
account of the above two manufacturers. Therefore, revisional proceedings were
initiated to include the amounts in question in the taxable turnover in respect
of the amounts representing the value covered by the Credit notes. In some
cases the Commissioner passed revisional orders because according to him while
revising the assessment, Deputy Commissioner had not taken the correct figures.
Assessees' stand before the Authorities as well as the High Court was that the
first seller had collected tax on the total turnover representing the sale
prices from the respective dealers and the first seller manufacturers claimed
reduction/rebate in their turnover representing the credit notes and obtain
reduction/rebate of the tax from the department. Therefore, such amounts should
not have been treated as a part of the taxable turnover in the hands of the
dealers who are the subsequent sellers. The stand of the Revenue was that when
the manufacturer returned a part of the sale consideration under the credit
notes, the returned amount under the credit notes includes a part of the tax
that was already collected since the tax collected was an inseparable part of
the sale consideration. The High Court was of the view that the basic question
was whether value of the credit notes goes to reduce the purchase turnover of
the dealers or not.
The High Court found
that the Revenue's stand was correct.
3.
In
support of the appeal learned counsel for the appellant submitted that the
whole seller had paid tax on the whole amount before adjustment of the credit
notes. Therefore the revenue was not justified in levying further demand.
4.
Learned
counsel for the Revenue on the other hand supported the judgments of the
Authorities and the High Court.
5.
The
basic issue can be better appreciated by way of an illustration.
Hypothetically taking
the sale price to be Rs.100/-, the tax to be paid by the selling dealers has to
be on 100. He may collect 90, after giving discount. If the sale price of the
intermediate seller is 110 his liability to pay tax shall be on 10 i.e.
110-100. The department's stand is that it should be 20 i.e. 110-90. This stand
will not be correct if the first seller had paid tax on 100. Therefore, it has
to be verified as to what was the amount on which tax was paid on the
illustrative figures given above by the selling dealer. The stand of the
assesses before the Tribunal and the High Court was that they were not given
personal hearing and only on consideration of their objections, the orders were
passed by the authorities. The Tribunal and the High Court held that since
objections were considered, there was no need for giving personal hearing.
Such conclusion is
clearly unsustainable.
6.
It
is conceded that the books of accounts were not produced before the
authorities. Additionally, there was no document produced to show that the
selling dealer had paid tax at 100 i.e. illustrative figure given above. It
appears that certain documents relating to the purchases by the assessees i.e.
sale bills and memos of the selling dealers were produced to show as to the
amount on which the tax was paid by the selling dealers. These apparently were
not considered because of the fact that the books of account were not produced
by the assessee. The stand of the assessees is that because the documents were
seized by certain taxing authorities, they could not be produced. It is stated
by learned counsel for the assessee that if given the opportunity, they shall
produce the documents.
7.
The
VIth Schedule as substituted by Act No. 22 of 1995 with effect from 1st April,
1995 relates to goods in respect of which the tax is leviable under Section 5.
The relevant
provision reads as follows :
"Provided that
for the purpose of liquor at any point of sale other than the first point of
sale and the last point of sale, the turnover of the goods liable to tax shall
be arrived at by deducting the turnover of such goods on which tax has been
levied at the immediately preceding point of sale.
Provided further in
respect of goods other than liquor mentioned in this Schedule, tax to be paid
at any point of sale other than First Point of Sale, shall be determined after
deducting the tax levied on the turnover of such goods at the immediately
preceding point of sale by a registered dealer from the tax leviable on the
turnover of the same goods at the point of sale by selling dealer."
8.
As
the adjudication to the basic issue involved depends upon the amount on which
tax has been paid by the selling dealer, it would be appropriate to permit the
assessee to produce the books of accounts for adjudication before the concerted
Deputy Commissioner. In the instant case it is the Dy. Commissioner (CT)
Sikandrabad. The assessees shall appear before the said authority on 4.11.2008
without further notice. It shall produce evidence to show that the tax has been
paid by the selling dealer on the illustrative figure of 100 given in the
illustrative figure.
The said authority
shall verify the correctness of the claim with reference to the documents to be
produced. If it is established, tax shall be payable on 10 of the illustration.
Otherwise, the Revenues' stand shall stand established.
9.
The
appeal is accordingly disposed of.
........................................J.
(Dr. ARIJIT PASAYAT)
........................................J.
(Dr. MUKUNDAKAM SHARMA)
New
Delhi,
November
18, 2008 6
REPORTABLE IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.6693 OF
2008 (Arising out of SLP(C) No. 7656 of 2007) M/s. KUMAR SPIRITS PVT. LTD.
ETC.ETC. ....Appellant Versus State of A.P. ....Respondent
Dr. ARIJIT PASAYAT,
J.
1.
Leave
granted.
2.
The
issues in the present appeal are similar with those which form the subject
matter of challenge in the appeal arising out of SLP (C) 21538 of 2006. The
appeal has been disposed of by a separate order today. The present appeal is
also disposed of on the same terms as were indicated in the appeal relating to
SLP (C) 21538 of 2006.
........................................J.
(Dr. ARIJIT PASAYAT)
........................................J
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