JUDGMENT Syed Shah Mohammed Quadri, J.
1. The question that arises for consideration in these writ petitions is :
"whether the petitioners, manufacturers and/or dealers of cement, are liable to pay arrears of difference in sales tax for the period during which the concessional rate of sales tax granted by the Government was in force ?"
2. To appreciate this question, the relevant facts may be noticed. Under the Andhra Pradesh General Sales Tax Act, 1957 (for short "the State Act") as well as the Central Sales Tax Act, 1956 (for short "the Central Act") cement is taxable. The Government of Andhra Pradesh in exercise of their power under section 9 of the State Act granted reduction in the rate of sales tax to the manufacturers of cement in Andhra Pradesh by issuing three orders. In G.O.Ms. No. 76, dated January 24, 1987, rate of sales tax was reduced to 4 per cent on cement sold to Government and Government companies. In G.O.Ms. No. 77, dated January 24, 1987, the rate of sales tax was reduced to 4 per cent on cement sold to manufacturers of cement products. In G.O.Ms. No. 78, dated January 24, 1987, the rate of sales tax under the Central Act was reduced to 2 per cent on inter-State sales of cement whether or not the returns were accompanied by C form. These orders were brought into force with effect from 1st January, 1987. The validity of the orders passed by the Government in G.O.Ms. Nos. 77 and 78 was questioned by India Cement Company, Madras and others in the Supreme Court in Indian Cement Ltd. v. State of Andhra Pradesh [1988] 69 STC 305. The Supreme Court quashed the said G.Os. as being violative of articles 301, 303 and 304 of the Constitution of India. As a follow-up action the Commercial Tax Officers made provisional assessment and raised a demand for the arrears of tax representing the difference between statutory rates and the concessional rates. The validity of the orders of provisional assessment is assailed in these writ petitions. Writ Petitions Nos. 8127, 8146, 8520, 9159, 9178, 9181, 9321, 9337 and 10841 of 1988 relate to the validity of the provisional assessments made under the State Act and Writ Petitions Nos. 2367, 8128, 8145, 8148, 8521, 9160, 9161, 9163, 9326 and 9338 of 1988 relate to the validity of the provisional assessments made under the Central Act. In Writ Petition No. 13733 of 1988 the orders of provisional assessment passed under the state act and the central act are challenged.
3. Sri K. Subramanya Reddy, the learned senior counsel who led the batch, contended that,
(i) before passing the provisional order of assessment no notice was issued to the petitioners and no opportunity of being heard was afforded to them, therefore the order of provisional assessment is illegal and liable to be quashed; on inter-State sales, tax is leviable at 4 per cent on production of C form certificate by the dealer, had any notice been given to the petitioners, they would have produced C form certificates and would have been entitled to the benefit of payment of sales tax at the reduced rate at 4 per cent.
(ii) the respondents levied surcharge and additional tax without authority of law, so the provisional order of assessment is liable to be quashed; and
(iii) as G.O.Ms. Nos. 76, 77 and 78 issued by the Government of Andhra Pradesh granting concessional rate of sales tax were in force during the relevant period, the petitioners collected only the rates specified in the said G.Os., so they cannot be called upon to pay higher rate of tax for sales during the said period and that the order of the Supreme Court quashing the G.Os. has to be applied prospectively.
4. Sri S. Dasaratharama Reddi, the learned counsel appearing for petitioner in Writ Petitions Nos. 8520 and 8521 of 1988, has contended that the tax levied under the Acts is indirect tax and the dealers pass on the burden of tax to the ultimate consumers; in view of the said G.Os. the petitioner could not have collected at normal rate of tax and could not have passed on the burden of tax to the consumer, therefore it cannot be made to pay arrears of tax of higher rate.
5. Sri K. Srinivasamurthy, the learned counsel for the petitioners in some writ petitions, has contended that collection of tax at more than the prescribed rate is an offense under the Acts, therefore the dealers could not have collected anything more than the concessional rate prescribed by the Government in the said G.Os. and, therefore, it would be unjust and inequitable to demand difference of tax from the petitioners as this would result in great hardship to the dealers.
6. The learned Government Pleader, on the other hand, has contended that the judgment of the Supreme Court quashing the said G.Os. does not lay down that the judgment would not affect the past transactions, as such it is open to the Commercial Tax Officers to demand the arrears of tax treating that the G.Os. are non est; the effect of the judgment of the Supreme Court is, submits the learned Government Pleader, that the uniform rate of tax should be collected from all the dealers, therefore, the demand for arrears of tax, in so far as it relates to the difference in the rates, is justified and legal.
7. Having regard to these contentions of the learned counsel we shall consider the question referred to above.
8. In Indian Cement's case , the Supreme Court has held that variation of rate of inter-State sales tax does affect free trade and commerce and creates a local preference which is contrary to the scheme of Part XIII of the Constitution. So both the Notifications (G.O.Ms. Nos. 77 and 78, dated January 24, 1987) of the Andhra Pradesh Government are bad and hit by the provisions of Part XIII of the Constitution and cannot be sustained in law. Consequently upon the striking down of the said notifications by the Supreme Court, the Commercial Tax Officers in the State raised the demand for the difference of tax. The dealers are liable to pay tax on inter-State sale of cement at 4 per cent under section 8(1) of the Central Act and at 10 per cent plus additional tax and surcharge in respect of sales that fall under section 8(2)(b) of the Central Act. Accordingly, the difference of tax between the concessional rate prescribed in the G.O. and the abovesaid rate was calculated for purposes of provisional assessment and the demand was accordingly raised. In so far as the sales tax under the State Act is concerned the rate of tax applicable to cement is 10 per cent. The concessional rate under the abovesaid orders of the Government issued in G.O.Ms. Nos. 76 and 77 was 4 per cent. Therefore, the Commercial Tax Officers calculated the difference of tax between the said rates, made a provisional assessment and raised the demand accordingly.
9. Under the scheme of the sales tax every dealer under the Act, whose total turnover for an year is not less than the prescribed amount and an agent of non-resident dealer irrespective of his turnover for the year, is enjoined to pay tax for each year at the prescribed rate. At the relevant time section 30-B of the State Act was in force and provided that no person, other than a dealer, shall collect on the sale or purchase of any goods, any sum by way of tax from any other person and no dealer shall collect any amount by way of tax in excess of the amount of tax payable by him under the provisions of the Act. It is thus clear that it is permissible for a dealer to collect tax from the consumer or any other person, but he cannot collect any amount by way of tax in excess of the amount of tax payable by him under the State Act. Section 30-C provides penalty for violation of section 30-B. It says that a dealer who collects tax in excess of the tax payable by him or in contravention of the provisions of section 30-B shall be liable to pay a penalty of an amount not exceeding Rs. 2,500. This is in addition to the power of the authorities to forfeit the amount collected in contravention of section 30-B. On these facts, and particularly in view of the absence of any specific denial in the counter-affidavit of the respondents, the case of the petitioners that they did not collect any amount in excess of the concessional rate during the period in question has to be accepted.
10. Now we shall refer to the cases cited at the Bar.
11. Collector of Customs and Central Excise v. Oriental Timber Industries : This case arose under the Central Excises and Salt Act. The assessment of excise duty was made on plywood circles after the same was produced and not on plywood as and when the same came out of the press. This mode of assessment was adopted by the excise authorities. The excise authorities sought to change the mode of assessment in view of audit objection. The change introduced in the mode of assessment was questioned before the High Court by the assessee. The High Court upheld the contention of the assessee. On appeal by the Collector, Central Excise, the Supreme Court allowed the appeal. On the question whether the assessee would be liable to pay the excess amount of excise duty for these years, the Supreme Court observed that no assessment for all those years on the basis of the impugned notices had been made or could have been made and to make fresh assessment for imposition of duty after such a long lapse of time may require a prolonged exercise which might not ultimately be worth the trouble so far as the Union of India was concerned and that it was bound to cause a great deal of hardship and harassment to the assessee-firm; and held that ends of justice required that there should be no levy of excise duty on the basis of the impugned notices for the years which had already passed and that the judgment of their Lordships allowing the appeal and holding the notices valid should be given effect to prospectively from then on and not retrospectively. This course of action was conceded by the learned counsel appearing for the Union of India in that case.
12. Union of India v. Godfrey Philips India Ltd. : This case also arose under the Central Excises and Salt Act. In this case the question was whether the cost of corrugated fibre board containers would be liable to be included in the value of the cigarettes for purposes of excise duty. The Central Board of Excise and Customs addressed a letter to the Cigarette Manufacturers' Association stating that the cost of corrugated fibre board will not be included. Subsequently the cost of corrugated fibre board containers was sought to be included in the price of the cigarettes. The contention of the assessee was that in view of the letter of the Central Board of Excise and Customs, the doctrine of promissory estoppel was attracted and the authorities were estopped from including the price of corrugated fibre board containers in the value of the cigarettes for purposes of assessment to excise duty. This contention was accepted by the Supreme Court. It was held that the letter issued by the Board was within its power having regard to rule 8(1) of the Central Excise Rules and the Central Government and the Central Board of Excise and Customs were bound by the promissory estoppel to exclude the cost of corrugated fibre board containers from the value of the cigarettes for purposes of assessment of excise duty for the period in question.
13. West Bengal Hosiery Association v. State of Bihar [1988] 71 STC 298 (SC) : This case arose under the Bihar Sales Tax Act. A notification issued by the State Government exempting from sales tax the hosiery goods manufactured within the State, was held to be bad and it was further held that the quashing of notification on the ground that it was void ab initio might lead to undue hardship for the dealers in the State of Bihar who might have sold locally manufactured hosiery goods without taking into consideration any amount on account of the liability to sales tax, in view of the exemption granted by the impugned notification, therefore, the arrears of sales tax which would become payable by the dealer in the State of Bihar in respect of the sale of local hosiery goods made during the period when the notification was in operation, should not be collected.
14. Video Electronics Pvt. Ltd. v. State of Rajasthan [1988] 71 STC 304 (SC) : In that case which arose under the Rajasthan Sales Tax Act a notification reducing the rate of tax on sales of goods manufactured within the State was held to be invalid and was quashed. It was observed that all the concerned parties would pay tax at the uniform higher rate. It was further held that in view of the facts and circumstances of the case and in view of that order, the past transaction would not be affected.
15. Hi-Beam Electronics Pvt. Ltd. v. State of Andhra Pradesh [1988] 71 STC 305 (SC) : That case also arose under the Andhra Pradesh General Sales Tax Act. The State Government issued a notification reducing the rate of tax on sales of electronic goods manufactured within the State. That notification was quashed and it was directed that the past transactions would not be affected. To the same effect is the decision of the Supreme Court in Besta Electronics Pvt. Ltd. v. State of Madhya Pradesh [1988] 71 STC 307.
16. A Division Bench of our High Court in Blue Star Ltd. v. State of Andhra Pradesh , held that the Notification issued in G.O.Ms. No. 172, Revenue (S) dated February 13, 1986, issued by the Government of Andhra pradesh, under which the rate of local sales tax was reduced to 4 paise in the rupees for specified goods manufactured or produced in the dealer's own manufacturing unit located in the State of Andhra Pradesh and supplied to certain specified undertakings, was violative of article 304 of the Constitution and was quashed. In regard to the past transactions the Bench directed that having regard to the facts and circumstances of the case and in view of the order of the Bench the past transactions would not be affected.
17. Writ Petition Mics. Petition No. 18988 of 1988, dated December 14, 1988. - In that case a show cause notice was issued for collection of difference of tax under the State Act. The notice was challenged in Writ Petition No. 10841 of 1988. In W.P. M.P. No. 13613 of 1988 a Division Bench of our High Court granted ad interim order on the condition of payment 4/5th of the amount of difference of sales tax which would be payable under the State Act as well as the Central Act consequent upon the striking down of G.O.Ms. Nos. 77 and 78. In regard to the amount demanded on the assumption that G.O.Ms. No. 76 dated January 24, 1987, had been struck down, collection of the entire amount was stayed. Subsequently the assessee filed W.P. M.P. No. 18988 of 1988 for modifying the said order. Referring to Indian Cement's case , Video Electronics case [1988] 71 STC 304 (SC) and West Bengal Hosiery Association's case [1988] 71 STC 298 the Bench observed as follows :
"Unfortunately, when G.O.Ms. Nos. 77 and 78 were struck down by the Supreme Court with regard to cement, the problems of the local dealers as a result of hardship were not brought to the notice of the Supreme Court and therefore there was no observation like the one we notice in the aforesaid decisions of the Supreme Court. This resulted in local dealers of Andhra Pradesh filing applications before the Supreme Court and the Bench consisting of Sabyasachi Mukherji and S. Ranganathan, JJ., passed orders on the 18th July, 1988 in W.P. No. 676 of 1988 (unreported) restraining the State of Andhra Pradesh from demanding and realising the differential tax under the A.P. General Sales Tax Act as well as the Central Sales Tax Act to the tune of Rs. 2,14,929 on the basis of the assessment order dated 30th April, 1988 for the assessment years 1986-87 and 1987-88.
It may be noticed that, in the latter two of the aforesaid reported cases, the Supreme Court while striking down the impugned G.Os. 77 and 78 gave a relief in relation to the past transactions to the local dealers also though they are not parties before it. As observed earlier in the case of Indian Cements [1988] 69 STC 305 the difficulty of the local dealers was not brought to the notice of the Supreme Court and therefore the Supreme court did not pass any order while striking down the G.O.Ms. Nos. 77 and 78 which has necessitated the passing of the aforesaid separate order dated 18th July, 1988 in W.P. No. 676 of 1988.
In view of the history of the litigation in the Supreme Court, we would modify our order dated 20th July, 1988 and direct that the State of Andhra Pradesh shall neither demand nor collect the difference in sales tax both under the A.P. General Sales Tax Act and Central Sales Tax Act in relation to the past transactions while G.O.Ms. Nos. 77 and 78 were in operation till they were struck down, during the pendency of the writ petition."
18. From the above discussion it is seen that where orders issued by the Government under the Sales Tax Acts favouring sales of indigenous products at reduced rates of tax, are found to be illegal and unconstitutional, the past transactions which took place on the strength of the impugned orders were directed not to be reopened. However, in Indian Cement's case [1988] 69 STC 305 there is no observation of the Supreme Court to the effect that the past transaction will not be affected, but it must be noted that the persons who questioned the notifications were not the persons who were affected by quashing of the impugned notifications. The persons who were affected by the quashing of the notifications were not before the Supreme Court. Having regard to the consistent orders passed by the Supreme Court in similar matters, it may reasonably be assumed that had a representation been made by the affected parties in the Supreme Court, a like direction would have been issued in their favour. Be that as it may, it has been found above that when G.O.Ms. Nos. 76, 77 and 78 were in force, the petitioners did not collect any amount towards sales tax over and above the concessional rates prescribed in the said orders. We, therefore, feel that it would be unjust and unreasonable to permit the respondents to collect the amounts of difference of sales tax on the basis that the said G.Os. were not in force during the said period. In this view of the matter it is unnecessary for us to consider the other contentions.
19. These writ petitions are filed, as noted above, against the orders of provisional assessment. We accordingly allow the writ petitions and quash the orders impugned therein. If any amounts are paid by the petitioners pursuant to the interim direction of the court towards the demand made pursuant to the impugned order, they may be adjusted against the sales tax payable by the petitioners either for the past period or for the subsequent period. No costs. Advocate's fee Rs. 150 in each.
20. In so far as Writ Petition No. 13733 of 1988 is concerned, the petitioner has challenged the validity of four orders - two orders passed under the State Act and two orders passed under the Central Act. As one writ petition would not have been maintainable in respect of four orders, we direct the petitioner to pay excess court-fee within two weeks from today.
21. Writ petitions allowed.