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Sri Venkateswara Ric... v. State Of Andhra Prad...
Factual and Procedural Background
The assessees, all groundnut-oil millers registered under the Andhra Pradesh General Sales Tax Act, 1956 (“the Act”), purchased groundnut or groundnut kernel during the relevant assessment years. The Commercial Tax Officer treated the very act of purchase by the millers as the taxable event and imposed purchase tax. The Assistant Commissioner upheld that view. On further appeal, the Sales Tax Appellate Tribunal held that tax was leviable only when the groundnut was crushed or, alternatively, at the stage of the last purchase. In revision, the High Court reversed the Tribunal and restored the Commercial Tax Officer’s assessment. The assessees obtained certificates to appeal, bringing the matter before the Supreme Court.
Legal Issues Presented
- At what point does liability to purchase tax arise under Item 6 of the Third Schedule to the Act in respect of groundnut—(a) on the miller’s first purchase, (b) when the groundnut is crushed, or (c) at the stage of the last purchase?
Arguments of the Parties
Appellants’ (Assessees’) Arguments
- Imposing tax at the first miller’s purchase would lead to multiple taxation if the same goods are later purchased by other millers, contrary to the single-point levy mandated by Sections 14 and 15 of the Central Sales Tax Act, 1956 and Section 6 of the Act.
- The legislature did not use the word “first” before “miller” in Item 6; courts should not read that word into the statute.
- Where part of the groundnut purchased is sold to other millers, the appellants should be taxed only on the quantity they themselves crush; the tax on the remaining quantity should fall on the last purchasing dealer.
No separate presentation of the respondent-State’s arguments is recorded in the opinion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| M. Nadar Khan & Co. v. Assistant Commissioner (Commercial Taxes), Anantpur | High Court decision that took a view contrary to the decision under appeal regarding the point of levy of purchase tax on groundnut. | The Supreme Court noted that the later co-ordinate Bench should have followed or referred the earlier decision to a larger Bench; the case was mentioned only to criticise that procedural lapse and was not followed. |
Court's Reasoning and Analysis
The Supreme Court began with Sections 14 and 15 of the Central Sales Tax Act, 1956, which restrict State taxation of “declared goods,” including groundnut, to a single stage and a maximum rate of 3 percent. Section 6 of the Andhra Pradesh Act implements this mandate by fixing the point of levy as specified in the Third Schedule. Item 6 of that Schedule provides that when groundnut is “purchased by a miller other than a decorticating miller,” tax is to be levied “at the point of purchase by such miller,” and in all other cases at the last-purchase point.
The Court distinguished between the incurring of tax liability and its computation. Liability attaches immediately upon the miller’s purchase, although assessment may occur later. Because the State’s power is exhausted after tax is collected once, subsequent purchases of the same goods cannot be taxed. Hence, there was no need for the legislature to insert the word “first” before “miller”; the statutory language already makes the initial miller’s purchase the taxable event.
On the argument that only quantities actually crushed by a purchasing miller should be taxed, the Court held that the taxable event is the purchase itself, not the later use or resale of the groundnut. No evidence showed that any appellant purchased groundnut with an intention primarily to resell; therefore, the entire turnover of each miller became taxable upon purchase.
The Court adopted the reasoning of the earlier High Court decision and rejected the contrary view taken in M. Nadar Khan, remarking that a co-ordinate Bench should have referred any disagreement to a larger Bench instead of overruling an earlier decision.
Holding and Implications
Appeals DISMISSED; High Court judgment affirmed.
Consequently, purchase tax on groundnut is exigible at the moment a non-decorticating miller first purchases the goods, regardless of later crushing or resale. This decision confirms a single-point levy at the miller’s purchase stage and clarifies that subsequent transactions in the same goods are exempt from further purchase tax. No broader doctrinal change was made beyond reaffirming the statutory scheme.
K.S Hegde, J.— In these appeals by certificate a common question of law arises for decision viz. on the facts and circumstances of these cases what is the point of levy of purchase tax in respect of certain transactions relating to purchase of groundnut or groundnut kernel by the assessees-appellants under the Andhra Pradesh General Sales Tax Act, 1956 (in brief “the Act”)?
2. The Commercial Tax Officer came to the conclusion that a critical event took place when the assessees purchased the groundnut with which we are concerned in these appeals. In appeal the Assistant Commissioner upheld the order of the Commercial Tax Officer. On a further appeal by the assessees, the Sales Tax Appellate Tribunal disagreeing with the conclusion reached by the Commercial Tax Officer as well as the Assistant Commissioner came to the conclusion that the turnovers relating to the purchases of groundnut in question became exigible to tax either when the groundnut purchased was crushed by the millers or when the same was purchased by the last purchasers. But when the matter was taken up in revision to the High Court, the High Court reversed the decision of the Tribunal and restored the order of the Commercial Tax Officer.
3. In all these appeals, the assessees are admittedly millers. They are registered dealers under the Act. The groundnut purchased by them was either entirely used by them for extracting oil or partly used for extracting oil and partly sold to others. The levy with which we are concerned in these appeals is purchase tax. The question for decision, as mentioned earlier, is which were the events that gave rise to tax liability —“first purchase”, the crushing of the groundnut purchased or the ‘last purchase’?
4. The groundnut is one of the “declared goods” to be of special importance in inter-State trade or commerce under Section 14 of the Central Sales Tax Act, 1956 and therefore in view of Section 15(a) of that Act, the State is not empowered to levy purchase tax of more than 3% on the turnover in respect of those purchases and further the tax cannot be levied at more than one stage. Herein we are not concerned with inter-State sales or purchases.
5. Now turning to the Act, Section 2(f) defines “declared goods” as meaning goods declared under Section 14 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956) to be of special importance in inter-State trade or commerce. In compliance with the mandate of Sections 14 and 15 of the Central Sales Tax Act, 1956, Section 6 of the Act provides that notwithstanding anything contained in Section 5 (the charging section), the sales or purchases of declared goods by a dealer shall be liable to tax at the rate, and only at the point of sale or purchase specified against each in the Third Schedule on his turnover of such sales or purchases for each year irrespective of the quantum of his turnover in such goods; and the tax shall be assessed, levied and collected in such manner as may be prescribed. Here again we need not refer to that part of Section 6 which deals with inter-State trade. The only other provision which we have to notice is Item 6 of the Third Schedule which deals with groundnut. The point of levy in respect of that item is when purchased by a miller other than a decorticating miller in the State, at the point of purchase by such miller and in all other cases at the point of purchase by the last dealer who buys in the State. The rate of tax is 2 paise in the rupee.
6. None of the assessees before us is a decorticating miller. Hence we have to see whether the purchases of groundnut made by them did not become taxable as soon as they made those purchases. It is now well settled that even under the Sales Tax Laws, the charge in respect of a sale or purchase becomes effective as soon as the sale in the case of sales tax and purchase in the case of purchase tax is made, though the liability of the dealer can be computed only at the end of the year. The incurring of the charge is one thing and its computation is a totally different thing. Hence the turnover relating to the purchases with which we are concerned in these appeals became charged with the liability to pay tax as soon as those purchases were made by the assessee-millers. To restate the position, whenever a miller purchases groundnut, the turnover relating to that purchase becomes exigible to tax subject to such exemptions as may be given under the Act. This means that as soon as a first miller purchases groundnut, the turnover relating to that purchase, the question of exemption apart, becomes liable to tax. This is also the view taken by the High Court.
7. It was urged on behalf of the assessees that if we place that interpretation then even the turnovers relating to subsequent purchases of the same groundnut made by the other millers would become exigible to tax despite the fact that only a single point purchase tax is leviable under the Act. It was further urged that we should not read into Item 6 of the Third Schedule the word “first” before the word “Miller” under Column 2 thereof. We see no merit in these contentions. Quite clearly in view of Section 14 and Section 15 of the Central Sales Tax Act and Section 6 of the Act, purchase of groundnut can be taxed only at one stage. Once a particular quantity of groundnut has been subjected to payment of tax, the State's power to tax in respect of those goods gets exhausted and any further dealing in those goods cannot be brought to tax. This is clear from the scheme of the Act. There was no need for the legislature to say “when purchased by first miller” in column 2 of Item 6 of the Third Schedule, because from the language employed therein, it is clear that the first purchase becomes exigible to tax and in view of Section 6 of the Act, the subsequent purchases of the same goods cannot be subjected to tax. Therefore there is no question of adding any word into that item, as contended by Mr M.C Chagla on behalf of the assessees.
8. The next argument advanced on behalf of the assessees is that in the case of some of the assessees a part of the groundnut purchased had been sold to other millers; hence in those cases, the assessees must be taxed only in respect of that part of the turnover which relates to groundnut which they had crushed for extracting oil and in the case of remaining part, it is the last dealer who purchased the same should be taxed. This contention again is unacceptable. As mentioned earlier the event which attracted tax is the act of the miller purchasing groundnut and not his act of crushing the groundnut purchased or dealing with that groundnut in any other manner. We have earlier mentioned that the very act of purchase by a miller attracted the liability to pay tax under Section 5 read with Schedule 3, Item 6. His subsequent dealings in those goods becomes irrelevant. In none of the cases before us it was shown that any of the assessees had purchased groundnut with a view to sell them. Hence we need not go into the question as to what would be the position in law where a miller purchases some groundnut for milling and the rest for sale.
9. Our approach to the question before us is similar to that adopted by the High Court in the decision under appeal. We are in entire agreement with the reasoning of the High Court. But our attention was invited to a latter decision of the same High Court in M. Nadar Khan & Co. v. Assistant Commissioner (Commercial Taxes), Anantpur which took a view contrary to that taken in the decision under appeal. It is strange that a coordinate Bench of the same High Court should have tried to sit on judgment over a decision of another Bench of that Court. It is regrettable that the learned Judge who decided the latter case overlooked the fact that they were bound by the earlier decision. If they wanted that the earlier decision should be reconsidered, they should have referred the question in issue to a larger Bench and not to ignore the earlier decision.
10. For the reasons mentioned above, these appeals fail and they are dismissed with costs.
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