Inter-State deemed sale and single point levy principles limit tax on transfer of the right to use goods in lease transactions.

A deemed sale by transfer of the right to use goods is subject to the constitutional and statutory limits governing inter-State sales, so hire transactions involving movement of goods from outside Andhra Pradesh were treated as inter-State and not liable to tax under section 5-E. The Court also held that withdrawal of an exemption notification takes effect on publication and does not permanently extinguish tax liability for existing lease transactions. Promissory estoppel and legitimate expectation were not established on the facts, but the same goods could not be taxed again under section 5-E where they had already suffered tax under the State's single point levy scheme. The revisional order was unsustainable and the assessee obtained relief.

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Issues: (i) whether hire transactions involving movement of goods from outside the State to lessees in Andhra Pradesh constituted inter-State transactions immune from tax under section 5-E of the Andhra Pradesh General Sales Tax Act, 1957 read with article 286 of the Constitution of India and the Central Sales Tax Act, 1956; (ii) whether the withdrawal of the exemption notification issued under section 9 of the Andhra Pradesh General Sales Tax Act, 1957 could revive liability under section 5-E for existing lease transactions, and whether the principle of promissory estoppel or the policy of single point levy barred such tax.

Issue (i): Whether hire transactions involving movement of goods from outside the State to lessees in Andhra Pradesh constituted inter-State transactions immune from tax under section 5-E of the Andhra Pradesh General Sales Tax Act, 1957 read with article 286 of the Constitution of India and the Central Sales Tax Act, 1956.

Analysis: The transactions were found to be integrally connected arrangements in which the lease contract and the purchase order could not be separated. The goods were procured only because of the lease arrangement, and the movement of goods from another State to Andhra Pradesh was an incident of that arrangement. The Court held that, for deemed sales also, constitutional restrictions under article 286 and the statutory limitations under sections 3, 4 and 5 of the Central Sales Tax Act, 1956 and section 38 of the Andhra Pradesh General Sales Tax Act, 1957 apply. The situs of the goods in Andhra Pradesh was held to be irrelevant, and the reasoning that physical possession in Andhra Pradesh alone created the taxable event under section 5-E was rejected.

Conclusion: The hire transactions covered by the appeal were inter-State in character and were not liable to tax under section 5-E.

Issue (ii): Whether the withdrawal of the exemption notification issued under section 9 of the Andhra Pradesh General Sales Tax Act, 1957 could revive liability under section 5-E for existing lease transactions, and whether the principle of promissory estoppel or the policy of single point levy barred such tax.

Analysis: The exemption granted to dealers transferring the right to use goods was held to be valid only until rescinded, and the later rescinding notification took effect from its publication in the Gazette. The Court rejected the plea that the earlier exemption had permanently extinguished tax liability for the currency of existing leases. It further held that no factual foundation existed to invoke promissory estoppel or legitimate expectation, and that a deemed sale could not be taxed twice where the goods had already suffered tax under the statutory scheme reflecting single point levy.

Conclusion: The withdrawal of the exemption was effective, but the assessee was still entitled to relief because the same goods could not again be taxed under section 5-E where they had already suffered tax.

Final Conclusion: The revisional order was unsustainable, the appellate relief granted to the assessee was restored, and the assessments challenged in the writ petitions were set aside with remand to the assessing authority for fresh assessment in accordance with the law declared.

Ratio Decidendi: A deemed sale involving transfer of the right to use goods is subject to the constitutional and statutory restrictions governing inter-State sales, and where the goods have already suffered tax under the State scheme, the same goods cannot again be taxed under section 5-E merely because the right to use them is transferred within the State.

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