Entry tax ceiling on commodity rate: notification fixing 12.5% on woven sacks was ultra vires and assessment quashed.

Section 3(1)(c) of the Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001 permitted the notified entry tax rate only within the ceiling fixed by the applicable sales tax rate for the commodity. After the repeal of the Andhra Pradesh General Sales Tax Act and the commencement of the Andhra Pradesh Value Added Tax Act, 2005, packing material under Schedule IV attracted 4% tax, so the notification fixing 12.5% on HDPE/PP woven fabrics and sacks exceeded the statutory limit. The later 2006 notification operated only prospectively and did not validate the earlier excess rate. G.O. Ms. No. 955 was therefore ultra vires, and the assessment based on it was quashed.

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Issues: Whether G.O. Ms. No. 955, Revenue (CT II), dated 11.05.2005, fixing tax at 12.5% on HDPE/PP woven fabrics and sacks, was ultra vires section 3(1)(c) of the Andhra Pradesh Tax on Entry of Goods into Local Areas Act, 2001, and whether the assessment made on that basis was liable to be quashed.

Analysis: Section 3(1)(c) of the Act permits the Government to notify the rate of tax only within the ceiling fixed by the rate applicable to the commodity under the Andhra Pradesh General Sales Tax Act, 1957 or the notifications issued thereunder. For the relevant period after 01.04.2005, the Andhra Pradesh General Sales Tax Act stood repealed and replaced by the Andhra Pradesh Value Added Tax Act, 2005. Under entry 90 of Schedule IV to that Act, packing material including hessian cloth and jute twine attracted tax at 4%. Reading the two enactments together, the notified rate under the entry tax law could not exceed the lower applicable rate, and the impugned G.O. prescribing 12.5% for the goods in question breached that statutory limitation. The later G.O. Ms. No. 405, Revenue (CT II), dated 31.03.2006, effective from 01.04.2006, clarified the position only prospectively and did not cure the illegality for the intervening period covered by G.O. Ms. No. 955.

Conclusion: G.O. Ms. No. 955 was illegal and ultra vires in relation to HDPE/PP woven fabrics and sacks, and the assessment order based on it was quashed.

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