2015 (10) TMI 2405 - HC - VAT and Sales Tax

Inter-state Sale of Levy Rice: VAT Assessment Orders Set Aside

Sri Bhargavi Agro Tech Versus Assistant Commissioner (CT), VMU-I & Large Tax Payer Unit Kakinada, East Godavari District and another (and other cases)

Sri Bhargavi Agro Tech Versus Assistant Commissioner (CT), VMU-I & Large Tax Payer Unit Kakinada, East Godavari District and another (and other cases) - ... Issues Involved:1. Preliminary Objection: Availability of Alternative Remedy2. Violation of Articles 269 and 286 of the Constitution3. Applicability of Control Orders4. Section 3(a) of the CST Act: Inter-State Movement of Goods5. Weighment and Ascertainment of Quality of Rice at Kakinada6. Payment of VAT by Petitioners7. Suppression of Facts by Petitioners8. Other ContentionsIssue-Wise Analysis:1. Preliminary Objection: Availability of Alternative RemedyThe respondents raised a preliminary objection that the petitioners should have availed the alternative remedy of appeal under Section 31 of the AP VAT Act instead of invoking the writ jurisdiction under Article 226 of the Constitution. The court noted that the writ petitions were admitted nearly two years ago, and the statutory embargo under Section 31 of the AP VAT Act now precludes the petitioners from being relegated to the alternative remedy. The court held that it is competent to deal with the matter based on the affidavits filed, especially since the facts necessary to determine whether the sales are inter-state or intra-state are undisputed.2. Violation of Articles 269 and 286 of the ConstitutionThe petitioners contended that the impugned assessment orders violated Articles 269 and 286 of the Constitution, as well as Sections 3(a) and 9 of the CST Act, arguing that the sale of levy rice from Yanam to FCI at Kakinada constituted inter-state sales. The court examined the historical context and constitutional provisions, concluding that the sale of levy rice by Yanam rice millers to FCI at Kakinada is an inter-state sale, and therefore, the tax authorities in Andhra Pradesh lack jurisdiction to levy tax on these transactions.3. Applicability of Control OrdersThe respondents argued that the petitioners should be treated as rice millers in Andhra Pradesh and subject to the same control orders. However, the court found that the control orders issued under the Essential Commodities Act, 1955, by the Government of Andhra Pradesh, do not have extra-territorial operation and cannot be applied to the Union Territory of Pondicherry. Therefore, the petitioners, as rice millers at Yanam, cannot be brought within the ambit of these control orders.4. Section 3(a) of the CST Act: Inter-State Movement of GoodsThe court examined whether the sale of levy rice by the Yanam rice millers to FCI at Kakinada falls within the ambit of Section 3(a) of the CST Act. The court noted that the arrangement under the Government memo dated 31.10.1983 obligated the Yanam rice millers to transport levy rice from Yanam to Kakinada. As this sale occasioned the movement of goods from one state to another, it qualifies as an inter-state sale under Section 3(a) of the CST Act.5. Weighment and Ascertainment of Quality of Rice at KakinadaThe respondents contended that the sale was an intra-state sale because the property in the goods passed to FCI only after weighment and quality checks at Kakinada. The court held that the obligation to transport levy rice from Yanam to Kakinada was inextricably linked to the arrangement in the Government memo dated 31.10.1983. Therefore, the sale qualifies as an inter-state sale despite the weighment and ascertainment of quality at Kakinada.6. Payment of VAT by PetitionersThe petitioners argued that they received a consolidated price for the levy rice and did not collect VAT. However, the court found that the petitioners had sought and were paid the VAT component by FCI. The court noted that while the petitioners retained the VAT component, they did not pay it to the Government of Andhra Pradesh. The court clarified that this excess payment does not confer jurisdiction on the Andhra Pradesh tax authorities to levy VAT on inter-state sales.7. Suppression of Facts by PetitionersThe respondents argued that the petitioners suppressed the fact that they had submitted a representation to FCI admitting liability under the AP VAT Act. The court held that suppression of this fact was not material for determining the lis, as the jurisdiction to levy tax on inter-state sales cannot be conferred by consent or acquiescence.8. Other ContentionsThe court did not find it necessary to address other contentions, such as whether the petitioners are casual dealers under the AP VAT Act or liable to purchase tax under Section 4(4) of the AP VAT Act, as these issues were not relevant to the determination of the main issue.Conclusion:The court concluded that the sale of levy rice by the petitioners to FCI at Kakinada is an inter-state sale under Section 3(a) of the CST Act. Consequently, the impugned assessment orders levying VAT under the AP VAT Act are without jurisdiction and are set aside. The court also clarified that this order does not preclude FCI from recovering the excess payment made to the petitioners as the VAT component.