TaxTMI 
TaxTMI 
2007 (10) TMI 580
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....th the first respondent. For the assessment year 2005-06, the petitioner reported a net turnover of Rs. 5,39,60,737 of which sale of pharmaceutical formulations were for Rs. 3,49,97,675 and bulk drugs for Rs. 1,80,56,069. According to the petitioner they collected and paid tax at four per cent. The first respondent issued notice dated March 1, 2007 proposing to assess the petitioner, on the turnover of bulk drugs, at 12.5 per cent instead of four per cent on the ground that aluminium hydroxide paste and magnesium hydroxide paste, though "bulk drugs", were taxable as unclassified goods at 12.5 per cent under Schedule V of the APVAT Act. The petitioner, vide letter dated April 12, 2007, submitted their objections to the show cause notice contending that levy of tax at 12.5 per cent on the sales turnover of bulk drugs was without jurisdiction as the competent authority, the Director, Drugs Control Administration, had classified both aluminium hydroxide paste and magnesium hydroxide paste as "bulk drugs" and, since "bulk drugs" were listed under entry 16 of Schedule IV, they were taxable only at four per cent. The petitioner contended that entry 16 of Schedule IV applied to all bulk dr....
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....f the APVAT Act and taxed at the higher rate of tax at 12.5 per cent. Since this question does not involve factual determination, both Sri V. Bhaskar Reddy, learned counsel for the petitioner and the Special Government Pleader for Taxes would agree that the writ petition itself be disposed of at this stage. Before examining the rival contentions it is necessary to briefly refer to the relevant statutory provisions and the applicable Government Orders placed before us by the learned Special Government Pleader. Section 4 of the APVAT Act relates to the charge to tax. Under subsection (1) thereof, save as otherwise provided in the Act, every dealer registered, or liable to be registered, as a VAT dealer shall be liable to pay tax on every sale of goods in the State at the rates specified in the Schedules. Sub-section (3) requires every VAT dealer to pay tax on every sale of goods taxable under the Act on the sale price at the rates specified in Schedules II, IV and V, subject to the provisions of section 13. Schedule IV is the list of goods taxable at four per cent and "bulk drugs" are listed under entry 16 thereof. Schedule V provides that all goods, other than those specif....
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....dity of anything previously done thereunder: Provided that if the notification under sub-section (1) is issued when the Legislative Assembly is in session, such a Bill shall be introduced in the Legislative Assembly during that session: Provided further that where for any reason a Bill as aforesaid does not become law within six months from the date of its introduction in the Legislative Assembly, the notification shall cease to have effect on the expiration of the said period of six months. (3) All reference made in the Act to any of the Schedules shall be construed as relating to the schedule in force for the time being amended in exercise of the powers conferred by this section." G.O. Ms. No. 1615 dated August 31, 2005 was issued in exercise of the powers conferred by sub-section (2) of section 76 of the APVAT Act and it was ordered that the HSN codes, in respect of 70 items in Schedule IV, shall be as specified in annexure II to the notification which was to come into force with effect from September 1, 2005. At serial No. 12 of annexure II are "bulk drugs". The eight bulk drugs specified thereunder are: In exercise of the powers conferred by section 79(1) of the VA....
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....ith or without modification, the notification issued under section 79(1) ceases to have effect without prejudice to the validity of anything previously done thereunder. Under the second proviso to section 79(2) if the Bill does not become law, within six months from the date of its introduction in the Legislative Assembly, the notification shall cease to have effect on the expiry of the said period of six months. If the goods sold by the petitioner, i.e., aluminium hydroxide paste and magnesium hydroxide paste, are held to fall under Schedule IV of the APVAT Act they are liable to be taxed at four per cent and if they do not, then, under Schedule V, they are taxable at 12.5 per cent. That "bulk drugs" are listed under entry 16 of Schedule IV of the APVAT Act is not in dispute. The learned Special Government Pleader, would, however, contend that it is only the eight bulk drugs, which are given HSN codes under G.O. Ms. No. 1615 dated August 31, 2005, which are alone liable to be taxed at four per cent and that all other bulk drugs are taxable as unclassified goods under Schedule V of the APVAT Act at 12.5 per cent. It is not even the case of the respondents that G.O. Ms. No. 1615 d....