TaxTMI 
TaxTMI 
2023 (3) TMI 59
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.... periods April, 2013 to August, 2016 levied by the 3rd respondent vide proceedings dated 04.08.2018 and confirmed by the 2nd respondent vide AO No.ZH371020OD80888, dated 22.10.2020 and pass such other orders. 2. Petitioner's case succinctly is thus: (a) Petitioner is doing business in paints and a registered turnover tax (TOT) dealer U/s 17(7) of AP VAT Act. For the tax period from 01.04.2013 to 30.09.2016 the petitioner filed returns regularly and paid tax @ 1% of its turnover in terms of Section 4(2) of the Act. (b) The 3rd respondent while conducting audit of petitioner's accounts having found that the petitioner made one purchase of paint on 06.06.2015 worth of Rs.54,000/- from Sri Anantha Padmanabha Swami Enterprises, Hyderabad, passed a best judgment assessment order on 04.08.2018 treating the petitioner as a VAT dealer in terms of Section 17(5)(b) of the VAT Act w.e.f 06.06.2015 and levied tax @ 14.5% U/s 4(1) of the Act for the tax period from 06.06.2015 to 31.09.2016 and raised a demand of Rs.8,27,315/- and also imposed 100% penalty by separate order dated 18.09.2019. (c) Petitioner submits that he never involved in regular interstate trade an....
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....r the period from October, 2014 to August, 2016 U/s 17(5)(b) r/w Rule 5(2) of AP VAT Act and its rules and raised demand of Rs.8,94,082/- levying tax @ 14.5%. The 3rd respondent has given credit of the TOT tax of Rs.66,967/- paid by the petitioner and arrived at net tax due at Rs.8,27,315/- in the assessment order in Form VAT 305 vide A.O.No.127838, dated 04.08.2018. (d) Aggrieved, the petitioner filed appeal before the 2nd respondent but the appeal was dismissed vide order dated 22.10.2020 holding that the petitioner is liable to obtain VAT registration in terms of Section 17(5) of AP VAT Act. (e) The contention of the petitioner that Section 17(5)(b) is ultra vires to Section 17(3)(7) is an untenable contention for the reason that there is no bar to apply the provisions of Section 17(5) of the AP VAT Act even for a single purchase transaction made from outside the State. Therefore, the petitioner is liable to be registered as VAT dealer and since he has not done so, the 3rd respondent was right in treating the petitioner as VAT dealer and assessing him as such. (f) The contention of the petitioner that for the noncompliance of the provisions of Section ....
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....ct. Nextly he argued that Section 17(5)(b) of the AP VAT Act without reference to the quantum of the turnover is ultra vires to sub-section (3) & (7) of Section 17 as well as charging Section 4(2) of the AP VAT Act and is therefore liable to be struck down. 6. Per contra, while supporting the impugned assessment order and the appellate order confirming the assessment, learned Advocate General would submit that Section 17(5)(b) being an exception to Section 17(2)(3)(4), it cannot be said that the said provision is inconsistent with the other sub-sections. Learned Advocate General argued that Section 17(2) to (4) would operate when the dealer makes business of purchase and sale of goods within the State and falls within sub-sections (2) (3) or (4). However, if the dealer purchases or sales goods during the course of interstate trade or commerce, he will come within the ambit of Section 17(5) of the Act and he will be required to be registered as VAT dealer, but not as TOT dealer. He would argue that there is no mutual inconsistency between Sections 17(2)(3) and (4) on one hand and Section 17(5) on the other. Both would operate in two difference spheres. Sub-sections (2), (3) an....
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.... can be imposed at 25% only on the tax due as per Section 49 of AP VAT Act? (5) Whether the writ petition is not maintainable due to availability of alternative, efficacious remedy of appeal? 8. Point No.1: The crux of the issue lies in the interpretation of Section 17(5)(b) of the AP VAT Act. This Act is a consolidated law for levying Value Added Tax on sale or purchase of goods in the State of Andhra Pradesh. For the purpose of present case, the dealers can be divided into two categories i.e., (i) VAT dealers and (ii) TOT dealers. Under Section 2(43) of the AP VAT Act, a VAT dealer means a dealer who is registered for Value Added Tax (VAT), whereas, under Section 2(41) a Turn Over Tax dealer or TOT dealer is a dealer who is registered or liable to be registered for TOT. (a) Then, Section 4 which is a charging Section draws distinction between the two dealers in the context of their tax liability. As per Section 4(1), every VAT dealer shall be liable to pay tax on every sale of goods in the State (emphasis supplied) at the rates specified in the schedules. Whereas under Section 4(2), a dealer who is registered or liable to be registered for TOT or whose taxabl....
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....ted in Schedule VI. (e) every commission agent, broker, delcredere agent, auctioneer or any other mercantile agent by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any non-resident principal; (f) every dealer availing sales tax deferment or sales tax holiday; (g) every dealer executing works contract exceeding Rs.5,00,000/- (Rupees five lakhs only) for the State Government or local authority or every dealer opting to pay tax by way of composition on works contract; (h) every dealer liable to pay tax under sub-section (9) of section 4 of the Act; (6) xxxx (7) xxxx (8) xxxx (9) xxxx (10) xxxx (11) xxxx (a) As per Section 17(2), every dealer who is commencing the business and whose estimated taxable turnover for 12 consecutive months will be more than Rs.40,00,000/- shall be registered as a VAT dealer before commencement of the business. So under Section 17(2), a dealer who commences business can, on the estimate that his taxable turnover for the coming 12 consecutive months will exceed Rs.40,00,000/-, register as VAT dealer.....
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....4) and (7) shall be set aside. 11. We find no much force in the above contention. A close scrutiny of Section 17(5) would show, as argued by learned Advocate General, it is in the nature of an exception to Sub Sections (2) to (4). It must be reminded that a "proviso" or "an exception" is a legislative device in the hands of statute framers to except some class of persons, things, situations from out of the operation of an enactment. An exception or proviso sometimes will be employed after a general section so as to restrict the operative sphere of the said general enactment. Thus an exception as a legislative device is adopted only to exclude a part from the whole, which but for the exclusion, continues to be a part of it. (a) In S. Sundaram Pillai v. V.R. Pattabiraman AIR 1985 SC 582 = MANU/SC/0387/1985 the Apex Court made a survey of decisions on the aspect of interpretation of proviso / exception. It is mentioned that: "36. While interpreting a proviso care must be taken that it is used to remove special cases from the general enactment and provide for them separately. 37. In short, generally speaking, a proviso is intended to limit the enacted prov....
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....g the real intendment of the statutory provision." (b) In Union of India v. Sanjay Kumar Jain AIR 2004 SC 4139 = MANU/SC/0604/2004 the Apex Court observed that the normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which, but for the proviso would be within the purview of the enactment. 12. With the above jurisprudence when 17(5) is looked into, the said provision states that the dealers enumerated in Clause (a) to (h) shall be liable to be registered as VAT dealers irrespective of their taxable turnover and notwithstanding anything contained in Sub Sections (2), (3) and (4). As stated supra, we are concerned with 17(5)(b). It has now to be seen whether there is any apparent conflict or inconsistency between 17(5)(b) and sub-sections (2)(3)(4) & (7) and if so, how the conflict has to be resolved by applying the rule of construction. In the above context, in Padma Ben Banushali's case ( supra), cited by Advocate General, the Apex Court while resolving the alleged conflict between Section 47 and Order XXI Rule 2 CPC, evolved following principles of construction. "14. This rule of construction whi....
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....ed as VAT dealer. They are: (i) a dealer registered or liable to be registered under CST Act, 1956 or (ii) any dealer making purchases or sales in the course of interstate trade or commerce or (iii) dispatches any goods to a place outside the State otherwise than by way of sale (a) First category is concerned, it has to be seen whether petitioner is liable to be registered under CST Act, 1956. Section 7 of CST Act, 1956 lays down, every dealer liable to pay tax under the said Act shall make an application for registration. Then Section 6 explains the person who is liable to pay tax under the CST Act. The said Section says that every dealer shall be liable to pay tax under the said Act on all Sales of goods other than electrical energy effected by him in the course of inter-state trade or commerce during any year on and from the date so notified. The cumulative effect of Section 6 and 7 is that a dealer who effects sale of goods during the course of inter-state trade or commerce shall be liable to be registered. In the instant case the petitioner admittedly made a single purchase of paints from a dealer from Hyderabad but he did not effect sale of goods....
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....e of Kerala AIR 1957 SC 657, the Apex Court referred the judgment in Inland Revenue Commissioners v. Duke of Westminister [(1936) A.C. 24], wherein Lord Russell of Killowen observed thus: "I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if in accordance with a Court's view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case" The Apex Court in the above judgment ultimately held thus "29. It is no doubt true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed ....
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....plain and unambiguous expression used therein rather than from any notions which may be entertained by the court as to what is just or expedient." (v) In J.K.Steel Limited v. Union of India MANU/SC/0283/1968 = AIR 1970 SC 1173, the Apex Court while interpreting certain terms in Central Excises and Salt Act, 1944 referred to judgment in C.A. Abraham v. I.T.O, Kottayam [MANU/SC/0124/1960 = (1961) 41 ITR 25 (SC) wherein it was observed: "In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there may be any; the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer" The Apex Court also referred its own judgment in Commissioner of Income Tax v. Karamchand Premchand Ltd, Ahmedabad [MANU/SC/0186/1960 = (1960) 40 ITR 106 (SC) wherein it was observed that if there is any ambiguity of language in a fiscal statute, the benefit of that ambiguity must be given to the assessee (vi) In Member-secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd. MANU/SC/0279/1988 = AIR 1989 SC 611, the Apex Court observed: "6. It has to be bo....
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....g the several decisions, the Apex Court held the sugar industries would not come under the term 'vegetable products industry". It observed thus: "24. Construction of words and the meaning to be given for such words shall normally depend on the nature, scope and purpose of the statute in which it is occurring and to the fitness of the matter to the statute. The meaning given to the same word occurring in a social security measure or a regulating enactment may not be apposite or appropriate when the same word is interpreted with reference to a taxing statute (emphasis supplied). The Cess Act is a fiscal enactment. In the context in which the word 'vegetable' is used in Entry 15 'vegetable product' means product of or made of or out of vegetable. 'Vegetables' as understood in common parlance are not products of manufacture unless we say that agriculture is an industry for certain purposes and vegetables are products of that industry. In order to bring an industry within any of the entries in Schedule I it has to be seen what is the end product produced by that industry. Sugar cane is not a vegetable though it may be an agricultural product. If the bota....
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....trial purposes. The wider meaning given to the word 'used' in the judgment under challenge is untenable. Having regard to the fact that the said Act is a taxing statute, no court is justified in imputing to the legislature an intention that it has not clearly expressed in the language it has employed." (x) In Commissioner of Income Tax v. Kasturi & Sons Ltd. MANU/SC/1605/1999 = AIR 1999 SC 1275, the Apex Court was engaged in interpreting the words "money payable" used in Section 41(2) of the Income Tax Act. The facts were that the respondent before Apex Court was the public limited company engaged in publishing the newspaper 'The Hindu'. It purchased a dacota aircraft for speedier transport and delivery of its newspapers. The publishing company insured its aircraft with British Aviation Insurance Limited, Calcutta for sum of Rs.4,00,000/-. As per terms of the insurance contract, in the event of loss or damage in an accident to the aircraft, the insurance company was given an option to pay or replace or make good the accidental loss or damage to the aircraft. The respondents aircraft met with an accident on 25.12.1967 and became a total wreck. The insurer exercised its op....
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....rt made a classic exposition of how to interpret the tax statutes and tax exemption provisions and notifications. It held thus: "41. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause 9at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provision, the benefit must necessarily go in favour of subject / assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue / State." 16. The principles laid down in the above thicket of decisions can be summed up thus: (i) Imposition of tax since involve exaction of money by the State from the subjects, it cannot be done without the sanction of law. (ii) Tax statutes shall require strict interpretation having regard to the strict letter of the law but not its spirit or substance. (iii) When the language of the provisions of the statute is plain a....
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....se of imposing inter-state sales tax on all sales under Section 6 of the CST Act, every sale or purchase is regarded as inter-state trade or commerce. So, the employment of singular words in Section 3 is only with reference to Section 6 of the CST Act, 1956 and confine to said Act only. However, it must be noted, in spite of having this knowledge, still, the framers of AP VAT Act, 2005, have deliberately used the plural nouns viz., "purchases or sales" in Section 17(5)(b). Therefore, in our honest view, the aforesaid plural nouns cannot be said to have imbibed the singular nouns also. 18. We are also not oblivious of provisions of AP General Clauses Act, 1897 in this context. Section 3 (35) of the said Act defines the term "number" as words in singular shall include the plural and the words in the plural shall include the singular. It is true that if this definition is employed in Section 17(5)(b), then the plural words "purchases or sales" can also be taken to mean as "purchase or sale". However, as per Section 3 of A.P. General Clauses Act, the definitions enumerated in that section can be employed in the Acts enacted in the State of Andhra Pradesh after commencement of this A....
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....loyed in Section 4 of Partnership Act, it would amount to giving scope to the unincorporated association or body of persons like a firm can enter into partnership which is against the Partnership Law, the Apex Court held that Partnership Firms cannot form into another partnership firm. 20. Thus Point No.2 is concerned, the petitioner shall be treated as a TOT dealer only irrespective of his involvement in a single transaction of purchase from outside the State. The said single transaction of purchase is concerned, the same is liable to be taxed under Section 6 of the CST Act, 1956 but not under the provisions of AP VAT Act, 2005 for the reason that as per Section 5 of AP VAT Act, the said Act has no application to impose tax on sale or purchase of any goods which took place outside the State. The petitioner cannot be treated as casual trader also for the reason that U/s 2(7) of AP VAT Act a casual trader is a person who carries on occasional transactions of a business nature involving buying, selling or distribution of goods in the State, whether as petitioner made a single purchase from outside the State. This point is answered accordingly. 21. POINT No.3: According to the p....