REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6694   OF 2008 (Arising out of SLP (C) No. 21538 of 2006)

M/s. Andhra Agencies   ….Appellant  

Versus

State of A.P. ….Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.

2. Challenge in this appeal is to the judgment of the Division Bench of the

Andhra Pradesh High Court dismissing the Revision Petitions and special appeals

filed by several assessees under Section 22(1) (so far as the revisions are concerned)

and Section 23(1)  (so  far as  the  appeals  are concerned) of  the  Andhra Pradesh

General Sales Tax, 1957 (in short the ‘Act’).  The basic issues involved are the same.

For different assessment years, orders were passed by exercising revisional power by

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the  Commissioner of  Sales  Tax.  In  some  cases  Deputy  Commissioner  exercised

revisional power. The issue involved was whether the value representing the credit

notes  issued by the manufacturers to  the distributors were to be included in the

taxable  turnover.  All  the  assessees  involved  were carrying business  in  liquor as

distributors of the brand manufactured by M/s. Shaw Wallace & Co. Ltd. And M/s.

Vinadale Distilleries (P) Ltd.,  Hyderabad.  For the relevant assessment years, sales

tax was leviable on the first and last sale of the total sales affected. At the same time

as  per  the  proviso  to  Schedule  VI  the  intermediate  dealers  are taxable  on  the

differential turnover i.e.  the intermediate dealers are entitled for exclusion of  the

turnover which had already suffered tax. The assessees in question are intermediate

dealers which are liable to tax only on the differential turnover i.e. after excluding the

turnover which had already suffered tax.  It is the case of the assessees that they used

to purchase various brands of liquor from the two manufacturers who are the first

sellers and who are liable to be taxed on the total turnover in so far as their sales are

concerned.  After the sales were affected by the dealers in question they have declared

the differential turnover i.e. the difference between the purchase price and the sales

price which was subjected to tax by the assessing officer. However, it came to light

that the assessees had received periodical credit notes representing the discount i.e.

either annual discount or quarterly discount from the manufacturers.  It  was the

stand of the Revenue that they were not taken into account while making assessment

though  they  were  entered  in  the  books  of  accounts.  These  facts  came to  light

subsequently when the task force of the department verified the books of account of

the above two manufacturers.  Therefore, revisional proceedings were initiated to

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include the amounts in question in the taxable turnover in respect of the amounts

representing the value covered by the Credit notes.  In some cases the Commissioner

passed  revisional orders because according to  him while revising the assessment,

Deputy Commissioner had not taken the correct figures.  Assessees’ stand before the

Authorities as well as the High Court was that the first seller had collected tax on the

total turnover representing the sale prices from the respective dealers and the first

seller  manufacturers  claimed  reduction/rebate  in  their  turnover representing  the

credit notes and obtain reduction/rebate of the tax from the department. Therefore,

such amounts should not have been treated as a part of the taxable turnover in the

hands of the dealers who are the subsequent sellers.  The stand of the Revenue was

that when the manufacturer returned a part of the sale consideration under the credit

notes, the returned amount under the credit notes includes a part of the tax that was

already  collected  since  the  tax  collected  was  an  inseparable  part  of  the  sale

consideration.  The High Court was of  the view that the basic question was whether

value of the credit notes goes to reduce the purchase turnover of the dealers or not.

The High Court found that the Revenue’s stand was correct.

3. In support of the appeal learned counsel for the appellant submitted that

the whole seller had paid tax on the whole amount before adjustment of the credit

notes.  Therefore the revenue was not justified in levying further demand.

4. Learned  counsel  for  the  Revenue  on  the  other  hand  supported  the

judgments of the Authorities and the High Court.

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5. The  basic  issue  can be  better appreciated  by  way of  an illustration.

Hypothetically taking the sale price to be Rs.100/-, the tax to be paid by the selling

dealers has to be on 100.   He may collect 90, after giving discount. If the sale price of

the intermediate seller is 110 his liability to pay tax shall be on 10 i.e. 110-100.  The

department’s stand is that it should be 20 i.e. 110-90. This stand will not be correct if

the first seller had paid tax on 100.  Therefore, it has to be verified as to what was the

amount on which tax was paid on the illustrative figures given above by the selling

dealer. The stand of the assesses before the Tribunal and the High Court was that

they were not given personal hearing and only on consideration of their objections,

the  orders were passed by the authorities.  The Tribunal and the High Court held

that since objections were considered, there was no need for giving personal hearing.

Such conclusion is clearly unsustainable.   

6. It is conceded that the books of accounts were not produced before the

authorities. Additionally, there was no document produced to show that the selling

dealer had paid tax at 100 i.e. illustrative figure given above.  It appears that certain

documents relating to the purchases by the assessees i.e. sale bills and memos of the

selling dealers were produced to show as to the amount on which the tax was paid by

the selling dealers.  These apparently were not considered because of the fact that the

books of account were not produced by the assessee.  The stand of the assessees is

that because the documents were seized by certain taxing authorities, they could not

be  produced.   It  is  stated  by  learned counsel  for the  assessee  that  if  given the

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opportunity, they shall produce the documents.

7. The VIth Schedule as substituted by Act No. 22 of 1995 with effect from

1st April, 1995 relates to goods in respect of which the tax is leviable under Section 5.

The relevant provision reads as follows :

“Provided that for the purpose of liquor at any point of sale other than the first point of sale and the last point of sale, the turnover of the goods liable to tax shall be arrived at by deducting the turnover  of  such  goods  on  which  tax  has  been  levied  at  the immediately preceding point of sale.

Provided further in respect  of  goods  other than liquor mentioned in this Schedule, tax to be paid at any point of sale other than First Point of Sale, shall be determined after deducting the tax levied on the turnover of  such goods  at the immediately preceding point  of  sale  by  a  registered  dealer from the  tax leviable  on  the turnover of the same goods at the point of sale by selling dealer.”  

8. As the adjudication to the basic issue involved depends upon the amount

on which tax has been paid by the selling dealer, it would be appropriate to permit

the assessee to produce the books of accounts for adjudication before the concerted

Deputy  Commissioner.  In  the  instant  case  it  is  the  Dy.  Commissioner  (CT)

Sikandrabad.   The assessees  shall  appear before the said  authority on 4.11.2008

without further notice.  It shall produce evidence to show that the tax has been paid

by the selling dealer on the illustrative figure of 100 given in the illustrative figure.

The said authority shall verify the correctness  of  the claim with reference to  the

documents to be produced.   If it is established, tax shall be payable on 10 of the

illustration.  Otherwise, the Revenues’ stand shall stand established.  

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9.  The appeal is accordingly disposed of.

………………………………….J.           (Dr. ARIJIT PASAYAT)

   ………………………………….J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, November 18, 2008  

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                    REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6693 OF 2008 (Arising out of SLP(C) No. 7656 of 2007)

M/s. KUMAR SPIRITS PVT. LTD. ETC.ETC. ….Appellant  

Versus

State of A.P. ….Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1.       Leave granted.

2. The issues in the present appeal are similar with those

which form the subject matter of challenge in the appeal arising out

of SLP (C) 21538 of 2006.  The appeal has been disposed of by a

separate order today.  The present appeal is also disposed of on the

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same terms as were indicated in the appeal relating to SLP (C) 21538

of 2006.

     ………………………………….J. (Dr. ARIJIT PASAYAT)

       ………………………………….J.         (Dr. MUKUNDAKAM SHARMA)

New Delhi, November 18, 2008  

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