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PETITIONER: RALLIS INDIA LTD.

       Vs.

RESPONDENT: STATE OF ANDHRA PRADESH

DATE OF JUDGMENT12/02/1980

BENCH: KOSHAL, A.D. BENCH: KOSHAL, A.D. PATHAK, R.S.

CITATION:  1980 AIR  749            1980 SCR  (2)1028  1980 SCC  (2) 315

ACT:      Central Sales Tax Act 1956-Section 15(b)-Scope of.

HEADNOTE:      On the  ground that  the dealers  have not  charged and collected Central  Sales Tax  during the  period 1st  April, 1969 to  9th June,  1969 the Commercial Tax Officer, allowed exemption under  section 10  of the Central Sales Tax Act in respect of certain turn-over of the appellant which included the price  realised on  account  of  inter-state  sales.  In respect of  a second  set of transactions which involved the purchase value of cotton sold during the year through inter- state  sales  the  Commercial  Tax  Officer  held  that  the appellant was  entitled to  exemption under  the proviso  to section 6 of the A.P. General Sales Tax Act.      In 1972  section 15(b)  of the  Central Act was amended with retrospective effect from 1st October, 1958 and in 1974 section 6  of the  State Act  was amended with retrospective effect from the same date.      The Deputy Commissioner of Commercial Taxes revised the assessment order  of the Commercial Tax Officer passed under the State  Act on  the ground that in view of the provisions of section  6 as  amended in  1974  the  appellant  was  not entitled to any exemption during the above period. The Sales Tax Appellate  Tribunal dismissed  the appellant’s appeal on the view that section 6 of the State Act did not talk of any exemption either  before or after its amendment in 1974. The High Court dismissed the appellant’s appeal holding that the exemption granted by the C.T.O. was patently wrong.      Dismissing the Appeal, ^      HELD: 1.  Section 10  of the Central Act which makes no reference to any tax leviable under a State Act can be of no assistance to the appellant. Granting that the appellant did not collect  any tax under the Central Act during the period in question  on the  ground that no such tax could have been levied or collected so that it becomes fully entitled to the benefit of  the exemption enacted by the section, that would only mean  that central  sales tax cannot be charged from it in respect  of sales  covered by  the section. No demand had been made from it for any tax leviable under the Central Act in respect  of such sales and the appellant could not derive

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any benefit from section 10 of the Central Act in the matter of its assessment under the State Act. [1033G-H]      2. In  so far  as the assessment under the State Act is concerned all  that the  C.T.O. could have meant by granting exemption was  that the appellant became liable to pay a tax under the  opening para  of the  section; but that since the appellant was also entitled to a refund of such tax the same was taken  to have  been paid  by and  refunded to  it.  The assessment order made 1029 under the  proviso to section 6 of the State Act and section 15  (b)   of  the   Central  Act  as  they  stood  then  was unexceptionable. [1034E-F]      3. Under  section 6  as amended  the liability  to  tax remained  unchanged   but  the  entitlement  to  refund  was abolished an  was substituted by a right to reimbursement of the tax  which arose  only if the concerned goods were later on sold in the course of inter-state trade under the Central Act and tax under that Act was paid in respect thereof. Such reimbursement would  not be  available  merely  because  the goods in question had been sold in the course of inter-state trade or  commerce when they were not subjected to tax under the Central  Act. No  such tax  was  paid.  The  proviso  to section 6  as amended in 1974 can be of no assistance to the appellant. [1035A-B]      4. The  language of  clause (b)  of section  15 of  the Central Act  is the  same as  that of the amended proviso to section 6  of the  State Act.  It clearly means that the tax under the  State Act  would be reimbursible only to a dealer who has  paid tax under the State Act in respect of the sale of the  goods in question in the course of inter-state trade or commerce.                                                    [1035C-D]      5. The  argument that  the Deputy  Commissioner had  no power to  cancel the  order of  refund is fallacious. He has done nothing  more than  to revise  an order  of the  C.T.O. which has  been varied  only in  so far  as it  was  not  in conformity with  the law  deemed to  have been prevailing on the date  of the  assessment by  virtue of the retrospective amendment  of  section  6  of  the  State  Act.  The  Deputy Commissioner had  not only  the power  but was duty bound to strike down the order of refund as being illegal. [1035F-G]      6. Rule  27A can  be of  little help  to the  appellant inasmuch as  even if  it can  be construed  as  laying  down something in  its  favour,  the  rule  cannot  override  the provisions of the Act. [1036A]      Daita Suryanarayana  and Company  v.  State  of  Andhra Pradesh 39 S.T.C. 500 approved.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1897 of 1978.      From the  Judgment and  Order dated  19-9-1977  of  the Andhra Pradesh High Court Tax Revision Petition No. 66/76.      S. T.  Desai, T.  A. Ramachandran, Mrs. J. Ramachandran and M. N. Tandon for the Appellant.      T. S.  Krishnamoorthy Iyer, and B. Parthasarshi for the Respondent.      The Judgment of the Court was delivered by      KOSHAL, J.  The question  which falls for determination in the  appeal by  certificate granted  by the High Court of Andhra  Pradesh   against  its   judgment  dated   the  19th September, 1977  is whether the appellant which is a limited

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company is  not liable  to make  good to the State Sales Tax authorities the amount of sales tax leviable under section 6 of the  Andhra Pradesh  General Sales  Tax Act  (hereinafter referred to  as the  A. P.  Act) in respect of the turn-over covering the purchase by the petitioner of cotton during the period  1-4-1969  to  8-6-1969,  which  turn-over  had  been exempted from sales tax by 1030 the Commercial  Tax Officer,  No.  II,  Guntur  (C.T.O.  for short) in  his assessment  order dated  the 30th  of  April, 1971.      2. Two  assessment orders  were passed by the C.T.O. on the date  last mentioned.  One of them covered the turn-over of the  appellant liable  to tax under the Central Sales Tax Act (hereinafter referred to as the Central Act). That turn- over included  a sum  of Rs. 26,61,166 which represented the price realised  on account  of inter-state  sale during  the period 1-4-1969  to 9-6-1969.  In respect of this amount the order made by the C.T.O. was:           "The  dealers   have  not  charged  and  collected      Central sales Tax for the period from 1-4-69 to 9-6-69.      The turnover of Rs. 26,61,166.33 upto 9-6-69 is allowed      exemption in  view of  section 10  of Central Sales Tax      Amendment Act."      The second  assessment order  was passed under the A.P. Act and  therein the  C.T.O., while considering a sum of Rs. 54,87,879/- being  the purchase  value of cotton sold during the  year   through  inter-state  sale,  remarked  that  the appellant was  entitled to  ’exemption’ under the proviso to section 6  of the A. P. Act in respect thereof. He finalised the assessment accordingly.      3. In  the year  1972, clause  (b) of section 15 of the Central  Act   was  amended  retrospectively  so  as  to  be effective from 1st October, 1958. Two years later, section 6 of the A.P. Act was also amended and made effective from the same  date.   On  the  21st  of  August,  1974,  the  Deputy Commissioner  (Commercial   Taxes)  hereinafter  called  the D.C.C.T.) issued  a notice  to the appellant calling upon it to show  cause why  the ’exemption’  granted to  it  by  the C.T.O.  should   not  be   cancelled.  After  receiving  the appellant’s reply, the D.C.C.T. revised the assessment order dated 30th  of April,  1971, passed  under the  A.P. Act and held that  in view of the provisions of section 6 thereof as amended in  1974 the  appellant  was  not  entitled  to  any ’exemption’ in  respect of  the purchase price (amounting to Rs. 23,00,057/-)  of cotton  sold by  it in  the  course  of interstate trade  for Rs. 26,61,166/- during the period 1-4- 1969 to  8-6-1969. The  order of the D.C.C.T. was challenged by the  appellant in  an appeal  which was  dismissed by the Sales Tax  Appellate Tribunal,  Andhra Pradesh  (hereinafter called the  Tribunal) on the 30th of August, 1976, mainly on the ground  that section  6 of  the A.P. Act did not talk of any ’exemption’  either before  or after  its  amendment  in 1974. The  appellant sought  a revision  of  the  Tribunal’s order by  the High Court under section 22(1) of the A.P. Act but remained  unsuccessful as  the High  Court  was  of  the opinion (for 1031 which it  relied upon  Vadivelu  Chetty  v.  Commercial  Tax Officer, Tirupathi(1) and Daita Suryanarayana and Company v. State of Andhra Pradesh(2) that the exemption granted by the C.T.O. was  ’patently wrong’. The High Court however granted a certificate  declaring the case to be a fit one for appeal to  the   Supreme  Court  under  article  133(1)(c)  of  the Constitution of  India read  with section 109 of the Code of

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Civil Procedure.      4. In  order to  appreciate the  contentions raised  on behalf of  the appellant  it is  necessary  to  examine  the various relevant  legislative provisions  which are  set out below:           Section 10  of the  Central Sales  Tax (Amendment)      Act, 1969 (hereinafter referred to as the 1969 Act).           "10.  Exemption  from  liability  to  pay  tax  in      certain cases.           (1) Where any sale of goods in the course of inter      state trade  or commerce  has been  effected during the      period between  the 10th day of November, 1961, and the      9th day  of June,  1969, and  the dealer effecting such      sale has  not collected any tax under the principal Act      on the  ground that  no such tax could have been levied      or collected  in respect of such sale or any portion of      the turn-over  relating to  such sale  and no  such tax      could have  been levied  or collected if the amendments      made in  the principal  Act by  this Act  had not  been      made,  then,   notwithstanding  anything  contained  in      section 9  on the said amendments, the dealer shall not      be liable  to pay  any tax  under the principal Act, as      amended by  this Act,  in respect  of such sale or such      part of the turn-over relating to such sale.           (2) For the purposes of sub-section(1), the burden      of  proving   that  no  tax  was  collected  under  the      principal Act  in respect  of any  sale referred  to in      sub-section (1)  or in  respect of  any portion  of the      turn-over relating  to such sale shall be on the dealer      effecting such sale."      Section 6 of the A. P. Act as on 30-4-1971           "6.   Tax    in   respect   of   declared   goods-      Notwithstanding anything  contained in  section 5,  the      sale or purchase of declared goods by a dealer shall be      liable to  tax at  the rate,  and only  at the point of      sale or purchase, specified against 1032      each in  the Third  Schedule, on  his turn-over of such      sales or  purchases for  each year  irrespective of the      quantum of  his turn-over  in such  goods; and  the tax      shall be  assessed, levied and collected in such manner      as may be prescribed:           Provided that  where any  such goods  on which tax      has been  so levied  are sold  in the  course of inter-      state trade  or commerce,  the tax  so levied  shall be      refunded to  such person, in such manner and subject to      such conditions as may be prescribed."           The proviso  to section  6 of  the A.  P.  Act  as      amended in  1974 retrospectively with effect from 1-10-      1958.           ’Provided that where any such goods on which a tax      has been  so levied  are sold  in the  course of inter-      state trade or commerce and tax has been paid under the      Central Sales  Tax Act, 1956. in respect of the sale of      such goods  in  the  course  of  inter-state  trade  or      commerce the  tax so  levied shall be reimbursed to the      person making  such sale  in the  course of inter-state      trade or  commerce, in  such manner and subject to such      conditions as may be prescribed."           Sub-rule (1)  of rule  27-A of  the  Rules  framed      under the A.P. Act as on 30-4-1971           "Where any tax has been levied and collected under      section 6 in respect of the sale or purchase inside the      State  of   any  declared  goods  and  such  goods  are      subsequently sold in the course of inter-state trade or

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    commerce, the  tax so  levied and  collected  shall  be      refunded to the person in the manner and subject to the      conditions specified in sub-rules (2) to (4)."           Sub-rule (1)  of  the  said  rule  27A  After  its           amendment 1-8-1974           "Where any tax has been levied and collected under      section 6 in respect of the sale or purchase inside the      State  of   any  declared  goods  and  such  goods  are      subsequently sold in the course of inter-state trade or      commerce, the  tax so  levied and  collected  shall  be      reimbursed to  the person  in the manner and subject to      the conditions specified in sub-rules (2) to (4):           Provided that  the refund shall not be made unless      the tax  payable under  the Central  Sales Tax  Act  is      paid." 1033           Clauses (a)  and (b)  of section 15 of the Central      Act as in force on 30-4-1971           "15. Restrictions  and conditions in regard to tax      on sale  or purchase  of declared goods within a State-      Every sales  tax law  of a State shall, in so far as it      imposes or  authorises the  imposition of  a tax on the      sale or  purchase of  declared goods, be subject to the      following restrictions and conditions, namely:-           (a)   the tax payable under that law in respect of                any sale or purchase of such goods inside the                State shall  be levied only in respect of the                last sale  or purchase  inside the  State and                shall not  exceed two per cent of the sale or                purchase price.           (b)  where a tax has been levied under that law in                respect of  the sale  or purchase  inside the                State of  any declared  goods and  such goods                are sold  in the  course of inter-state trade                or commerce,  the  tax  so  levied  shall  be                refunded to  such person  in such  manner and                subject to such conditions as may be provided                in any law in force in that State."           Clause (b)  of section  15 of  the Central  Act as      amended in  1972 retrospectively with effect from 1-10-      1958           "(b) where a tax has been levied under that law in                respect of  the sale  or purchase  inside the                State of  any declared  goods and  such goods                are sold  in the  course of inter-State trade                or commerce, and tax has been paid under this                Act in  respect of  the sale of such goods in                the course  of inter-state trade or commerce,                the  tax  levied  under  such  law  shall  be                reimbursed to  the person making such sale in                the course  of inter-state  trade or commerce                in such manner and subject to such conditions                as may  be provided  in any  law in  force in                that State."      5. Section 10 of the 1969 Act makes no reference at all to any  tax leviable under the State Act. It concerns itself only with  the tax  payable under  the Central  Act which it calls the  ’Principal Act’  and says that a dealer shall not be liable  to pay any such tax for the period between 10-11- 1964 and  9-6-1969 if certain conditions are satisfied. Much reliance  has   been  placed  by  learned  counsel  for  the appellant on this section which, in our opinion, however, is of no  assistance to  him. It  may be taken for granted that the appellant  did not collect any tax under the Central Act on the sale of goods effected by it in

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1034 the course  of inter-state  trade during the period 1-4-1969 to 9-6-1969  on the  ground that no such tax could have been levied or  collected in  respect of  such sale,  so that  it becomes fully  entitled to  the  benefit  of  the  exemption enacted by  the section;  but  that  would  only  mean  that Central sales  tax cannot  be charged  from it in respect of such sale. As it is, no demand has been made from it for any tax leviable  under the  Central Act in respect of such sale and we  do not  see how the appellant could benefit from the said section  10 in  the matter  of its  assessment for  the period in  question under  the A.P.  Act. All  that  we  are concerned with  is the liability of the appellant to pay tax on the  purchase of  cotton which it sold during that period in the  course of  inter-state trade  and that  is a  matter which has  to be  decided with reference to section 6 of the A.P. Act,  rule 27-A  extracted above  and section 15 of the Central Act.      6. As  on 30-4-1971  the provisions of section 6 of the A.P. Act  laid down that if goods were sold in the course of inter-state trade or commerce and tax had been levied on the sale or  purchase  there  of  under  that  Act,  the  dealer concerned would be entitled to refund of such tax. As on the date of  assessment therefore  the appellant  was within its rights to  claim refund of any tax that it was liable to pay on the  purchase of cotton later sold by it in the course of inter-state trade;  and although the section did not talk of any ’exemption’,  all that  the C.T.O.  could have  meant by granting the  appellant ’exemption  from the tax was that it became liable  to pay  a tax  under the  opening para of the section but as it was also entitled to a refund of such tax, the same  was taken to have been paid by and refunded to it. As the section then stood therefore the assessment order was unexceptionable. This was also the position under clause (b) of section  15 of  the Central  Act the language of which is practically the  same as  of the proviso to section 6 of the A.P. Act.      7. The  matter  however  does  not  end  there  as  the amendment of  section 15 of the Central Act in 1972 and that of section  6 of the A.P. Act in 1974 made a real difference which appears  to us  to be  an insurmountable hurdle in the way of  the appellant’s  stand being  accepted.  As  already stated, both  the amendments  were retrospective so as to be effective from the 1st of October, 1958. That means that the law to  be applied  to the  assessment finalised through the two orders dated 30th of April, 1971, by the C.T.O. was that as modified  by the  two amendments.  Of course  we are here concerned only  with the  order of assessment made under the A.P. Act.  That order  would be  good if it is in conformity with the provisions of the amended section 6 of the A.P. Act but not  otherwise. Under  the amended section the liability to tax 1035 remained  unchanged   but  the  entitlement  to  refund  was abolished and was substituted by a right to reimbursement of the tax  which arose  only if the concerned goods were later on sold in the course of inter-state trade or commerce under the Central  Act and  tax under that Act was paid in respect thereof. Such  reimbursement would  not be avaialable merely because the goods in question had been sold in the course of inter-state trade  or commerce  when they were not subjected to tax  under the  Central Act.  Admittedly no  such tax was paid by  the appellant in the course of inter-trade on goods regarding the  purchase of  which reimbursement  of the  tax leviable under  the A.P.  Act is  claimed.  The  proviso  to

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section 6  as amended  in 1974 therefore is of no assistance to it.      8. Nor does the amended clause (b) of section 15 of the Central Act  come to  the appellant’s  aid, as  the language used therein,  for all  practical purposes,  is the  same as that of the amended proviso to section 6 of the A.P. Act and clearly means  that the  tax under  the A.P.  Act  would  be reimbursible only  to a  dealer who  has paid  tax under the Central Act  in respect of the sale of the goods in question in the course of inter-state trade or commerce.      9. Faced  with the  above situation, Mr. Desai, Learned counsel for  the appellant,  pressed into  service  a  novel contention to  the effect  that the appellant was not asking for any  reimbursement or  refund, that  it was the D.C.C.T. who had  cancelled the  order of  refund  (inherent  in  the ’exemption’ granted  by the  C.T.O.) and  that there  was no provision authorising the D.C.C.T. to force the appellant to return any  amount paid  to it  as a refund. The argument is obviously fallacious.  The D.C.C.T.  has done  nothing  more than to  revise an order of the C.T.O. which has been varied only in  so far  as it  was not  in conformity  with the law deemed to have been prevailing on the date of the assessment by virtue of the retrospective amendment of section 6 of the A.P. Act.  It is  conceded by Mr. Desai that the ’exemption’ has to be regarded as a composite order of levy plus refund. That part of it which granted a refund was illegal under the amended proviso  to section 6 of the A.P. Act inasmuch as no reimbursement was due in respect of goods on which tax under the Central  Act had  not been  paid. The D.C.C.T. therefore had not only the power but was duty-bound to strike down the order of refund as being illegal. The order of the C.T.O. as revised by  the D.C.C.T.  thus is reduced to an order merely of levy  of the  tax due  under  the  opening  paragraph  of section 6  of the  A.P. Act  so that  the appellant  becomes liable to pay such tax.      10. The only other argument put forward by Mr. Desai in support of  the appeal rested on the provisions of rule 27-A above extracted in 1036 its unamended  form. The rule can obviously be of no help to him inasmuch  as even  if it can be construed as laying down something in  favour of the appellant it cannot override the provisions of the Act under which it is framed. No amount of argument  would   make  a  rule  over-ride  or  control  the legislative enactment  under the authority of which it comes into being  and that  is why the rule was amended in 1974 so as to conform to the parent statute.      11. It  may be stated that at one stage of the argument Mr. Desai  drew our  attention to the fact that by reason of the amendments  made in  the statute  law and the consequent demand by the D.C.C.T. for the refunded amount the appellant had been  placed under  a burden which did not fall on those who collected  the Central sales tax from the purchasers and paid it to the Government because they were held entitled to refund of  the tax  under the  A.P. Act even though they had not paid  anything out  of their own pocket as tax under the Central  Act.   However,  as   he  did   not  challenge  the constitutional validity  of any  of the  amended sections he did not  pursue the  matter further  and  we  need  take  no further notice of it.      12. We  might mention here that Daita Suryanarayana and Company’s case  (supra) on  which the  High Court  relied in support of  the impugned  judgment takes  a view  of the law which is  in conformity  with the opinion expressed above by us and we unreservedly approve of the same.

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    13. In the result the appeal fails and is dismissed but with no order as to costs. P.B.R.                                     Appeal dismissed. 1037