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CASE NO.: Appeal (civil)  4649 of 2002

PETITIONER: M/s. Shakthi Seeds Pvt. Ltd.

RESPONDENT: Dy. Commnr. (CT) & Anr.

DATE OF JUDGMENT: 30/05/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT:

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1.      Challenge in this appeal is to the judgment of a Division  Bench of the Andhra Pradesh High Court dismissing the  Revision Petition filed by the appellant under Section 22(1) of  the Andhra Pradesh General Sales Tax Act, 1957 (in short the  ’Act’).  Before the High Court challenge was to the order  passed by the Sales Tax Appellate Tribunal, Andhra Pradesh  (in short the ’Tribunal’).  

2.      Background facts in a nutshell are as follows:         M/s. Shakthi Seeds (P) Ltd., the appellant herein, is a  private limited company and they are dealers in agricultural  seeds, chillies, paddy, sun-flower and other crops. It is an  assessee and a registered dealer under the Act. The  Commercial Tax Officer, Hyderguda Circle, Hyderabad, framed  final assessment orders in respect of the turnovers for the  assessment year 1992-93 granting benefit of G.O.Ms. No. 604,  Rev (S), dated 9.4.1981 and G.O.Ms. No. 129 Rev(CT II), dated  14.2.1989. However, the Deputy Commissioner (CT), Abids  Division, Hyderabad, on scrutiny of the assessment finalised  by the Commercial Tax Officer vide his proceedings dated  16.12.1993 noticed that the appellant after purchasing  chillies, paddy and sun-flower from unregistered dealers, sold  those goods as "certified and truthfully labelled seeds" and on  that basis claimed exemption in terms of G.O.No. 604 Revenue  (S), dated 9.4.1981. He, therefore, proceeded to revise the  assessment order and proposed tax on those items as the  appellant effected purchase from unregistered dealers and  therefore they are liable to tax as first purchasers within the  State of Andhra Pradesh. Before the Deputy Commissioner  (CT), the appellant contended that they are entitled to  exemption in terms of G.O.Ms. No 604 dated 9.4.1981 treating  the seeds as truthfully labelled and certified seeds.  In support  of their contention, they have also placed reliance on the  decision in the case of Gururaj Seeds (P) Ltd., v. State of  Andhra Pradesh & Ors. (18 APSTJ 46). The Deputy  Commissioner (CT), disallowed the claim of the appellant and  revised the assessment order framed by the Commercial Tax  Officer, Hyderguda, Hyderabad.  Then the matter was carried  before the Tribunal by the appellant. The Tribunal opining  that in order to claim exemption in terms of G.O.Ms. No 604  dated 9.4.1981,  the claimant should establish and prove that

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the seeds in question are certified seeds as well as truthfully  labelled seeds and that the appellant-dealer has failed to  adduce any satisfactory material and evidence to establish  these two conditions for grant of exemption in terms of  G.O.Ms. No. 604, dismissed the appeal by its order dated  13.3.2000. The order of the Tribunal was challenged before the  High Court by a revision petition on the ground that view  taken by the Tribunal that both the conditions should co-exist  for getting exemption under G.O.Ms. No. 604 is on a  misreading of the G.O.Ms. Tribunal’s view completely ignores  the clarification issued by the Government vide its  Memorandum No. 13630/CT-II(2)/89-19, dated 26.4.1994.   By the said office Memorandum, the Government had directed  the Commercial Tax Departmental Authorities to note that  both the certified seeds and/or truthfully labelled seeds are  entitled for exemption from tax in terms of GOMs. No. 604  dated 9.4.1981.  In that context, it was submitted that the  department could not have required the appellant-dealer to  produce evidence as regards accuracy or veracity of the  declaration regarding  the labelling.

3.      In support of the appeal, learned counsel for the  appellant reiterated its stand before the High Court.

4.      Learned counsel for the respondent on the other hand  supported the findings of the authorities, Tribunal and the  High Court.

5.      The reasoning of the Tribunal related to certified and   truthfully labelled seeds reads as follows:

"Regarding treatment with fungicides, it has to  be stated that not all fungicides treated are  certified and truthfully labelled seeds.   Because, even ordinary and high quality pure  seeds are also treated with fungicides by some  persons to prevent loss of seeds and future  seedlings from such seeds because of the  fungal infection of the said seeds of the seeding  purpose.  Besides there is prohibition to use  the said treated seeds for edible purpose also  after certain periods after which there is no  residual effect of such fungicides."

6.      In reply to the show cause notice issued the appellant  had clarified its stand as follows: "In this regard, we would like to bring to your  kind notice, that we have purchased processed  chilli seed, Paddy seed and Sunflower seed  from farmers, and not chillies, paddy or  sunflower commodities.  The above cited seeds  namely Chillis seed, paddy seed and Sunflower  seed have been processed, treated with  fungicides and packed by us using packing  material and sold under our brand name of  "Shakthi" as truthfully labelled seeds.   Moreover the said seeds were meant for  agricultural purpose only and not for food, feed  or oil purpose, since they were treated with  fungicides.  All seeds are first purchased only  from the farmers who are unregistered  dealers."

7.      There was no consideration of these aspects as

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apparently the High Court has lost sight of the substance of  the clarification.

8.      The G.O.Ms. No. 604 dated 9.4.1981 reads as follows:

"In exercise of powers conferred by sub-section  (1) of Section 9 of the Andhra Pradesh General  Sales Tax Act, 1957 (A.P. Act 6 of 1957) the  Governor of Andhra Pradesh hereby exempts  from the Tax payable under the said Act the  sales or purchases of all varieties of certified  and truthfully labelled seeds for agricultural  purposes.

       Sales of certified and truthfully labelled  seeds in the course of inter-State trade of  Commerce Exemption from CST".

9.      The Clarification Memorandum No. 13630/CT-II(2)/89- 19 dated 26.4.1994  reads as follows:

"In the G.O.Ms. No. 604 Revenue (s)  Department dated 9.4.81, the Government  issued orders exempting from the tax payable  under the A.P.G.S.T.Act the Sales or  Purchases of all varieties of certified and  truthfully labelled seeds for agricultural  purposes.  In the G.O.second read above, a  similar order was issued under the C.S.T.  Act  in respect of the above goods sold in the  course of inter\027state trade also.

       The     A.P. Seed       Growers Merchants and  Nurserymen Association, Hyderabad, National  Seeds Corporation, New Delhi and Peddireddy  Thimmaredy Farm Foundation, Hyderabad  have now represented to the Government that  even though the exemption granted in the  above G.Os. are applicable to both the  categories of seeds viz. certified seeds and or  truthfully labelled seeds some of the assessing  authorities are insisting that the seeds should  be certified as well as truthfully labelled to  become eligible for grant of exemption. Hence  they requested the Government to issue  clarification in the matter to remove the  ambiguity.

       The Government has examined the  matter in consultation with the Agriculture  and Co-operation Department and they hereby  clarify that both "certified seeds and/or  truthfully labelled seeds" are exempt from tax  as per the orders issued in G.O.Ms. No. 604  Revenue (s) Department dated 9.4.81 and  G.O.Ms. No. 129 Revenue (CT-II) Department  dated 14.2.89 as they are two types of seeds  sold for Agricultural purposes."

10.     Rule 7 of the Seeds Rules, 1968 (in short the ’Rules’)  reads as follows:

"Rule 7. Responsibility for marking or labeling  \026 When seed of a notified kind or variety is  offered for sale under Sec.7 each container

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shall be marked or labelled in the manner  hereinafter specified.  The person whose name  appears on the mark or label shall be  responsible for the accuracy of the information  required to appear on the mark or label so long  as seed is contained in the unopened original  container:

Provided, however, that such person shall not  be responsible for the accuracy of the  statement appearing on the mark or label if  the seed is removed from the original  unopened container, or he shall not be  responsible for the accuracy of the germination  statement beyond the date of validity indicated  on the mark or label".

11.     The Clarification Memorandum dated 26.4.1994 clarified  that two alternatives are available i.e. either certified or  truthfully labelled.  ’Certified seeds’ is defined in Section 9 of  the Seeds Act, 1966 (in short the ’Seeds Act’). Reference in this  context also may be made to the Rule 2(e) of the Rules dealing  with certified seeds.

12.     Learned counsel for the appellant conceded that there  was no claim by the appellant about sale of certified seeds.   Rule 7 deals with marking or labelling.  

13.     It appears that Tribunal proceeded on the basis that  the  seeds were required to be certified and truthfully labelled for  the purpose of eligibility for exemption.  In reality, as clearly  stated in the clarificatory memorandum they are alternatives.

14.     The High Court also proceeded on the same basis  overlooking the clarificatory memorandum

15.     In the circumstances, it would be appropriate for the  Tribunal to examine the factual aspect, keeping in view the  clarificatory memorandum providing alternatives. The parties  shall be free to lead fresh evidence.  The appellant shall  produce evidence to show that the seeds were truthfully  labelled.  It cannot be said that the authorities cannot require  the dealer to satisfy the requirement that the seeds were  truthfully labelled.  There is no such blanket protection. In  order to be satisfied about the acceptability of the claim, they  can require the assessee to justify the claim and that it is  entitled to the exemption.  

16.     The appeal is accordingly allowed with no orders as to  costs.