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CASE NO.: Appeal (civil)  4832 of 2007

PETITIONER: STATE OF ANDHRA PRADESH & ANR

RESPONDENT: M/S CONCAP CAPACITORS,BALANAGAR, HYDERABAD & ORS

DATE OF JUDGMENT: 12/10/2007

BENCH: C.K. THAKKER & ALTAMAS KABIR

JUDGMENT: J U D G M E N T ARISING OUT OF SPECIAL LEAVE PETITION (C) NO. 13207 OF 2006 C.K. THAKKER, J.

1.              Leave granted.

2.              This appeal is filed by the State of  Andhra Pradesh & Anr. (\021Revenue\022 for short)  against common judgment and order dated August  31, 2005 in several Revisions. By the impugned  order, the High Court allowed Tax Revision  Cases (TRC) filed by manufacturers, dealers and  traders (\021assessee\022 for short) and held that  \021Capacitors\022 is one of the items of \021electronic  goods\022 or components, taxable at a concessional  rate of tax under the Andhra Pradesh General  Sales Tax Act, 1957 (hereinafter referred to as  \021the State Act\022) as also under the Central  Sales Tax Act, 1956 (hereinafter referred to as  \021the Central Act\022). 3.              To appreciate the issue raised by the  Revenue, few relevant facts may be stated. 4.              The respondents in this appeal are  manufacturers, dealers or traders of electronic  goods, components and materials. They are duly  registered under the State Act as well as  Central Act. Their claim was that Capacitors,  manufactured by them, was exigible to tax at a  concessional rate as \021electronic goods\022 in  terms of various Government Orders issued from  time to time and not as \021electric goods\022  subject to higher tax. It was their case that  the Assessing Authorities had taken conflicting  views in different cases. In some cases, while  making assessment orders, they accepted the  case of  manufacturers/dealers/traders treating  Capacitors as \021electronic goods\022 and levied  concessional rate of tax; while in other cases,  the Assessing Authorities negatived such claim  as to concessional rate of tax and ordered to  levy Capacitors as \021electric goods\022. Where the  Assessing Authorities had decided against the  assessee, the assessee challenged the action  before the Tribunal and where the issue was  decided by the Authorities in favour of  assessee, the Revenue had challenged such  decision. All the matters were, therefore,  placed before the Sales Tax Appellate Tribunal,  Andhra Pradesh, Hyderabad. The Tribunal

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considered the rival contentions of the parties  as also provisions of the State Act and Central  Act and various G.O.Ms. and observed that the  item in question i.e. Capacitors did not  operate on electronic principle and could not  be considered as \021electronic\022 goods or  component for the purpose of concessional rate  of tax. It, therefore, remanded the cases to  the Assessing Authorities to pass fresh  assessment orders giving opportunity to the  assessee to produce any material to show that  they sold Capacitors which could be said to be  \021electronic goods\022. 5.              Being aggrieved by the orders passed  by the Tribunal, the assessee approached the  High Court of Andhra Pradesh by filing  Revisions. The High Court, on consideration of  relevant provisions of law as also various  G.O.Ms. and referring to several decisions,  held that from the relevant material, it was  clearly established that \021Capacitors\022 would  fall under the category of \021electronic goods\022  and the Tribunal was wrong in upholding the  contention of Revenue that the item could not  be said to be electronic goods. The High Court  also held that in G.O.Ms. issued by the Revenue  from time to time, various items were expressly  specified and Capacitors was one of them. In  view of specific mention of the item, the  Revenue was bound to grant benefit to the  assessee of concessional rate of tax and the  Tribunal was not justified in considering the  question on the basis of \021operating principle\022.  The said process could have been undertaken by  the Tribunal had there not been a specific  mention of the item and the question was  required to be decided on general principle and  practice. But once there was a list of  electronic items prepared by the Electronic  Commission and G.O.Ms. referred to those items  wherein \021Capacitors\022 was included, only thing  the Tribunal required to do was to ascertain  whether the item found place in the list or  not. Once the item is included in the list, no  further inquiry could have been undertaken.  Accordingly, all Revisions were allowed and the  issue was answered in favour of the assessee. 6.              The Revenue has challenged in this  Court the decision of the High Court. On July  31, 2006 delay was condoned and notice was  issued. Affidavits in reply and rejoinder were  thereafter filed and the matters were placed  for final disposal. 7.              We have heard learned counsel for the  parties. 8.              The learned counsel for the Revenue  challenged the decision of the High Court. He  submitted that the High Court was not at all  justified in interfering with the order passed  by the Tribunal. He urged that a finding of  fact was recorded by the Tribunal which was  \021final\022 and could not have been interfered with  by the High Court in Revisions. It was also  submitted that the Tribunal, in any case, had  remanded the matter and it was thus not a

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\021final order\022 which could have been disturbed  by the High Court. If the assessee was in a  position to convince the Authorities that he  was entitled to concessional rate of tax, the  Authorities would have decided the case in his  favour. The High Court was, therefore, not  right in entertaining and allowing Revisions.  The counsel submitted that where a particular  item is subject to payment of tax and the case  of the assessee is that he is not liable to pay  tax or is liable to pay tax at a concessional  rate, the burden is on him to establish such  case as it is an exception to the general rule.  Such provisions of law\027primary or delegated\027 must be construed strictly. It was also argued  that the Tribunal was wholly justified in  considering the question on \021operating  principle\022. The Tribunal noted that so far as  \021Capacitors\022 is concerned, it did not operate  as \021electronic goods\022 but as \021electric goods\022.  Such approach which was real and practical,  could not have been objected by the assessee  and the High Court could not have commented the  basis on which the Tribunal proceeded to  consider the matter. Finally, it was submitted  that in certain cases, assessee (manufacturers/  dealers/distributors/traders) had collected the  amount of tax at higher rates from the  customers. Thus, on the one hand, the assessee  contended that the item was subject to payment  of concessional rate of tax and on the other  hand, it collected the tax at higher rate from  customers. The assessee thus would retain the  amount collected from customers towards tax.   This cannot be allowed to be done as it would  amount to \021unjust enrichment\022 by the assessee.  To that extent, therefore, in any case, the  assessee is liable to pay the amount to the  Revenue. On all these grounds, it was submitted  that the appeals deserve to be allowed by  setting aside the order passed by the High  Court and by restoring the order of the  Tribunal. 9.              Learned counsel for the assessee, on  the other hand, supported the order passed by  the High Court. It was submitted that no error  of law can be said to have been committed by  the High Court in deciding the matters and  these are not fit cases to entertain appeals  under the discretionary jurisdiction of this  Court under Article 136 of the Constitution. It  was also submitted that it was clear from the  provisions of law that \021Capacitors\022 could be  said to be \021electronic goods\022 and subject to  payment of tax at a concessional rate. In  several cases, such view was taken by the  Assessing Authorities. Since in some cases, a  different view was struck, G.O.Ms. were  required to be issued by the Authorities. Such  amendments / instructions / communications were  declaratory in nature and obviously, therefore,  they were applicable with retrospective effect;  i.e. not only to transactions subsequent to the  issue of notification but even to prior  transactions. \021Capacitors\022, hence, must be

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treated as an item covered by the entry  \021electronic goods\022 and subject to payment of  tax at a concessional rate. It was also  submitted that concessional rate has been  granted on the item in question so as to ensure  industrial growth in the State. A provision  which has been intended for a laudable object  of industrial development, must be liberally  construed. And, even if two views are possible,  the view favourable to the assessee should be  adopted. When the High Court has taken such  view, this Court may not interfere with it  under Article 136 of the Constitution. It was  also submitted that the High Court was wholly  justified in criticizing the approach adopted  by the Tribunal. The High Court was right in  holding that \021operating principle\022 or \021user  test\022 would apply to those cases where there is  no express mention of a particular item in the  notification or G.O.Ms. But once the item is  specified in the list, there should not be  further inquiry and the assessee would be  entitled to concessional rate of tax on the  basis of such entry. In the case on hand,  several items were specifically mentioned in  various G.O.Ms. \021Capacitors\022, admittedly, was  one of them. In view of the said position, the  Tribunal exceeded its jurisdiction in applying  \021operating principle\022 or \021functioning\022 of the  item and the High Court was right in  criticizing it. The High Court was also  constrained to observe that though the point  was concluded by a decision of the High Court  in earlier cases, the Tribunal sought to  distinguish the said decision on the grounds  not permissible in law. The counsel, therefore,  submitted that no case has been made out by the  Revenue to interfere with the order of the High  Court and the appeal deserves to be dismissed. 10.             We have given anxious consideration to  the rival contentions of the parties. The  question which is raised before us and which  was raised before the Tribunal as well as  before the High Court was as to whether the  item \021Capacitors\022 is \021electronic goods\022 or  \021electric goods\022. In this connection, our  attention was invited by the learned counsel  for the parties to the provisions of the State  Act as also of the Central Act. The learned  counsel for the assessee also referred to  G.O.Ms. No. 520, dated July 20, 1998, issued  under the State Act and G.O. Ms. No. 521 issued  under the Central Act. The relevant part of  G.O. Ms. No. 520 reads thus: (2) For the purpose of this  notification, the term \021electronic  goods\022 means electronic systems,  instruments, appliances, apparatus,  equipment operating on electronic  principles and all types of electronic  components, parts and materials and  includes\027

(i)     consumer electronics; (ii)    electronic test and measuring

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instruments; (iii)   medical electronic equipment, (iv)      electronic analytical instruments; (v)       electronic equipment / instruments  for nuclear, geo-scientific and  other special applications; (vi)      electronic process control  equipment; (vii)   power electronic equipment; (viii)  electronic industrial automation  and control equipment; (ix)      electronic data processing systems  and electronic office equipment; (x)       electronic broadcasting equipment; (xi)      electronic communication equipment  and (xii)   electronic aerospace and defence  equipment

11.             G.O. Ms. No. 521 issued under Central  Act is in pari materia to G.O. Ms. No. 520.  12.             On June 1, 1989, Memo No.23718/  CT.II.2/89 was issued by the Principal  Secretary to Government of Andhra Pradesh,  Revenue (CT-II) Department, inviting the  attention of the Commissioner of Commercial  Taxes to the reference cited in the said Memo  and informing him that the Government had  decided that the list of electronic items  prepared by the Electronic Commission should be  followed for the purpose of concessional rate  of tax on electronic goods ordered in  G.O.Ms.Nos. 520 and 521. The Commissioner was  requested to issue necessary instructions to  subordinate officers under Section 42A of the  State Act. 13.             Pursuant to the above Memo, a Circular  was issued by the Commissioner of Commercial  Taxes on July 13, 1989 which is also relevant  and reads thus:

Office of the Commissioner of Commercial Taxes Andhra Pradesh : Hyderabad Dated 13.07.1989

Ref. A1/1240/88

M.V. NATARAJAN, I.A.S., COMMISSIONER OF COMMERCIAL TAXES C I R C U L A R

Sub : APGST Act & CST Act \026 Reduction in  the rate of tax on Electronic goods \026  Reg.

Ref:1. G.O.Ms.No. 520 Rev dt. 20.07.1988.     2. G.O.Ms.No. 521 Rev dt. 20.07.1988.     3. Govt. Memo No.23718/CT.11.2./89        dated 01.06.1989

       It is informed that vide G.O.s first  and second cited, Government were pleased  to reduce the rate of tax to 2 paise on

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Electronic goods with effect from  1.7.1988 mentioning a broad  classification of electronic goods such  as Consumer Electronics, Electronic test  and measuring instruments, General  Electronic Equipment etc.

       Several representations have been  received from the dealers requesting to  clarify the specific items which falls  under the classification, mentioned in  the G.O. first cited, a copy of the  Government Memo, third cited is enclosed  along with a copy of the list prepared by  the Electronic Commission duly  authenticated.

2.      The Assessing authorities are  requested to take action accordingly.

3.      This reference may please be  acknowledged to next authority.

                                       Sd/-                                 M.V. NATARAJAN                  COMMISSIONER OF COMMERCIAL TAXES                                                 (emphasis supplied)

14.             A list of electronic items prepared by  the Electronic Commission was also produced  before the Tribunal as well as before the High  Court and before us. Item No.13.0 relates to  \021Electronic Components\022 under which at Item  No.13.39 is shown \021Plastic Film Capacitors\022. 15.             Thus, from the above G.O.Ms. and  Circular issued by the Commissioner, it is  clear that in pursuance of several  representations received from Dealers  requesting to clarify the specific items  falling under \021electronic goods\022 that the  Classification Memo was issued by the  Government and the Circular by the Commissioner  on the basis of the list prepared by the  Electronic Commission. The said list expressly  contained an item \021Capacitors\022. In view of  specific reference to \021Capacitors\022, in our  opinion, the High Court was right in relying on  the said item and in holding that \021Capacitors\022  could be said to be \021electronic goods\022 and was  covered by a concessional rate of tax under the  Act. 16.             The learned counsel for the assessee  stated that on the basis of the list prepared  by Electronic Commission, concessional rate of  tax was recovered on items mentioned in the  list. A similar question came up for  consideration before the High Court of Andhra  Pradesh in State of Andhra Pradesh v. Amara  Raja Batteries, [1998 (111) STC 664 (AP)].  There, the Court was concerned with NICD  Batteries. The Court considered G.O.Ms. 520 and  521 and item No. 13.93 of the list (\021Other  batteries\022) declared by Electronic Commission  and held that it was entitled to concessional  rate of tax.

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17.             The Court observed:      \023Since according to the list  prepared by the Electronics  Commission, the batteries are  electronic components and since the  electronic components are one of the  items which are eligible for  concessional rate of duty and since  the clarification in the list prepared  by the Electronics Commission is  treated as part of the G.O. the  batteries manufactured by the assessee  are eligible for concessional rate of  duty under G.O. Ms. No. 520, Revenue  dated July 20, 1988 and G.O. Ms. No.  521 Revenue dated July 20, 1988 issued  under the A.P. General Sales Tax Act  and also Central Sales Tax Act\024.

18.             It appears that the Revenue challenged  the decision of the High Court by filing Civil  Appeal Nos. 723-25 of 1999, but a three Judge  Bench of this Court dismissed them on March 21,  2001 observing that there was \023no good reason  to interfere with the order under appeal\024.   19.             Once again, the issue came up for  consideration before the same Court in India  Extrusion v. Commission of Commercial Taxes,  A.P., Hyderabad, (2001) 124 STC 474. In India  Extrusion, the Court was considering the item  of \021Cable Joining Kits\022. Relying on G.O.Ms.Nos.  520 and 521 and taking recourse to the list of  electronic goods prepared by Electronic  Commission, the High Court held that it could  be said to be \021electronic goods\022 and was  subject to levy at the concessional rate of  tax. The Revenue accepted the judgment and had  not challenged the said decision. 20.             The High Court, in our opinion, was  right in observing that when the Electronic  Commission had prepared a list which contained  the item \021Capacitors\022, it had to be accepted by  the Revenue and tax can be levied only on the  basis of such classification. The High Court  was, therefore, right when it stated:      \023The contention of the learned  Counsel for the petitioners is that  when the Government has issued  clarificatory memo with reference to  G.O. Ms. Nos. 520 and 521, adopting  the list prepared by the Electronics  Commission for the purpose of  concessional rate of tax as electronic  items or electronic components, the  same holds good even for the  subsequent notifications, as there was  no material variation in the contents  of the subsequent Government Orders  except variation in the rate of tax.  But, on the other hand, the contention  of the department is that unless a  particular item operates on electronic  principle the same would not be  considered as "electronic goods" or  component for the purpose of

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concessional rate of tax. We are  unable to accept the said contention  of the Revenue on the first principle.  If a particular item of goods or  component, part or material is not  specified in the list either in the  Government Order or in the list of  electronic items that are prepared by  the Electronics Commission, then only  the question would arise for  consideration whether a particular  item can be treated as an electronic  goods or component or material,  depending upon its operating  principle, but not otherwise.  Admittedly, the list of electronic  items prepared by the Electronics  Commission shows that there are as  many as 16 sub-headings under which  various items that are listed or  specified. In the present case, we are  concerned with "plastic film  capacitors". The said item finds place  under the sub-heading "electronic  components." In the list of items  prepared by the Electronics Commission  the plastic film capacitors is  specified at 13.39. Similarly, there  are other capacitors such as paper  capacitors at 13.38, ceramic  capacitors at 13.42, and mica  capacitors at 13.43. Therefore, it is  clear that the item in question is  clearly specified as one of the  electronic items contained in the list  prepared by the Electronics  Commission. In fact, when similar  issue came up for consideration before  this Court in Amara Raja Batteries,  [1998] 111 STC 664, while considering  G.O. Ms. Nos. 520 and 521, referred  and relied upon the list prepared by  the Electronics Commission as was  ordered to be adopted by the  Government by its memo dated June 1,  1989. As batteries, which fell for  consideration, was found under item  13.93, the division Bench accepted the  claim of the assessee and upheld the  decision of the Tribunal where the  Tribunal allowed the claim of the  assessee treating the batteries as  electronic component. But, however,  this decision was distinguished by the  Tribunal in the impugned orders on  unsustainable grounds\024.                     (emphasis supplied)       21.             To us, the High Court was also right  in indicating that when the item has been  specifically included in the list prepared by  Electronic Commission, the Tribunal could not  have applied \021functional test\022, \021operating  principle\022 or \021user test\022. A limited inquiry  which was required to be made by the Tribunal

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was whether the item had been included in the  list prepared by the Electronic Commission. If  any item is included in the said list, it has  to be treated as such and tax has to be levied  on that basis. But if the item is not included  in the list, it is open to the Tribunal to  consider its placement on the basis of  \021functional test\022 as to whether such item could  be said to be \021electronic goods\022. The item  \021Capacitors\022 has been expressly included in the  list prepared by the Electronic Commission and  hence it was not open to the Tribunal to apply  \021operating principle\022 or \021user test\022 and the  High Court was wholly justified in interfering  with the order passed by the Tribunal. 22.             The learned counsel for the assessee  also urged that the underlying object of  granting concessional rate of tax to Capacitors  was industrial development. Relying on  Commissioner of Income Tax, Amritsar v. Straw  Board Manufacturing Co. Ltd., (1989) Supp (2)  SCC 523, Commissioner of Sales Tax v.  Industrial Coal Enterprises, (1999) 2 SCC 607  and Collector of Central Excise, Meerut v.  Maruti Foam (P) Ltd., (2004) 6 SCC 722, it was  urged that whenever a concession has been  granted so as to bring about industrial  expansion and growth, the provision must be  liberally construed. In view of the fact,  however, that according to us, item relating to  \021Capacitors\022 has been expressly included in the  list prepared by Electronic Commission, it is  not necessary for us to enter into larger  question as, in our judgment, the assessee had  rightly succeeded and the High Court was  justified in allowing Revisions. 23.             The learned counsel for the Revenue,  no doubt, submitted that the Tribunal merely  remanded the matter to the Authorities to  decide them in accordance with law and the High  Court ought not to have interfered with the  order. In our opinion, however, the submission  is ill-founded. As rightly held by the High  Court, the Authorities were required to proceed  on the basis of list prepared by Electronic  Commission. Since the Electronic Commission  included \021Capacitors\022 as one of the items, it  was not open to the Tribunal to enter into the  question as to the functions to be performed by  Capacitors and to remit the matter to decide as  to whether it would be covered by the item  \021electronic goods\022 or \021electric goods\022.  Hence,  though the matter was remanded, the High Court  was justified in interfering with the said  order as it was not open to the Tribunal to  pass such order. 24.             Finally, it was submitted that some of  the manufacturers, dealers and traders had  collected the tax at the higher rate from their  customers and now they are seeking relief from  the Court to pay tax at concessional rate.  If  the contention of the assessees is upheld and  they will be allowed to pay tax at a  concessional rate, they would thereby unjustly  enrich themselves inasmuch as on one hand they

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had collected much more amount towards tax and  will now pay lesser amount of tax to the  Government.  No assessee can be allowed \021unjust  enrichment\022.  Where an assessee is not entitled  to a particular benefit, he cannot be permitted  to retain such benefit. [vide Mafatlal  Industries Ltd. v. Union of India,  (1997) 5  SCC 536]. 25.             In the affidavit in reply, the  allegation has been emphatically denied by the  assessee.  It was the case of the assessee that  the allegation was factually incorrect that the  assessees had collected tax at a higher rate  and they now want to pay tax at a concessional  rate. But in view of assertion by the Revenue  and denial by the assessee, it would be  appropriate if we do not enter into the said  question by granting liberty to the Revenue to  consider the question independently.  26.             We, therefore, hold that the item  \021Capacitors\022 is subject to payment of tax at a  concessional rate. The order passed by the High  Court, to that extent is, therefore, upheld.   It is, however, made clear that if any assessee  had collected an amount at a higher rate of tax  from its customers than the concessional rate  as held by us, it is open to the Revenue to  take appropriate proceedings in accordance with  law for the recovery of such amount.  The  excess amount, if any, recovered by any  assessee towards tax shall have to be paid by  such assessee to the Government. 27.             For the foregoing reasons, the appeal  deserves to be disposed of and is accordingly  disposed of subject to the observations made by  us hereinabove. On the facts and in the  circumstances of the case, however, there shall  be no order as to costs.