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PETITIONER: BHADRACHALAM PAPERBOARDS LTD. & ANR.

       Vs.

RESPONDENT: THE GOVERNMENT OF ANDHRA PRADESH & ORS.

DATE OF JUDGMENT:       04/08/1998

BENCH: S.P. BHARUCHA, K. VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K. Venkataswami, J.      The appellants  moved the  High Court of Andhra Pradesh under Article  226 of  the Constitution  of  India  for  the issuance of  a Writ of Mandamus to declare the action of the respondents in  demanding and collecting sales tax from them on the royalty and extraction charges paid for the supply of bamboo and  hardwood to  them from the forest for the period 1978-79  onwards  as  illegal,  hull  and  void  and  for  a consequential relief  of refund  of the  taxes so  collected from them.      The admitted facts are that the appellants entered into an agreement  on 27.3.1978  with the  State  Government  for supply of  bamboo and hardwood from the Government forest on certain terms  and  conditions.  The  Sales  Tax  Department demanded and  collected sales  tax upon  the  value  of  the bamboo and  hardwood removed  by  the  appellants  from  the forest. Under  the State  sales Tax Act, during the relevant period the  commodity (bamboo  and hardwood) was exigible to tax at the first sale and as such the forest Department, who was a  dealer, was  liable to  pay the  sales tax.  However, under  the   agreement  mentioned   above,  the   appellants undertook to  reimburse the  Forest Department the amount of sales tax payable on the supply of bamboo and hardwood. Both the  appellants  and  the  Revenue  were  under  a  mistaken impression that  the supply  of bamboo and hardwood from the Government forest  under an  agreement was  exigible to tax. This court  in state  of Orissa  & Ors.  Vs. Titaghur  paper Mills Co.  Ltd. &  Anr., etc.  [1985 (suppl.) SCC 280]  held that such  supply of  bamboo from  the Government forest was not exigible  to tax.  It was  on that  basis the appellants moved the High Court for the relief set out above.      The High  Court by  the judgment under appeal held that no sales  tax was  payable by  the appellants on the royalty and   extraction charges payable by them under the Agreement entered into  with  the  State  for  supply  of  bamboo  and hardwood with  effect from  1.11.85. However, the High Court declined to  grant the refund of sales tax already collected for the  period 27.3.78  to 31.10.85.  The High  Court,  for denying the  refund, was  of the  view that the manufacturer

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(appellants) is presumed to have passed on the burden of tax to the consumer unless there are clear allegations and proof to the  contrary. In  the absence  of such  allegations  and proof, the  appellants must  be deemed to have passed on the burden of  tax to the consumers, which would disentitle them from seeking refund of the sales tax already paid.      Aggrieved by the judgment of the High Court denying the relief of  refund, the  present appeal has been filed by the appellants.      The  learned   counsel  appearing  for  the  appellants submitted that  the High  Court was  not right  in presuming that the appellants must have passed on the burden of tax to the consumers.  He invited  our attention to the case of the respondents advanced  before the  High Court. The High Court has observed thus:-      "He   (the    Government   Pleader)      submits that  in the  case of  this      petitioner the  demand is  not upon      the  petitioner   upon  the  Forest      Department as  seller of the goods.      He submits  that according  to  the      definition  of   the  dealer,   the      Forest Department is also a dealer.      He submits  that  both  bamboo  and      hardwood are  placed in  the  first      schedule to  the A.P. General Sales      Tax Act which means that the tax is      payable at  the point of first sale      in the State."      In the  the light  of the  above case of the Revenue as put forward  before the  High Court, it is the contention of the learned  counsel for the appellants that the question of passing on  the tax  burden to the consumers would not arise in this  case. According  to the learned counsel, in view of the above  stand taken  by the Revenue before the High Court the relief of refund ought to have been allowed.      Mr. K.  Ram Kumar,  learned counsel  appearing for  the respondents, placing  reliance on the judgment of this court in Mafatlal Industries Ltd. & Ors. Vs. Union of India & Ors. [(1997) 5  SCC 536]  submitted that  unless  the  appellants moved the  appropriate forum  to set  aside the  assessments already made  for collecting  the sales tax, the question of refund  will   not  arise.  In  any  case,  learned  counsel submitted that  the refund  cannot be  ordered for more than three years preceding the filing of the writ petition.      We have  seen that  the appellants sought a declaration that the  tax demanded  and collected on the transactions in question for  the period  from 1978-79  onwards was illegal, null and  void. The  High Court in the light of the decision of this court in Titaghur Paper Mills Co. Ltd. (supra), held that the  transactions in question were not exigible to tax. The refund  was, however,  denied on  the  ground  that  the appellants must be deemed to have passed on the liability to the consumer.      We find  that the  High  Court  was  not  right  in  so presuming in  the light  of the  case  put  forward  by  the Government pleader  as extracted  above. The appellants have reumbursed  a   tax  liability   which  was  on  the  Forest Department and  the appellants  have consumed  the goods for manufacturing paper  boards, etc. Therefore, the question of the appellants passing on the tax liability to the consumer, on the  facts of  this case,  would not arise. Consequently, the appellants are entitled for refund of the  tax collected from them,  not for  the entire  period but  for the  period commencing three  years prior  to the date of filling of the

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Writ Petition.      The appeal  is accordingly  allowed with no order as to costs.