A.P. Gas Power Corporation Ltd., Hyd. Vs. Asst. Commercial Tax Officer, Kovvur and ors. - Court Judgment

Excerpt:
sales tax - exemption from tax - rule 9 of central sales tax (a.p.) rules, 1957, andhra pradesh general sales tax act, 1957 and section 6 (2) of central sales tax act, 1956 - petitioner a registered corporation under act of 1957 - corporation entered into contract with respondent 3 for supply, erection and commission of gas - corporation claimed exemption under section 6 (2) of central sales tax act - respondent turned down request for exemption - petition before high court to assail correctness of notice - petitioner satisfied requirements for issuance of 'c' form for exemption from tax - held, writ petition allowed. - - venkateshwara reddy (hereinafter referred to as 'the corporation'). the corporation is a registered dealer under the andhra pradesh general sales tax act, 1957 (for.....ordersyed shah mohammed quadri, j. 1. the petitioner in these two writ petitions is m/s. a.p. gas power corporation limited, ameerpet, hyderabad, represented by its manager (finance) d. venkateshwara reddy (hereinafter referred to as 'the corporation'). the corporation is a registered dealer under the andhra pradesh general sales tax act, 1957 (for short 'the apgst act') as well as under the central sales tax act, 1956 (for short 'the cst act'). it is also an assesses on the roles of the commercial tax officer, nidadavolu, respondent no.2 herein. the corporation entered into a contract with m/s. sumitomo corporation, respondent no.3 (hereinafter referred to as 'sumilomo') for supply, erection and commissioning of gas/ steam turbines for generation of power. sumitomo, it is stated, has.....

Judgment:
ORDER

Syed Shah Mohammed Quadri, J.

1. The petitioner in these two writ petitions is M/s. A.P. Gas Power Corporation Limited, Ameerpet, Hyderabad, represented by its Manager (Finance) D. Venkateshwara Reddy (hereinafter referred to as 'the Corporation'). The Corporation is a registered dealer under the Andhra Pradesh General Sales Tax Act, 1957 (for short 'the APGST Act') as well as under the Central Sales Tax Act, 1956 (for short 'the CST Act'). It is also an assesses on the roles of the Commercial Tax Officer, Nidadavolu, Respondent No.2 herein. The Corporation entered into a contract with M/s. Sumitomo Corporation, Respondent No.3 (hereinafter referred to as 'Sumilomo') for Supply, erection and commissioning of gas/ steam turbines for generation of power. Sumitomo, it is stated, has supplied certain equipment parts and components, procuring them from suppliers outside the State of Andhra Pradesh and effected transit sales to Corporation. It is in respect of such purchases by the Corporation that it proposes to issue 'C' Form. As it claims to enjoy exemption under Section 6(2) of the CST Act, it complains that the first respondent, the Assistant Commercial Tax Officer, Kovvur, did not respond to its request made on June 29, 1996 which was reiterated on September 5, 1997. It is further submitted that the Commercial Tax Officer, the second respondent herein, issued a letter turning down the request for supply of 'C' Form. The legality of the said notice is assailed by the Corporation in WP No.18662 of 1997- While so, on 18-7-1997 the second respondent in his reference No.B/533/97 stated that if the Corporation was prepared to pay tax on turn over of the supply of the material under Section 5 or on the turn over of the material involved in the execution of the work under Section 5(f) duly filing correct A2 return reflecting any of the above mentioned turn over he had no objection to issue 'C' Declaration form. The correctness of this notice is assailed in Writ Petition No. 18682 of 1997.

2. At the time when the interlocutor.' applications in these writ petitions came up for hearing it was felt that the arguments in both the WPMPs as well as the main writ petitions, are the same so the learned Counsel appearing on both sides addressed the arguments in the main writ petitions.

3. The second respondent filed counter-affidavit stating, inter alia, that in the application in Form A under CST Act filed by the petitioner the details of the goods ordinarily purchased by it are noted as 'procurement of equipment for electricity generation'' in clauses (a) and (c) in column 16 and based on that Form B certificate was granted to the petitioner. It is submitted that on the strength of the Registration Certificate, the petitioner is entitled to purchase equipment for electricity generation, but not the spares, tools, stores and accessories, therefore, they are not entitled to receive 'C' Form Declaration. It is further submitted that admittedly the machinery, plant etc. was made available through various contractors by M/s. Sumitomo Corporation, Secunderabad, who is the main contractor for erection of the power plant at Vijjeswaram. On the ground that the said transaction amounts to sale in transit, for which the petitioner has to issue 'C' Declaration forms to enable the contractor to get exemption of tax on the sales of goods effected to the petitioner in transit, the petitioner claims supply of 'C' Forms. The petitioner failed to furnish sufficient account or evidence of endorsement i.e., invoice in its favour. Further, the petitioner also says that the goods purchased by it have been entrusted again to the seller under a bailment agreement for erection of the project but the agreement of the petitioner cannot justify any bailment of the goods. The petitioner also stated that he had not sold the goods to the third respondent. The agreement relied upon by the petitioner is made on turn-key basis only and the petitioner is trying to camouflage the transactions of supply or transfer of goods to the contract as one under bailment agreement with a view to escape the tax liability without there being a bailment agreement and that the supply of goods by M/s. Sumkomo Corporation (Contractor) in pursuance of the contract amounts to inter-Stale sale at the hands of the contractor, whereas the supply of the goods to the same contractor on turnkey basis constitutes intra-state sales which forms part of the turnover for the purpose of taxation. In view of these facts a detailed reply was given to the petitioner on 18-8-1997. On those facts it is submitted that the writ petition may be dismissed.

4. A detailed reply affidavit was filed by the petitioner reiterating his stand and raising various contentions; therefore it is not necessary to reiterate the same here.

5. Sri S. Krishna Murthy, the learned Counsel for the petitioner submits that having regard to the provisions of the CST Act and the rules made thereunder, the petitioner is entitled to receive 'C' Form. He further submits that as M/s. Sumitomo, contractor, transferred documents in the course of inter-State trade, the petitioner will be deemed to be a purchaser in the course of the interstate trade and he is not liable to pay tax and for that reason il is necessary for the petitioner to issue 'C' Form declaration, which the authorities cannot withhold.

6. The learned Government Pleader on the other hand, contends that M/s. Sumitomo is the real purchaser, the transaction of purchase by the contractor is completed in the course of the inter-State trade. The subsequent step of transferring the document of title in favour of the petitioner and again handing over the same to the contractor, is the scheme to evade payment of tax, as such, the petitioner is not entitled to 'C' Form Declaration.

7. On the above contentions, the short question that arise for consideration is :

'Whether the petitioner is entitled to supply of C' Form Declaration ?'

8. For the purposes of consideration of the question of supply of 'C' Form Declaration, it would be necessary to refer to the relevant provisions of the Central Sales Tax Act, 1956, and the rules made thereunder, as well as the APGST Act.

9. Section? of the CST Act deals with registration. The registration is done in Form 'A' prescribed under the Rule 3 of the CST (Registration and Turnover) Rules, 1957.

10. A perusal of Form A would show, in column 16 the following entry :

'16. The following goods or classes of goods are purchased by the dealer in the course of inter-Stale trade or commerce for-

(a) resale;

(b) use in the manufacture or processing of goods for sale;

(c) use in mining;

(d) use in the generation or distribution of electricity or any other form of power;

(e) use in the packing of goods for sale/ resale.'

It is under this item the petitioner has given the description of the commodity as 'procurement of equipment for electricity generation''. The same are under clauses (a) and (c).

11. Section 8 of the Central Sales Tax Act, as is relevant for our purpose, reads as under :

'Section 8(1)(b) sells to aregistered dealer other than the Government goods of the description referred to in sub-section (3) shall be liable to pay tax under this Act, which shall be (four per cent) of his turnover,

Section 3(b)........ are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power.'

12. A combined reading of the said rules discloses that when any dealer during inter-State trade or commerce, sells to a registered dealer other than the Government, goods of the description referred to in sub-section (3), he shall be liable to pay tax under the Act @ 4% on the turnover of the said goods. Those goods are the goods which are specified in the certificate of registration (Form A) referred to above, which are intended for resale by him subject to the rules made thereunder.

13. Rule 9 of (he CST (Andhra Pradesh) Rules, 1957 directs that every registered dealer shall apply to the notified authority and obtain from him adequate number of forms of declaration 'C' Forms, for use by him at the time of receipt or purchase of goods as mentioned in sub-section (1) of Section 6A or sub-section (4) of Section 8 of the Act, on payment of the costs and on production of the receipt or challan in proof of such payment alongwith the application. Under Rule 9A of the said rules, a registered dealer who purchased goods in the course of inter-State trade or commerce, is entitled to issue a single declaration form to cover two or more purchasers.

14. Rule 10 enjoins upon every registered dealer the duty to maintain the register in Form 12, showing a true and correct account of such 'C' Forms and the allied matters.

15. Thus from the reading of the above provisions it is clear that at the stage of issuing of 'C' Declaration Form, the notified authority is not required to conduct an enquiry into the nature of the transaction and as to whether the petitioner needs the Forms for use in the course of inter-State trade or for avoidance of payment of tax which he would be liable to pay. The authorities will, however, be at liberty to make such an enquiry as it is necessary to see whether 'C' Forms have been properly issued and if not what is the liability of the parties under the APGST or CST Act, as the case may be. Such an enquiry need not be made at the stage of issuance of 'C' Form. What all is required under Rule 9 of the said rules is :

(1) Whether the person applied for 'C' Form is a registered dealer;

(2) Whether the goods in respect of which 'C' Form is used are included in the certificate of registration Form 'A'; and

(3) Whether he has paid the amount for the 'C' Form and produced necessary challan in proof of the payment.

16. When these requirements are satisfied, 'C' Form has to be issued. From the above discussion it follows that the petitioner is entitled to receive 'C' Form on the compliance of the above three conditions. This is without prejudice to the authorities making enquiry at die time of assessment as to the proper use of the 'C' Form.

17. The Writ Petition No. 18682/97 is accordingly allowed to the extent indicated above.

18. In so far as the other writ petition i.e., Writ Petition No. 18662 of 1997 is concerned, as the petitioner approached this Court at the stage of show-cause notice, we direct the petitioner to file its explanation to the show-cause notice before the authorities i.e., 2nd respondent within two weeks from today, and on such explanation being filed, the authorities are directed to consider the same and pass appropriate orders in accordance with law. The issuance of 'C' Form to the petitioner would abide the result of the proceedings initiated by the show-cause notice. It would be open to the petitioner, if deemed necessary, to have the Form A amended in accordance with law after receiving 'C' Form in respect of other goods which are not mentioned in 'C' Form, provided it can be done in accordance with law.

19. Accordingly, the writ petition is dismissed. No costs.