BHADRACHALAM PAPERBOARDS LIMITED Vs. GOVERNMENT OF ANDHRA PRADESH

JUDGEMENT

(1.) 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, null and void and for a consequential relief of refund of the taxes so collected from them.

(2.) 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 v. Titaghur Paper Mills Co. Ltd., (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.

(3.) 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 (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.