OM BROTHERS TRADERS Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS is an appeal filed against the orders of the Joint Commissioner (CT) (Legal), Hyderabad, dated 25.11.1998 passed in CCT's Ref.LV.(2)/1539/98, revising the orders of the Appellate Deputy Commissioner, Vijayawada, dated 16.12.97. The facts which led to the filing of this appeal are as follows. M/s. Om Brother Traders, Vjayawada, are registered dealers on the rolls of Commercial Tax Officer, Convent Street, Vijayawada. It is a partnership firm doing business in sale of copper wire, varnish, motor spares, lead cotton tape, goods under the name and style of M/s. Om Brother Traders, Convent Street, Vijayawada -1. During the year 1995 -96 the C.T.O., Convent Street, Vijayawada passed final assessment order determining the turnovers of the appellant/assessee as follows.

(2.) AGGRIEVED by the said orders, the appellant/assessee preferred an appeal before the Appellate Deputy Commissioner (CT), Vijayawada, contending that the disputed turnover of Rs. 2,84,460/ - related to the sales of starters for the motors below 7.5 HP used for the agricultural purposes and as per the G.O.Ms. No. 1058, dated 24.10.89 the starters used for motors upto 7.5 HP are liable to be taxed at the reduced rate of 7% and that the C.T.O., erred in observing that the appellant has to prove that the motors are used for agricultural purposes and that it is difficult to prove so because their customers activities are not capable of being watched and that as per the G.O., there are no such conditions imposed and that such starters are generally used for agriculture only. It is further contended before the A.D.C. that the C.T.O., wrongly adopted 13.2% on the opening stock of copper wire of Rs. 8,10,915/ - while arriving at the set off tax under VAT system and that the assessing authority should have adopted 16% rate of tax on the copper wire used for electrical motors as against 13.2%. He further contended that the C.T.O., adopted 12% on varnish instead of 15% on a turnover of Rs. 2,09,965/ - while calculating the set off. The learned A.D.C. allowed the appeal in toto on 16.12.97.

(3.) AGGRIEVED by the said orders of the learned Joint Commissioner, the assessee preferred the present appeal contending that there is absolutely no justification for the Joint Commissioner to invoke the powers U/s. 20(2) of the APGST Act and revise the orders of the Appellate Deputy Commissioner with reference to the relief granted on the excess levy of VAT on second sales of Electrical Goods and also on the issue of levying the tax at concessional rate of 7% on electrical starters by virtue of G.O.Ms. No. 252, Dt. 19.5.95. It is pleaded in the grounds of appeal that there is no justification for insisting the production of the required proof to the effect that the starters are used for agricultural purpose only. The learned Joint Commissioner failed to consider that there is no such condition in the G.O.Ms. No. 1058, Dt. 24.10.89. The learned Joint Commissioner misconstrued the G.O. It is further pleaded that it is common knowledge that the starters cannot be used for agricultural or for any other purposes by themselves and the starters will be used only to start the electrical motors and G.O., specifically speaks of the tax leviable at the reduced rate of 7% U/s. 5 read with Item No. 126 of the I Schedule on the starters used in the electrical motors upto 7.5 H.P. used for agricultural purposes and thus it is very clear that the starters fit for use in the electrical motors upto 7.5 H.P is a general qualification which cannot be linked to the sales of starters. The Joint Commissioner failed to consider that the appellant is the dealer in starters only but not in electrical motors and the capacity of starters varies with reference to the H.P. Motors and the sale of starters effected by the appellant is suitable upto 7.5 H.P. only which were sold to the retail dealers who in turn sell the Electrical Motors along with starters to agriculturists. It is further pleaded that at any rate the appellant furnished certificates issued by the purchasing retail dealers who certified that the starters purchased from the appellant upto 7.5 H.P, capacity are sold to the agriculturists for the use of mono block motors for agricultural purpose and those dealers further certified that the agriculturists who purchased these motors have been financed by Co -operative Banks under NABARD system and thus there is no justification for revising the orders of A.D.C., in this regard. It is further pleaded that there is no justification for the Joint Commissioner in confirming the orders of the Commercial Tax Officer in working out the VAT by observing that the tax due on the opening stock has to be calculated as per the rates in force prior to introduction of VAT System by applying the formula mentioned in proviso to VI Schedule. The Joint Commissioner failed to understand the VAT System introduced by Act No. 22 of 95 w.e.f. 1.4.95 and as per the formula a lower per cent at the prevailing rates prior to 1.4.95 is only applicable and by further observing that some benefit of the tax rebate will be given to the dealers for the anomaly in the percentage of tax. On the contrary, the learned Joint Commissioner failed to consider that the tax calculation should be on the sale of the goods but not on the opening stock. The sale value of the goods purchased prior to 1.4.95 even at a lower or a NIL rate which is being included in the sales effected after 1.4.95 the enforceable rate of tax is only 16% on electrical goods and 15% on varnish. Otherwise, the gap on the value added tax would work out more than 16% and 15% as per entries in the VI Schedule w.e.f. 1.4.95 for VAT which is not otherwise permissible. Thus, the formula given in the proviso to the VI Schedule is only with reference to the new rates that are applicable from 1.4.95 for the purpose of giving deduction on the preceding point of sale. This is what the Commissioner (CT) stated in the Circular Ref. No. A1(3)/2168/95 -1, dated 4.10.95. On the said grounds, it is pleaded that the impugned orders are not sustainable and are liable to be set -aside.