SRI LAXMIGANAPATHI ENTERPRISES Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) IN these writ petitions, the petitioners who are rice millers question the legality of the assessment orders passed by the first respondent for the year 1997-98 on the ground that the deduction of tax to the extent permissible under rule 6 (1) (1) of the A. P. General Sales Tax Rules, 1957 has not been given based on the circular issued by the Commissioner of Commercial Taxes, the second respondent herein in Roe. No. All (1)/1950/98 dated February 24, 1998 Paddy and rice are declared goods. Declared goods are specified in section 14 of the Central Sales Tax Act, 1956 to be goods of special importance in inter-State trade and commerce. The declared goods are chargeable to tax under section 6 of the Andhra Pradesh General Sales Tax Act, 1957 read with the Third Schedule at single point and at a rate not exceeding 4 per cent. Paddy is taxable at 4 per cent at the first purchase point whereas rice is taxable at the point of first sale at 4 per cent. In order to avoid the contingency of both paddy and corresponding rice being subjected to tax, the Legislature introduced Explanation III of the Third in tune with section 15 (c) of the Central Sales Tax Act, 1956. The said explanation reads as follows :

(2.) TO illustrate the application of the explanation if the sale value of rice is Rs. 5,000 and the purchase value of paddy from which rice is derived is Rs. 4,000, the actual rate of tax payable would be Rs. 40, i. e. , 0. 8 per cent. This is the net amount of tax payable, though if the general rate of 4 per cent is applied, the tax would have been Rs. 200.

(3.) THE rule was introduced in 1995 after the definition of "turnover" was changed by the Andhra Pradesh General Sales Tax (Amendment) Act No. 22 of 1995 with the object of excluding the tax on tax. The amount collected towards tax is excludible from "turnover". In other words, if the sale price is inclusive of tax, the amount representing the tax shall be deducted from the sale price and the tax should be levied on the balance. If the tax passed on to the buyer is separately shown or otherwise deducted, no tax should be leviable thereon. In order to give effect to the principle that there should be no tax on tax, a formula has been set out in clause (1) of rule 6 (1 ). The relevant portion of the rule reads as under :