Facts of the Case

The petitioner, M/s Anasurya Traders, Guntur, was a registered dealer on the rolls of the Commercial Tax Officer, Main Bazar, Guntur, and was engaged in the business of V-Belts, Transmission Belts and related goods during the relevant assessment year 1995–1996.

The primary assessing authority, namely the Commercial Tax Officer, exempted the turnover relating to sales of Transmission Belts. The exemption was granted by relying upon earlier judgments concerning the classification of Transmission Belting, which contained approximately 66.7% cotton and 33.3% rubber, and treating the product as cotton fabric subjected to the process of rubberising. On that basis, the goods were classified as “Cotton Fabric” falling under Entry 5 of the Fourth Schedule, read with Section 8 of the Andhra Pradesh General Sales Tax Act, 1957, and were therefore treated as exempt from sales tax.

The Deputy Commissioner revised the assessment and subjected the relevant turnover for 1995–1996 to tax at 15% under Item 12 of the Sixth Schedule, on the reasoning that Entry 101 of the First Schedule had been shifted to Item 12 of the Sixth Schedule with effect from 1 April 1995. The revisional authority relied upon the earlier Division Bench ruling in Good Year India Limited vs State of Andhra Pradesh, under which Transmission Belting had been treated as taxable.

Aggrieved by the revisional order, the dealer preferred an appeal before the Sales Tax Appellate Tribunal. The Tribunal dismissed the appeal by its order dated 12 September 2002, again relying upon the earlier Good Year India ruling. The petitioner thereafter invoked the revisional jurisdiction of the High Court under Section 22(1) of the APGST Act, 1957.

Since the issue involved in T.R.C. Nos. 79 and 239 of 2003 was identical, the High Court disposed of both matters by a common order, taking T.R.C. No. 79 of 2003 as the lead case.

Issues Involved

The principal issue before the High Court was:

Whether the petitioner was liable to pay sales tax at 15% on the turnover relating to Transmission Belting as directed by the Tribunal and the revisional authority, or whether the goods were exempt from tax under Section 8 of the APGST Act as cotton fabrics falling under Entry 5 of the Fourth Schedule?

The Court was also required to determine the effect of the following statutory and factual considerations:

  • Whether Transmission Belting, admittedly treated as cotton fabric, was covered by Entry 5 of the Fourth Schedule.
  • Whether payment of Additional Duties of Excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 supported exemption under Section 8 of the APGST Act.
  • Whether inclusion of the goods under Entry 101 of the First Schedule / Item 12 of the Sixth Schedule could override the categorical exemption available under Section 8.
  • Whether the Supreme Court ruling in Fenoplast vs State of Andhra Pradesh and Others governed the controversy.

Petitioner’s Arguments

The petitioner contended that the Tribunal and the revisional authority had incorrectly relied upon the earlier judgment in Good Year India Limited vs State of Andhra Pradesh.

It was argued that the legal position had subsequently been clarified by the Hon’ble Supreme Court in Fenoplast vs State of Andhra Pradesh and Others, where the treatment of goods falling within the relevant textile-fabric classification and the effect of Section 8 exemption had been examined.

The petitioner submitted that:

  • The disputed Transmission Belting was cotton fabric.
  • The goods fell within the scope of Entry 5 of the Fourth Schedule.
  • The petitioner had paid Additional Duties of Excise under Central Act 58 of 1957.
  • The relevant expressions in Entry 5 of the Fourth Schedule had to be understood in light of the corresponding entries under the Additional Duties of Excise legislation.
  • Once the goods were covered by the relevant textile-fabric classification and additional excise duty had been paid, exemption under Section 8 of the APGST Act followed.
  • The mere inclusion of the goods under Entry 101 of the First Schedule or Item 12 of the Sixth Schedule could not defeat the statutory exemption.

Accordingly, the petitioner sought setting aside of the Tribunal’s order and allowance of the Tax Revision Cases.

Respondent’s Arguments

The learned Assistant Government Pleader for Commercial Tax opposed the revisions and contended that there was no illegality in the impugned order.

The respondent relied upon the Division Bench judgment in Good Year India Limited vs State of Andhra Pradesh and argued that the Tribunal as well as the revisional authority had correctly held the petitioner liable to pay tax at 15%.

The State’s position was that, for the assessment year 1995–1996, Entry 101 of the First Schedule had been shifted to Item 12 of the Sixth Schedule, and therefore the turnover relating to Transmission Belting was taxable at the applicable rate.

Court Order / Findings

The High Court allowed both Tax Revision Cases.

The Court noted that the subject matter of the dispute was a cotton fabric, and this factual position was not seriously disputed by the State. The Court further observed that the State representative did not dispute that the Transmission Belting sold by the petitioner constituted cotton fabric.

The High Court examined Sections 5, 6 and 8 of the APGST Act, 1957, together with Entry 5 of the Fourth Schedule and the Explanation appended thereto.

The Court found that the Explanation to the Fourth Schedule made the relevant classification dependent upon the corresponding heads and sub-heads under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The Court further noted that the petitioner had paid additional excise duty under Central Act 58 of 1957.

Relying upon the Supreme Court ruling in Fenoplast vs State of Andhra Pradesh and Others, the High Court held that the expressions concerning cotton fabrics, man-made fabrics and woollen fabrics in Item 5 of the Fourth Schedule had to be read in light of the corresponding classification under the Central enactment, including Item 59.03, dealing with textile fabrics and impregnated, coated, covered or laminated cloth.

The Court concluded that the Supreme Court’s findings in Fenoplast clearly applied to the case at hand. Since the disputed product was treated as cotton fabric and the petitioner had paid additional duties of excise under Central Act 58 of 1957, the petitioner was entitled to exemption under Section 8 of the APGST Act.

Accordingly, the High Court held that:

  • The petitioner was entitled to sales tax exemption.
  • Inclusion of Entry 101 in the First Schedule did not alter the exemption position.
  • The impugned order in T.R.C. No. 79 of 2003 was set aside.
  • Since the petitioner in T.R.C. No. 239 of 2003 was similarly situated, the impugned order in that matter was also set aside.
  • Both Tax Revision Cases were allowed.
  • There was no order as to costs.
  • Pending miscellaneous petitions, if any, stood closed.

Important Clarification

The significant clarification emerging from the judgment is that mere inclusion of a commodity in a taxable entry of the First Schedule or its corresponding placement in the Sixth Schedule does not automatically defeat a specific statutory exemption available under Section 8 of the APGST Act.

Where the goods are covered by the relevant expression in Entry 5 of the Fourth Schedule, read with the corresponding classification under the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and the applicable additional excise duty has been paid, the exemption under Section 8 must be given due effect.

The High Court specifically applied the principle emerging from the Supreme Court’s decision in Fenoplast vs State of Andhra Pradesh and Others, and held that inclusion of Entry 101 in the First Schedule would make no difference to the exemption available in the facts of the case.

The judgment therefore clarifies the legal distinction between:

(i) a general charging or taxable schedule entry; and
(ii) a specific statutory exemption operating under Section 8 read with the Fourth Schedule.

Sections and Statutory Provisions Involved

  • Section 22(1), Andhra Pradesh General Sales Tax Act, 1957 – Tax revision jurisdiction.
  • Section 5, APGST Act, 1957 – Levy of tax on dealer turnover at prescribed rates.
  • Section 6, APGST Act, 1957 – Sales tax on declared goods.
  • Section 8, APGST Act, 1957 – Exemption from tax in respect of specified goods.
  • Entry 5, Fourth Schedule to the APGST Act – Cotton fabrics, man-made fabrics and woollen fabrics.
  • Entry 101, First Schedule to the APGST Act – Entry considered in relation to Transmission Belting.
  • Item 12, Sixth Schedule to the APGST Act – Relevant taxable entry considered for assessment year 1995–1996.
  • Item 59.03, First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 – Textile fabrics, including impregnated, coated, covered or laminated fabrics, as discussed in the judgment.
  • Central Act 58 of 1957 – Additional Duties of Excise (Goods of Special Importance) Act, 1957.
  • Section 15, Central Sales Tax Act, 1956 – Discussed in the context of the Fenoplast precedent and declared goods.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783505767_1539compressed.pdf

Disclaimer
This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.