ASSOCIATED CEMENT CPMPANIES LTD Vs. GOVT OF A P
LAWS(SC)-2006-1-12
SUPREME COURT OF INDIA (FROM: ANDHRA PRADESH)
Decided on January 04,2006

ASSOCIATED CEMENT COMPANIES LTD. Appellant
VERSUS
GOVERNMENT OF ANDHRA PRADESH Respondents





Cited Judgements :-

AASHIRWAD FILMS VS. UNION OF INDIA [LAWS(SC)-2007-5-189] [REFERRED TO]
KHADI GRAMA VYAVASAYA ASSOCIATION STATE COMMITTEE VS. STATE OF KERALA [LAWS(KER)-2006-2-82] [REFERRED TO]
STATE OF U P VS. DEEPAK FERTILIZERS AND PETRO-CHEMICAL CORPORATION LTD [LAWS(SC)-2007-5-7] [REFERRED TO]
MODI INDUSTRIES LIMITED VS. STATE OF U.P. AND ORS. [LAWS(ALL)-2010-4-327] [REFERRED TO]
SIR SHADILAL ENTERPRISES LTD. VS. STATE OF U.P. AND ORS. [LAWS(ALL)-2010-4-329] [REFERRED TO]
KESAR ENTERPRISES LTD. VS. STATE OF U.P. AND ORS. [LAWS(ALL)-2010-8-395] [REFERRED TO]
STATE OF U P VS. DEEPAK FERTILIZERS AND PETROCHEMICAL CORPORATION LTD [LAWS(SC)-2007-5-144] [DISTINGUISHED]
SURINDER MOHAN & OTHERS VS. STATE OF PUNJAB & OTHERS [LAWS(P&H)-2013-4-269] [REFERRED TO]
NIKO RESOURCES LIMITED VS. UNION OF INDIA AND ORS. [LAWS(GJH)-2015-3-186] [REFERRED TO]
UNION OF INDIA VS. N.S.RATHNAM [LAWS(SC)-2015-7-71] [REFERRED TO]
MAJHOLA DISTILLERY AND CHEMICAL WORKS, PILIBHIT VS. STATE OF UTTAR PRADESH AND OTHERS [LAWS(ALL)-2007-10-206] [REFERRED TO]
B. GOVINDRAJ HEGDE VS. STATE OF KARNATAKA AND OTHERS [LAWS(KAR)-2016-7-54] [REFERRED TO]
ROYAL CHICKENS AND OTHERS VS. UNION OF INDIA AND OTHERS [LAWS(MAD)-2015-8-300] [REFERRED]
M/S GRAPHITE INDIA LIMITED AND ANOTHER VS. THE STATE OF MAHARASHTRA [LAWS(BOM)-2017-1-173] [REFERRED TO]


JUDGEMENT

Ashok Bhan, J. - (1.)THIS appeal by grant of special leave is directed against the judgment and final order dated 8.9.2000 passed by the High Court of judicature of Andhra Pradesh at Hyderabad dismissing the Writ Petition No. 19304 of 1996 filed by the appellants. In the aforesaid writ petition the appellants had challenged the constitutional validity of Entry 18 of the First Schedule to the A.P. General Sales Tax Act (for short "the Act") introduced by A.P.G.S.T. (Amendment) Act, 1996 (Act No. 27 of 1996) on the ground that it is violative of Article 14 of the Constitution of India.
(2.)APPELLANTS are inter alia engaged in the manufacture and sale of cement and have various factories in different locations in India, including a unit in the State of Andhra Pradesh for manufacturing cement. The appellants have their marketing division at Secunderabad from where sales of cement are carried on. It has its warehouses all over the State of Andhra Pradesh. Earlier the State was charging sales tax on the sale of cement at the rate of 16% as notified by the State Government, which included the value of the packing material used for packing cement. The value of packing material is also charged to sales tax on the total sales turnover. As far as second sale is concerned Sales tax is not paid on the value of packing materials, as sales tax is leviable only on the first sale of packing materials. Section 6-C was introduced by Andhra Pradesh General Sales Tax Act (Amendment Act No. 11 of 1984) which reads as under:-
"6-C Levy of tax on packing material :- Notwithstanding anything in Sections 5 and 6-A, where goods packed in any materials are sold or purchased, the materials in which the goods are so packed shall be deemed to have been sold or purchased along with the goods and the tax shall be leviable on such sale or purchase of the materials at the rate of tax, if any, as applicable to the sale, or, as the case may be, purchase of goods themselves."

The validity of this provision was challenged and this Court in Raj Steel Vs. State of Andhra Pradesh and Others, 1989 (3) SCC 262 interpreted this Section to mean that "Section 6-C can at best be regarded as a provision by way of clarification of existing legal situation". The Court pointed out

"Section 6-C merely clarifies and explains that the components which have entered into determining the price of the goods cannot be treated separately from the goods themselves, and that no account was in fact taken of the packing material when the transaction took place, and that if such account must be taken then the same rate must be applied to the packing material as is applicable to the goods themselves. We find it difficult to accept the contention of the appellants that a rate applicable to the packing material in the Schedule should be applied to the sale of such packing material in a case under Section 6-C, when in fact there was no such sale of packing material and it is only by legal fiction, and for a limited purpose, that such sale can be contemplated."

With these observations the matter was remanded to the High Court for fresh consideration and disposal in the light of the observations made in the Judgment. In the earlier part of this judgment the Court after referring to the various decisions summarized the legal position vis-a-vis sales tax on turnover relatable to packing material thus:

"It is, therefore, perfectly plain that the issue as to whether the packing material has been sold or merely transferred without consideration depends on the contract between the parties. The fact that the packing is of insignificant value in relation to the value of the contents may imply that there was no intention to sell the packing, but where any packing material is of significant value it may imply an intention to sell the packing material. In a case where the packing material is an independent commodity and the packing material as well as the contents are sold independently, the packing material is liable to tax on its own footing."

(3.)THE deeming provision as introduced by Act No. 11 of 1984 by the legislature by this interpretation was reduced to mere insignificance. This interpretation put the Assessing and Appellate Authorities to the need of making elaborate enquiries on the question whether there was an agreement express or implied for the sale of packing material and whether any artificial or colourable devices were adopted by the assessee to split up the transaction so as to take the plea that there was a separate contract for the sale of packing material. THE State Legislature then introduced Section 6-C in a modified form. THE following provision was substituted by Andhra Pradesh Amending Act 22 of 1995 with effect from 1.4.1995. THE amended section 6-C reads as follows:-
"6-C Levy of tax on packing material:- Notwithstanding anything contained in Section 5, Section 5-F, Section 6 and Section 6-A, the rate of tax on packing material sold with the goods shall be the same as that of the goods packed or filled, whether or not there is separate sale or agreement for sale for the packing material and the goods packed or filled."

In order to follow up the amendment from the revenue's point of view, the Entry in the First Schedule relating to cement was amended as follows by Act 27 of 1996 with effect from 1.8.1996:- JUDGEMENT_175_SUPREME1_2006Html1.htm



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