Full Judgment Text
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CASE NO.:
Appeal (civil) 4649 of 2002
PETITIONER:
M/s. Shakthi Seeds Pvt. Ltd.
RESPONDENT:
Dy. Commnr. (CT) & Anr.
DATE OF JUDGMENT: 30/05/2007
BENCH:
Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
Dr. ARIJIT PASAYAT, J.
1. Challenge in this appeal is to the judgment of a Division
Bench of the Andhra Pradesh High Court dismissing the
Revision Petition filed by the appellant under Section 22(1) of
the Andhra Pradesh General Sales Tax Act, 1957 (in short the
’Act’). Before the High Court challenge was to the order
passed by the Sales Tax Appellate Tribunal, Andhra Pradesh
(in short the ’Tribunal’).
2. Background facts in a nutshell are as follows:
M/s. Shakthi Seeds (P) Ltd., the appellant herein, is a
private limited company and they are dealers in agricultural
seeds, chillies, paddy, sun-flower and other crops. It is an
assessee and a registered dealer under the Act. The
Commercial Tax Officer, Hyderguda Circle, Hyderabad, framed
final assessment orders in respect of the turnovers for the
assessment year 1992-93 granting benefit of G.O.Ms. No. 604,
Rev (S), dated 9.4.1981 and G.O.Ms. No. 129 Rev(CT II), dated
14.2.1989. However, the Deputy Commissioner (CT), Abids
Division, Hyderabad, on scrutiny of the assessment finalised
by the Commercial Tax Officer vide his proceedings dated
16.12.1993 noticed that the appellant after purchasing
chillies, paddy and sun-flower from unregistered dealers, sold
those goods as "certified and truthfully labelled seeds" and on
that basis claimed exemption in terms of G.O.No. 604 Revenue
(S), dated 9.4.1981. He, therefore, proceeded to revise the
assessment order and proposed tax on those items as the
appellant effected purchase from unregistered dealers and
therefore they are liable to tax as first purchasers within the
State of Andhra Pradesh. Before the Deputy Commissioner
(CT), the appellant contended that they are entitled to
exemption in terms of G.O.Ms. No 604 dated 9.4.1981 treating
the seeds as truthfully labelled and certified seeds. In support
of their contention, they have also placed reliance on the
decision in the case of Gururaj Seeds (P) Ltd., v. State of
Andhra Pradesh & Ors. (18 APSTJ 46). The Deputy
Commissioner (CT), disallowed the claim of the appellant and
revised the assessment order framed by the Commercial Tax
Officer, Hyderguda, Hyderabad. Then the matter was carried
before the Tribunal by the appellant. The Tribunal opining
that in order to claim exemption in terms of G.O.Ms. No 604
dated 9.4.1981, the claimant should establish and prove that
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the seeds in question are certified seeds as well as truthfully
labelled seeds and that the appellant-dealer has failed to
adduce any satisfactory material and evidence to establish
these two conditions for grant of exemption in terms of
G.O.Ms. No. 604, dismissed the appeal by its order dated
13.3.2000. The order of the Tribunal was challenged before the
High Court by a revision petition on the ground that view
taken by the Tribunal that both the conditions should co-exist
for getting exemption under G.O.Ms. No. 604 is on a
misreading of the G.O.Ms. Tribunal’s view completely ignores
the clarification issued by the Government vide its
Memorandum No. 13630/CT-II(2)/89-19, dated 26.4.1994.
By the said office Memorandum, the Government had directed
the Commercial Tax Departmental Authorities to note that
both the certified seeds and/or truthfully labelled seeds are
entitled for exemption from tax in terms of GOMs. No. 604
dated 9.4.1981. In that context, it was submitted that the
department could not have required the appellant-dealer to
produce evidence as regards accuracy or veracity of the
declaration regarding the labelling.
3. In support of the appeal, learned counsel for the
appellant reiterated its stand before the High Court.
4. Learned counsel for the respondent on the other hand
supported the findings of the authorities, Tribunal and the
High Court.
5. The reasoning of the Tribunal related to certified and
truthfully labelled seeds reads as follows:
"Regarding treatment with fungicides, it has to
be stated that not all fungicides treated are
certified and truthfully labelled seeds.
Because, even ordinary and high quality pure
seeds are also treated with fungicides by some
persons to prevent loss of seeds and future
seedlings from such seeds because of the
fungal infection of the said seeds of the seeding
purpose. Besides there is prohibition to use
the said treated seeds for edible purpose also
after certain periods after which there is no
residual effect of such fungicides."
6. In reply to the show cause notice issued the appellant
had clarified its stand as follows:
"In this regard, we would like to bring to your
kind notice, that we have purchased processed
chilli seed, Paddy seed and Sunflower seed
from farmers, and not chillies, paddy or
sunflower commodities. The above cited seeds
namely Chillis seed, paddy seed and Sunflower
seed have been processed, treated with
fungicides and packed by us using packing
material and sold under our brand name of
"Shakthi" as truthfully labelled seeds.
Moreover the said seeds were meant for
agricultural purpose only and not for food, feed
or oil purpose, since they were treated with
fungicides. All seeds are first purchased only
from the farmers who are unregistered
dealers."
7. There was no consideration of these aspects as
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apparently the High Court has lost sight of the substance of
the clarification.
8. The G.O.Ms. No. 604 dated 9.4.1981 reads as follows:
"In exercise of powers conferred by sub-section
(1) of Section 9 of the Andhra Pradesh General
Sales Tax Act, 1957 (A.P. Act 6 of 1957) the
Governor of Andhra Pradesh hereby exempts
from the Tax payable under the said Act the
sales or purchases of all varieties of certified
and truthfully labelled seeds for agricultural
purposes.
Sales of certified and truthfully labelled
seeds in the course of inter-State trade of
Commerce Exemption from CST".
9. The Clarification Memorandum No. 13630/CT-II(2)/89-
19 dated 26.4.1994 reads as follows:
"In the G.O.Ms. No. 604 Revenue (s)
Department dated 9.4.81, the Government
issued orders exempting from the tax payable
under the A.P.G.S.T.Act the Sales or
Purchases of all varieties of certified and
truthfully labelled seeds for agricultural
purposes. In the G.O.second read above, a
similar order was issued under the C.S.T. Act
in respect of the above goods sold in the
course of inter\027state trade also.
The A.P. Seed Growers Merchants and
Nurserymen Association, Hyderabad, National
Seeds Corporation, New Delhi and Peddireddy
Thimmaredy Farm Foundation, Hyderabad
have now represented to the Government that
even though the exemption granted in the
above G.Os. are applicable to both the
categories of seeds viz. certified seeds and or
truthfully labelled seeds some of the assessing
authorities are insisting that the seeds should
be certified as well as truthfully labelled to
become eligible for grant of exemption. Hence
they requested the Government to issue
clarification in the matter to remove the
ambiguity.
The Government has examined the
matter in consultation with the Agriculture
and Co-operation Department and they hereby
clarify that both "certified seeds and/or
truthfully labelled seeds" are exempt from tax
as per the orders issued in G.O.Ms. No. 604
Revenue (s) Department dated 9.4.81 and
G.O.Ms. No. 129 Revenue (CT-II) Department
dated 14.2.89 as they are two types of seeds
sold for Agricultural purposes."
10. Rule 7 of the Seeds Rules, 1968 (in short the ’Rules’)
reads as follows:
"Rule 7. Responsibility for marking or labeling
\026 When seed of a notified kind or variety is
offered for sale under Sec.7 each container
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shall be marked or labelled in the manner
hereinafter specified. The person whose name
appears on the mark or label shall be
responsible for the accuracy of the information
required to appear on the mark or label so long
as seed is contained in the unopened original
container:
Provided, however, that such person shall not
be responsible for the accuracy of the
statement appearing on the mark or label if
the seed is removed from the original
unopened container, or he shall not be
responsible for the accuracy of the germination
statement beyond the date of validity indicated
on the mark or label".
11. The Clarification Memorandum dated 26.4.1994 clarified
that two alternatives are available i.e. either certified or
truthfully labelled. ’Certified seeds’ is defined in Section 9 of
the Seeds Act, 1966 (in short the ’Seeds Act’). Reference in this
context also may be made to the Rule 2(e) of the Rules dealing
with certified seeds.
12. Learned counsel for the appellant conceded that there
was no claim by the appellant about sale of certified seeds.
Rule 7 deals with marking or labelling.
13. It appears that Tribunal proceeded on the basis that the
seeds were required to be certified and truthfully labelled for
the purpose of eligibility for exemption. In reality, as clearly
stated in the clarificatory memorandum they are alternatives.
14. The High Court also proceeded on the same basis
overlooking the clarificatory memorandum
15. In the circumstances, it would be appropriate for the
Tribunal to examine the factual aspect, keeping in view the
clarificatory memorandum providing alternatives. The parties
shall be free to lead fresh evidence. The appellant shall
produce evidence to show that the seeds were truthfully
labelled. It cannot be said that the authorities cannot require
the dealer to satisfy the requirement that the seeds were
truthfully labelled. There is no such blanket protection. In
order to be satisfied about the acceptability of the claim, they
can require the assessee to justify the claim and that it is
entitled to the exemption.
16. The appeal is accordingly allowed with no orders as to
costs.