Full Judgment Text
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CASE NO.:
Appeal (civil) 4912 of 2006
PETITIONER:
M/s Supra Marketing Agencies
RESPONDENT:
Commercial Tax Officer,Hyderabad and Ors
DATE OF JUDGMENT: 13/11/2006
BENCH:
ARIJIT PASAYAT & LOKESHWAR SINGH PANTA
JUDGMENT:
J U D G M E N T
(Arising out of SLP (C) Nos. 2381-2382 of 2006)
ARIJIT PASAYAT, J
Leave granted.
The controversy in the present appeal lies within a narrow
compass. The appellant is a dealer registered under the
provisions of Andhra Pradesh General Sales Tax Act, 1957 (in
short the ’Act’) and the Central Sales Tax Act, 1956 (in short
the ’CST Act’). The present disputes relates to the assessment
years 1998-1999 and 1999-2000. The State Government in
the Commercial Tax Department issued a letter to the Andhra
Pradesh Backward Classes Cooperative Finance Corporation
Limited (in short ’Corporation’) directing that taxes are to be
deducted at a source on the payments made by it to the
appellant. It was stipulated that the amounts so deducted at
source are to be deposited with the Commercial Tax
Department. The Corporation directed to its Executive Director
to credit sales tax deducted at source by Account Payee
cheque in favour of the concerned Assessing Officer in terms of
discussion held at a meeting held on 27.03.1999 where the
Managing Director of the Corporation and the Commissioner
of Commercial Taxes were present. The Corporation had
floated a project known as Adarna for the purpose of
ameliorating the conditions of poor backward class artisans.
The Corporation had taken a decision to procure number of
articles used by artisans. An agreement was entered into
between the appellant and the Corporation for supply of milk
cans, insulating boxes etc. Undisputedly, certain amounts had
been deducted at source in respect of sales tax payable. The
appellant brought it to the notice of the Corporation that by
letter dated 7.7.1999 in view of the Circular issued by the
Commissioner of Commercial Tax (in short the ’Commissioner’)
in terms Section 42-A of the Act, it was the responsibility of
the Corporation to discharge the sales tax liability under the
Act and CST Act. A Circular had been issued by the
Commissioner directing all the Deputy Commissioners to
implement the instructions issued in respect of payments
made in the Adarna scheme. The Corporation in terms of
Circular had deposited Rs.5,50,089/- which is a part of the
amount deducted at source. The balance amount
undisputedly is Rs.10,44,396/-. The Sales Tax Authorities
wanted to recover the said amount from the appellant. Placing
reliance on the Circular issued by the Deputy Commissioner
on behalf of the Commissioner and Commissioner on
17.12.1998 and 7.7.1999 respectively, appellant requested
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the Sales Tax Authorities to collect the amounts from the
Corporation. It appears that there was some dispute about the
amounts payable to the appellant. The stand of the
Corporation appears to be that payment in excess of the actual
dues had been made to the appellant. The present dispute
does not relate to the said controversy.
Undisputedly, arbitration proceedings have been
initiated. The Commercial Tax Officer, respondent No- I
issued notices of attachment to Lakshmi Vilas Bank Limited,
Secunderabad to attach bank account of the appellant to the
extent Rs. 1O,44,396/-. Writ Petition was filed before the High
Court questioning the action. The High Court by impugned
judgment dismissed the writ petition holding that there was no
valid Circular in existence. The High Court was of the view
that letter issued by the Deputy Commissioner, Commercial
Taxes cannot be equated with the circular which the
Commissioner alone could have issued. It is also not relevant
that in the arbitration proceedings, Corporation has been held
liable to pay amounts which have been deducted at source at
tax as Commercial Tax Officer was not a party to such
proceedings.
In support of appeals, learned counsel for the appellant
submitted that notwithstanding the fact that the parties
accept the position that whatever has been deducted at source
has to be deposited with the Commercial Tax Department, the
appellant is being asked to pay the amount again. Nobody
disputes that the Corporation was required to deduct the
amount and to deposit it. In fact the dispute on which the
Corporation placed reliance has nothing to do with the
question of deposit of amounts which has been deducted at
source. The State Government accepts that the Deputy
Commissioner had issued communication in question acting
on behalf of the Commissioner and it is a Circular by the
Commissioner. It has also accepted that the Corporation is to
deposit amounts which it has deducted at source.
Learned counsel for respondents 1 and 2 submitted that
Commercial Tax Officer and the State Government did not
dispute the stand that the Corporation has to deposit the
amounts which has been deducted at source. The stand of the
Corporation essentially is that there is some dispute about
the amounts to be paid to the appellant and in fact its stand is
that the payment in excess of what is legally due has been
made.
The basic issue is whether the amount which has been
deducted at source by the Corporation is required to be
deposited with the Commercia1 Tax Department. There is no
scope for any controversy on this score. The amounts have
been deducted in terms of the directions given by the
Commissioner. The relevant portion of the Circular dated
17.12.1998 reads as follows:
"During the course of meeting, I have made it
clear to the suppliers that the tax should be
deducted at source, that is by the Corporation
in respect of the supplies of goods wherever
tax is leviable. I, therefore, request you to
kindly to confirm to the Commissioner of
Commercial Taxes that the Corporation will be
undertaking to deduct tax at source before
paying the consideration to all the suppliers of
goods ADARNA PROJECT. The tax so deducted
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from these suppliers, in case they are
registered with ACTO Punjagutta Circle, under
the said proceedings, may be paid through
crossed cheque drawn in favor of Commercial
Tax Officer, Punjagutta Circle, Hyderabad duly
indicating the names of suppliers and the tax
amount deducted from them in the covering
letter. A certificate of the deduction may also
be issued to the individual suppliers. In
respect of suppliers who are already registered
in this State other than in Punjagutta Circle,
such crossed cheques may be issued in favour
of the concerned C.T.O. in the State and sent
by registered post to that C.T.O.".
The stand of the Corporation that it has raised the
dispute about the amounts payab1e is really unconnected
with the issue under consideration. Undisputedly, since the
amounts have been deducted at source from the amounts paid
to the appellant for supply of articles, Corporation had to
deposit the amounts.
In the Circular of the Deputy Commissioner as quoted
above, it has been clearly stated that the tax is to be deducted
at source wherever tax is leviable. In the Commissioner’s
Circular dated 7.7.1999, it has been clearly stated that in the
meeting held on 27.3.1999, it was decided to deduct tax at
source in respect of all purchases made by the Corporation
and to deposit the said amount with the Commissioner.
In view of the aforesaid factual position, we direct that
the Corporation should deposit the amounts which have not
yet been deposited in respect of amounts deducted at source
as tax. The deposit shall be made within one month from
today. It is unnecessary to state that we have not expressed
any opinion on the dispute relating to the entitlement of the
appellant and the question where there has been any over
payment as claimed by the Corporation. The appeals are
allowed to the aforesaid extent. No costs.