THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY WRIT PETITON No.1767 of 2008 ORDER: (per Hon’ble Sri Justice Ramesh Ranganathan) The Writ Petition is filed to quash the impugned garnishee notice dated 14.09.2007 whereby the petitioner was called upon to pay Rs.1,41,54,373/- representing the sales tax payable by the forest department, in respect of the bamboo supplied by them to the petitioner, for the assessment years 1991-92 to 1998-99, 2000-01, 2002-03 to 2004-05.
It is the petitioner’s case that the commercial tax department had forcibly collected taxes from them under Section 6-A of the Act, on the supply of bamboo to them by the forest department; they had stopped payment of sales tax in view of the law declared by the Supreme Court in
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State of Orissa v. Titaghur Paper Mills Co. Ltd. ; in terms of proviso (i) to Section 5 of the Act, both the buyer and the seller cannot be taxed on the same transaction; the respondent had unsuccessfully attempted to assess and levy tax on the petitioner in respect of the bamboo procured by them; having failed in their attempt to collect tax from the petitioner, the commercial tax department was seeking to collect tax, in respect of the same transaction, from the forest department; this is contrary to proviso (i) to Section 5 of the Act; in view of the order passed by the STAT on 29.01.2007, no taxes are payable in respect of the transactions between the forest department and the petitioner; the demand of the forest department, for payment of tax, is illegal; in any event the sales tax department can only collect tax from the forest department; after the STAT had passed an order on 29.01.2007, the respondents have not made any assessment for any year, on the forest department of the Government of A.P, assessing them to tax in respect of supply of bamboo to the petitioner; the 3rd respondent had issued a show-cause notice on 11.07.2007 to the 5th respondent for the assessment years 2003-04 and 2004-05; on receipt of the show-cause notice, the 5th respondent had addressed a letter dated 19.07.2007, forwarding copies of the notice to the petitioner; they had replied thereto stating that no tax was leviable on them; after service of notice, the petitioner had submitted a letter to the Joint Commissioner of Commercial Taxes, Hyderabad seeking his intervention in the matter; in view of the order of the STAT, the commercial tax department was not justified in pressurizing the forest department, to collect tax from the petitioner, in relation to the bamboo transactions; a joint meeting of the commercial tax officials, forest department officials and the officers of the petitioner was held on 23.01.2008 in the office of the Commissioner of Commercial Taxes; the petitioner submitted a detailed note on 23.01.2008; the impugned garnishee notice falls foul of the decisions of the Supreme Court in Titaghur Paper Mills Co. Ltd1, a n d Bhadrachalam Paper
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Boards Ltd v. Government of Andhra Pradesh and the decision of this Court in Andhra Pradesh paper Mills Ltd. v. Government of [3] Andhra Pradesh , and Bhadrachalam Paper Boards Ltd v.
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Government of Andhra Pradesh ; no tax can be demanded, without there being an assessment order followed by the service of a demand notice; the commercial tax department has nowhere stated that they have initiated assessment proceedings, against the forest department, in respect of these transactions; the garnishee notice, served on the petitioner, is merely an attempt to collect the said amount as tax from the petitioner; for a notice to be issued under Section 17 of the Act, a prior assessment order must be in existence; the demand notice, in the present case, was not preceded by any order either under the APGST Act or the A.P. VAT Act; without an assessment order being passed, no garnishee proceedings can be issued; the consistent stand of the sales tax department is that the petitioner is the person liable to pay sales tax; the petitioner cannot be a garnishee in respect of its own alleged liability; the impugned action of the respondents constitutes abuse of power, and amounts to harassment; the impugned notice does not indicate whether or not any assessment was made on the forest department, followed by demand notices; it is only if an assessment order is passed and, thereafter, a demand notice is raised can a garnishee notice be issued for recovery of the amounts therein; tax cannot be levied, on the transactions of supply of bamboo, either on the forest department or on the petitioner, as such supplies of bamboo by the forest department is pursuant to the lease agreement; the consideration, in a contract of this nature, is a “profit a pendre” on immovable property falling outside the purview of both the APGST Act and the A.P. VAT Act.
No counter-affidavit has been filed by the Commercial Tax Department. In the counter-affidavit, filed by the Principal Chief Conservator of Forests, it is stated that a copy of the Section 17 notice was marked to the Divisional Forest Officer, Paloncha; the claim, for payment of sales tax, by the Commercial Tax Officer, Kothagudem was justified; the supplies made to the petitioner were in contrast to the supplies made before the enactment of the A.P. Forest Produce (Fixation of Selling prices) Act, 1989 and the A.P. Forest Produce (Fixation of selling prices) Rules, 1991; in those cases, where sales tax was demanded, the bamboo coupes were not leased to the petitioner; the coupes were worked by the department, and the bamboo cuts in bundles were handed over to the petitioner by forming quantified lots at the coupe site; in the changed circumstances, the judgment of the Supreme Court in Titaghur Paper Mills Co. Ltd1 is not applicable; the selling price of cut bamboo was fixed on the basis of its market rate; the department enters into fresh agreements for supply of cut bamboo; these agreements were signed by the Conservator of Forests wherein it is stated that all taxes are to be paid by the mill, in addition to payment of the “selling price”, and reimbursement of “extraction charges”; the STAT had erred in not distinguishing the present mode of supply of BIS, compared to the earlier mode of supply wherein bamboo coupes were leased to the petitioner; the petitioner’s contention that the Forest Department issued demand notice on 03.07.2007 due to pressure from the Commercial Tax Department is not correct; the forest department had earlier issued demand notices, from time to time, for payment of Sales Tax/VAT; a consolidated demand notice was issued on 03.07.2007; as per agreement condition No.15, the petitioner failed to pay the sales tax dues, despite repeated demand notices; the Commercial Tax Officer, Kothagudem was justified in asking the forest department to pay sales tax of Rs.1,37,79,653/- due from the petitioner; the demand notices were sent to the petitioner as per rules, and not due to pressure from the Commercial taxes department; the definition of “Goods”, as interpreted by the Supreme Court in Titagarh Paper Mills1, has been amended from July, 1985; as per the new definition, all growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale, are “goods”; issuing demand notices, after the goods (BIC) are quantified and numbered, is valid; since the petitioner pays the selling price and extraction charges, when the goods-BIC are in a deliverable state, they are bound to pay sales tax; since supply of BIC, in the present system, attracts the definition of “goods”, the petitioner is liable to pay tax; the agreements entered into between the Forest Department and the petitioner, for which Sales Tax is demanded, are not “lease agreements” for handing over immovable property to obtain profit, as was done earlier; and these agreements are made to enforce the terms and conditions of supply by the department, and due payment thereof by the petitioner.
In the affidavit, filed in reply thereto, the petitioner stated that the impugned notice, under Section 17 of the APGST Act, could only have been issued for recovery of arrears of tax, interest, and penalty as determined under the Act; in the present case no assessment orders were passed, against respondents 4 to 6, for any of the years under dispute; no tax liability was determined against respondents 4 to 6, in respect of the transactions quoted in the impugned notice; and their contention, that no assessment orders were passed, has not been denied by respondents 4 to 6.
In reply to the demand notice dated 28.04.2007 issued by the 5th respondent calling upon them to make payment of tax of Rs.1,37,79,653/- along with interest at 2% per annum, the petitioner informed them, by their letter dated 11.05.2007, that the Commercial Tax Department had earlier reopened their sales tax assessments for the five assessment years from 1994-1995 to 1998-1999; they had preferred appeals, before the STAT, theragainst; they had also approached the High Court for grant of stay of the demand; the High Court had, while granting stay, directed the STAT to dispose of the matter expeditiously; the STAT, by order dated 29.01.2007, had allowed their appeals, setting aside the revisional orders of the Deputy Commissioner (CT); and, therefore, the matter should be treated as closed. The 5th respondent informed the petitioner by their letter dated 03.07.2007, that condition No.15 of the agreement, entered into between the Conservator of Forests and the petitioner during the years 2000-2001 and 2006-2007, required them to pay all taxes prescribed by the Government; and, therefore, the petitioner was bound to make payment of sales tax of Rs.1,37,79,653/- with interest at 2% per annum.
By the impugned proceedings dated 14.09.2007, the 3rd respondent informed the petitioner that the Forest Department had supplied bamboo cuts to them; and they had to pay arrears of sales tax, under the APGST Act for the years 1991-1992 to 2004-2005, for Rs.1,41,54,373/-. The 3rd respondent, in the exercise of his powers under Section 17 of the Act, informed the petitioner that, as they were holding, or may subsequently hold, money due or which would become due from them to the Forest Department, they should pay the amount towards arrears of tax due from the Forest Department. The petitioner was also informed that, if the amount was not paid as required under the notice, it would be recoverable from them as arrears of land revenue.
Section 17 of the APGST Act relates to recovery of tax, and other dues payable under the Act, from persons from whom money is due to the dealer. Section 17(1) enables the assessing authority, at any time, by notice in writing (a copy of which shall be forwarded to the dealer at his last known address), to require any person, from whom money is due or may become due to the dealer or any person who holds or may subsequently hold money for or on account of the dealer, to pay to the assessing authority either forthwith, if the money has become due or is so held, or within the time specified in the notice, so much of the money as is sufficient to pay the amount due by the dealer in respect of the arrears of tax, interest or penalty. Under Section 17(3) any person, making any payment in compliance with the notice under Section 17(1), shall be deemed to have made the payment under the authority of the dealer; and the receipt of the assessing authority would constitute a good and sufficient discharge of the liability of such person to the extent of the amount referred to in the receipt. Under sub-section (4) any person discharging any liability to the dealer, after receipt of the notice referred to in Section 17(1), shall be personally liable to the assessing authority to the extent of the liability of the dealer for the amount due under the Act. Under Section 17(5-a) where any person, to whom a notice under Section 17(1) is sent, fails to pay to the assessing authority the sum demanded or any part thereof, as required in the said notice, such sum shall be recoverable from such person as if it were arrears of land revenue due from him.
Section 17 merely requires a person, from whom money is due to the dealer, to make payment, of the amount referred to in the notice, to the Commercial Tax Department. On payment, the said person is entitled to claim discharge of their liability to the dealer for a like sum. However the notice, under Section 17(1) of the Act, can be issued by the assessing authority only if any amount is due from the dealer towards arrears of tax, interest, penalty or fee. The premise, underlying a notice issued under Section 17(1), is that the dealer is in arrears of sales tax, interest or penalty. In the present case the dealer is the Forest Department of the Government of A.P. which supplied bamboo to the petitioner. While the impugned notice does appear innocuous, and merely requires the petitioner to pay the amount referred to in the notice; and, on such payment, to claim discharge of their liability for a like sum, payable by them to the Forest Department of the Government, Sri M.V.J.K. Kumar, Learned Counsel for the petitioner, would submit that it is only if sales tax is payable by the Forest Department of the Government of A.P, to the Commercial Tax Department of the Government of A.P, could a notice have been issued to the petitioner under Section 17(1) of the Act; and, as sales tax paid by a selling dealer can be passed on to the purchaser, payment of the amount, under the notice under Section 17(1), may be construed as a tacit admission by the petitioner that the bamboos supplied to them, by the Forest Department, constitute “sale of goods” liable to tax under the Act; and the forest Department may later claim that the said amount represents the sales tax component of the sale value of bamboo supplied by them to the petitioner.
Both under clauses (1) and (2) of Section 6-A of the APGST Act, it was only if a dealer, who in the course of business, purchased any goods, the sale or purchase of which was liable to tax under the APGST Act, was he required to pay tax on the turnover relating to the said purchases at the same rate at which tax would have been leviable on such goods under Section 5 or 6 of the Act. Section 5(1) required every dealer to pay tax under the Act for each year on every rupee of his turnover of sales or purchases of goods. Section 6 related to the tax in respect of declared goods and, thereunder, the dealer was liable to tax at the rate, and only at the point of sale or purchases, specified in the III Schedule to the Act. The Deputy Commissioner (CT) had earlier revised the assessment orders, for the five assessment years from 1994-95 to 1998-99, levying tax under Section 6-A of the Act on the bamboo cuts supplied to the petitoners by the Forest Department of the Government of Andhra Pradesh. These revisional orders were set aside by the STAT in TA No.75 of 2004 and batch dated 29.01.2007. The TREVCs, preferred by the State Government thereagainst, have been dismissed by us and, as such, the petitioner cannot be subjected to tax under Section 6-A of the APGST Act for the bamboo cuts supplied to them, by the Forest Department of the Government of Andhra Pradesh, during the five assessment years from 1994-95 to 1998-99.
While the submission of Sri M.V.J.K.Kumar, Learned Counsel for the petitioner, that, as the petitioner is not liable to tax under Section 6-A of the Act, the supply of bamboo cuts to them by the Forest Department does not constitute “sales” liable to tax under the Act, is not without merit, it would be wholly inappropriate for this Court, in writ proceedings under Article 226 of the Constitution of India, to examine whether or not the Forest Department is liable to pay sales tax under the APGST Act. While the apprehension expressed by Sri M.V.J.K.Kumar, Learned Counsel for the petitioner, cannot be brushed aside, that would not justify this Court taking upon itself the task of examining the validity of assessment orders, if any, levying sales tax on the Forest Department, more so when these proceedings are not even under challenge. The impugned notice does not even refer to any assessment orders having been passed against the Forest Department of the Government of Andhra Pradesh. While the Commercial Tax Department has not even chosen to file a counter- affidavit, the Forest Department has not denied the petition’s assertion that no assessment orders were passed by the Commercial Tax Department against the Forest Department of the Government of Andhra Pradesh.
The impugned notice relates to arrears of tax, allegedly due from the Forest Department, under the APGST Act for the years 1991-92 to 2004-05. Supply of bamboo by the Forest department of the Government of A.P. to the petitioner, for a part of this period (the five year period from 1994-95 to 1998-99), was the subject matter of consideration in TREVC No.13 of 2007 and batch, which have been allowed by this Court. It is but appropriate, therefore, that the third respondent examines the matter afresh, in the light of the orders passed by us in TREVC No.13 of 2007 and batch, and thereafter takes action in accordance with law. The impugned notice dated 14.09.2007 is, accordingly, set aside. It is made clear that, in case the Forest Department of the Government of Andhra Pradesh demands payment of sales tax on the bamboo cuts supplied by them, it is always open to the petitioner to challenge such orders in appropriate legal proceedings.
The Writ Petition is, accordingly, disposed of. The miscellaneous petitions pending, if any, shall stand automatically dismissed. However, in the circumstances, without costs.
(RAMESH RANGANATHAN, J) (M. SATYANARAYANA MURTHY, J) Date: 20.11.2014.
MRKR/CS
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(1985) 60 STC 213
(1998) 111 STC 657 (SC)
(1989) 73 STC 26
(1989) 75 STC 262 (AP)