CASE NO.: Appeal (civil) 4832 of 2007 PETITIONER: STATE OF ANDHRA PRADESH & ANR RESPONDENT: M/S CONCAP CAPACITORS,BALANAGAR, HYDERABAD & ORS DATE OF JUDGMENT: 12/10/2007 BENCH: C.K. THAKKER & ALTAMAS KABIR JUDGMENT:
J U D G M E N T
ARISING OUT OF SPECIAL LEAVE PETITION (C) NO. 13207 OF 2006
C.K. THAKKER, J.
1. Leave granted.
2. This appeal is filed by the State of
Andhra Pradesh & Anr. (Revenue for short)
against common judgment and order dated August
31, 2005 in several Revisions. By the impugned
order, the High Court allowed Tax Revision
Cases (TRC) filed by manufacturers, dealers and
traders (assessee for short) and held that
Capacitors is one of the items of electronic
goods or components, taxable at a concessional
rate of tax under the Andhra Pradesh General
Sales Tax Act, 1957 (hereinafter referred to as
the State Act) as also under the Central
Sales Tax Act, 1956 (hereinafter referred to as
the Central Act).
3. To appreciate the issue raised by the
Revenue, few relevant facts may be stated.
4. The respondents in this appeal are
manufacturers, dealers or traders of electronic
goods, components and materials. They are duly
registered under the State Act as well as
Central Act. Their claim was that Capacitors,
manufactured by them, was exigible to tax at a
concessional rate as electronic goods in
terms of various Government Orders issued from
time to time and not as electric goods
subject to higher tax. It was their case that
the Assessing Authorities had taken conflicting
views in different cases. In some cases, while
making assessment orders, they accepted the
case of manufacturers/dealers/traders treating
Capacitors as electronic goods and levied
concessional rate of tax; while in other cases,
the Assessing Authorities negatived such claim
as to concessional rate of tax and ordered to
levy Capacitors as electric goods. Where the
Assessing Authorities had decided against the
assessee, the assessee challenged the action
before the Tribunal and where the issue was
decided by the Authorities in favour of
assessee, the Revenue had challenged such
decision. All the matters were, therefore,
placed before the Sales Tax Appellate Tribunal,
Andhra Pradesh, Hyderabad. The Tribunal
considered the rival contentions of the parties
as also provisions of the State Act and Central
Act and various G.O.Ms. and observed that the
item in question i.e. Capacitors did not
operate on electronic principle and could not
be considered as electronic goods or
component for the purpose of concessional rate
of tax. It, therefore, remanded the cases to
the Assessing Authorities to pass fresh
assessment orders giving opportunity to the
assessee to produce any material to show that
they sold Capacitors which could be said to be
electronic goods.
5. Being aggrieved by the orders passed
by the Tribunal, the assessee approached the
High Court of Andhra Pradesh by filing
Revisions. The High Court, on consideration of
relevant provisions of law as also various
G.O.Ms. and referring to several decisions,
held that from the relevant material, it was
clearly established that Capacitors would
fall under the category of electronic goods
and the Tribunal was wrong in upholding the
contention of Revenue that the item could not
be said to be electronic goods. The High Court
also held that in G.O.Ms. issued by the Revenue
from time to time, various items were expressly
specified and Capacitors was one of them. In
view of specific mention of the item, the
Revenue was bound to grant benefit to the
assessee of concessional rate of tax and the
Tribunal was not justified in considering the
question on the basis of operating principle.
The said process could have been undertaken by
the Tribunal had there not been a specific
mention of the item and the question was
required to be decided on general principle and
practice. But once there was a list of
electronic items prepared by the Electronic
Commission and G.O.Ms. referred to those items
wherein Capacitors was included, only thing
the Tribunal required to do was to ascertain
whether the item found place in the list or
not. Once the item is included in the list, no
further inquiry could have been undertaken.
Accordingly, all Revisions were allowed and the
issue was answered in favour of the assessee.
6. The Revenue has challenged in this
Court the decision of the High Court. On July
31, 2006 delay was condoned and notice was
issued. Affidavits in reply and rejoinder were
thereafter filed and the matters were placed
for final disposal.
7. We have heard learned counsel for the
parties.
8. The learned counsel for the Revenue
challenged the decision of the High Court. He
submitted that the High Court was not at all
justified in interfering with the order passed
by the Tribunal. He urged that a finding of
fact was recorded by the Tribunal which was
final and could not have been interfered with
by the High Court in Revisions. It was also
submitted that the Tribunal, in any case, had
remanded the matter and it was thus not a
final order which could have been disturbed
by the High Court. If the assessee was in a
position to convince the Authorities that he
was entitled to concessional rate of tax, the
Authorities would have decided the case in his
favour. The High Court was, therefore, not
right in entertaining and allowing Revisions.
The counsel submitted that where a particular
item is subject to payment of tax and the case
of the assessee is that he is not liable to pay
tax or is liable to pay tax at a concessional
rate, the burden is on him to establish such
case as it is an exception to the general rule.
Such provisions of lawprimary or delegated
must be construed strictly. It was also argued
that the Tribunal was wholly justified in
considering the question on operating
principle. The Tribunal noted that so far as
Capacitors is concerned, it did not operate
as electronic goods but as electric goods.
Such approach which was real and practical,
could not have been objected by the assessee
and the High Court could not have commented the
basis on which the Tribunal proceeded to
consider the matter. Finally, it was submitted
that in certain cases, assessee (manufacturers/
dealers/distributors/traders) had collected the
amount of tax at higher rates from the
customers. Thus, on the one hand, the assessee
contended that the item was subject to payment
of concessional rate of tax and on the other
hand, it collected the tax at higher rate from
customers. The assessee thus would retain the
amount collected from customers towards tax.
This cannot be allowed to be done as it would
amount to unjust enrichment by the assessee.
To that extent, therefore, in any case, the
assessee is liable to pay the amount to the
Revenue. On all these grounds, it was submitted
that the appeals deserve to be allowed by
setting aside the order passed by the High
Court and by restoring the order of the
Tribunal.
9. Learned counsel for the assessee, on
the other hand, supported the order passed by
the High Court. It was submitted that no error
of law can be said to have been committed by
the High Court in deciding the matters and
these are not fit cases to entertain appeals
under the discretionary jurisdiction of this
Court under Article 136 of the Constitution. It
was also submitted that it was clear from the
provisions of law that Capacitors could be
said to be electronic goods and subject to
payment of tax at a concessional rate. In
several cases, such view was taken by the
Assessing Authorities. Since in some cases, a
different view was struck, G.O.Ms. were
required to be issued by the Authorities. Such
amendments / instructions / communications were
declaratory in nature and obviously, therefore,
they were applicable with retrospective effect;
i.e. not only to transactions subsequent to the
issue of notification but even to prior
transactions. Capacitors, hence, must be
treated as an item covered by the entry
electronic goods and subject to payment of
tax at a concessional rate. It was also
submitted that concessional rate has been
granted on the item in question so as to ensure
industrial growth in the State. A provision
which has been intended for a laudable object
of industrial development, must be liberally
construed. And, even if two views are possible,
the view favourable to the assessee should be
adopted. When the High Court has taken such
view, this Court may not interfere with it
under Article 136 of the Constitution. It was
also submitted that the High Court was wholly
justified in criticizing the approach adopted
by the Tribunal. The High Court was right in
holding that operating principle or user
test would apply to those cases where there is
no express mention of a particular item in the
notification or G.O.Ms. But once the item is
specified in the list, there should not be
further inquiry and the assessee would be
entitled to concessional rate of tax on the
basis of such entry. In the case on hand,
several items were specifically mentioned in
various G.O.Ms. Capacitors, admittedly, was
one of them. In view of the said position, the
Tribunal exceeded its jurisdiction in applying
operating principle or functioning of the
item and the High Court was right in
criticizing it. The High Court was also
constrained to observe that though the point
was concluded by a decision of the High Court
in earlier cases, the Tribunal sought to
distinguish the said decision on the grounds
not permissible in law. The counsel, therefore,
submitted that no case has been made out by the
Revenue to interfere with the order of the High
Court and the appeal deserves to be dismissed.
10. We have given anxious consideration to
the rival contentions of the parties. The
question which is raised before us and which
was raised before the Tribunal as well as
before the High Court was as to whether the
item Capacitors is electronic goods or
electric goods. In this connection, our
attention was invited by the learned counsel
for the parties to the provisions of the State
Act as also of the Central Act. The learned
counsel for the assessee also referred to
G.O.Ms. No. 520, dated July 20, 1998, issued
under the State Act and G.O. Ms. No. 521 issued
under the Central Act. The relevant part of
G.O. Ms. No. 520 reads thus:
(2) For the purpose of this
notification, the term electronic
goods means electronic systems,
instruments, appliances, apparatus,
equipment operating on electronic
principles and all types of electronic
components, parts and materials and
includes
(i) consumer electronics;
(ii) electronic test and measuring
instruments;
(iii) medical electronic equipment,
(iv) electronic analytical instruments;
(v) electronic equipment / instruments
for nuclear, geo-scientific and
other special applications;
(vi) electronic process control
equipment;
(vii) power electronic equipment;
(viii) electronic industrial automation
and control equipment;
(ix) electronic data processing systems
and electronic office equipment;
(x) electronic broadcasting equipment;
(xi) electronic communication equipment
and
(xii) electronic aerospace and defence
equipment
11. G.O. Ms. No. 521 issued under Central
Act is in pari materia to G.O. Ms. No. 520.
12. On June 1, 1989, Memo No.23718/
CT.II.2/89 was issued by the Principal
Secretary to Government of Andhra Pradesh,
Revenue (CT-II) Department, inviting the
attention of the Commissioner of Commercial
Taxes to the reference cited in the said Memo
and informing him that the Government had
decided that the list of electronic items
prepared by the Electronic Commission should be
followed for the purpose of concessional rate
of tax on electronic goods ordered in
G.O.Ms.Nos. 520 and 521. The Commissioner was
requested to issue necessary instructions to
subordinate officers under Section 42A of the
State Act.
13. Pursuant to the above Memo, a Circular
was issued by the Commissioner of Commercial
Taxes on July 13, 1989 which is also relevant
and reads thus:
Office of the
Commissioner of Commercial Taxes
Andhra Pradesh : Hyderabad
Dated 13.07.1989
Ref. A1/1240/88
M.V. NATARAJAN, I.A.S.,
COMMISSIONER OF COMMERCIAL TAXES
C I R C U L A R
Sub : APGST Act & CST Act Reduction in
the rate of tax on Electronic goods
Reg.
Ref:1. G.O.Ms.No. 520 Rev dt. 20.07.1988.
2. G.O.Ms.No. 521 Rev dt. 20.07.1988.
3. Govt. Memo No.23718/CT.11.2./89
dated 01.06.1989
It is informed that vide G.O.s first
and second cited, Government were pleased
to reduce the rate of tax to 2 paise on
Electronic goods with effect from
1.7.1988 mentioning a broad
classification of electronic goods such
as Consumer Electronics, Electronic test
and measuring instruments, General
Electronic Equipment etc.
Several representations have been
received from the dealers requesting to
clarify the specific items which falls
under the classification, mentioned in
the G.O. first cited, a copy of the
Government Memo, third cited is enclosed
along with a copy of the list prepared by
the Electronic Commission duly
authenticated.
2. The Assessing authorities are
requested to take action accordingly.
3. This reference may please be
acknowledged to next authority.
Sd/-
M.V. NATARAJAN
COMMISSIONER OF COMMERCIAL TAXES
(emphasis supplied)
14. A list of electronic items prepared by
the Electronic Commission was also produced
before the Tribunal as well as before the High
Court and before us. Item No.13.0 relates to
Electronic Components under which at Item
No.13.39 is shown Plastic Film Capacitors.
15. Thus, from the above G.O.Ms. and
Circular issued by the Commissioner, it is
clear that in pursuance of several
representations received from Dealers
requesting to clarify the specific items
falling under electronic goods that the
Classification Memo was issued by the
Government and the Circular by the Commissioner
on the basis of the list prepared by the
Electronic Commission. The said list expressly
contained an item Capacitors. In view of
specific reference to Capacitors, in our
opinion, the High Court was right in relying on
the said item and in holding that Capacitors
could be said to be electronic goods and was
covered by a concessional rate of tax under the
Act.
16. The learned counsel for the assessee
stated that on the basis of the list prepared
by Electronic Commission, concessional rate of
tax was recovered on items mentioned in the
list. A similar question came up for
consideration before the High Court of Andhra
Pradesh in State of Andhra Pradesh v. Amara
Raja Batteries, [1998 (111) STC 664 (AP)].
There, the Court was concerned with NICD
Batteries. The Court considered G.O.Ms. 520 and
521 and item No. 13.93 of the list (Other
batteries) declared by Electronic Commission
and held that it was entitled to concessional
rate of tax.
17. The Court observed:
Since according to the list
prepared by the Electronics
Commission, the batteries are
electronic components and since the
electronic components are one of the
items which are eligible for
concessional rate of duty and since
the clarification in the list prepared
by the Electronics Commission is
treated as part of the G.O. the
batteries manufactured by the assessee
are eligible for concessional rate of
duty under G.O. Ms. No. 520, Revenue
dated July 20, 1988 and G.O. Ms. No.
521 Revenue dated July 20, 1988 issued
under the A.P. General Sales Tax Act
and also Central Sales Tax Act.
18. It appears that the Revenue challenged
the decision of the High Court by filing Civil
Appeal Nos. 723-25 of 1999, but a three Judge
Bench of this Court dismissed them on March 21,
2001 observing that there was no good reason
to interfere with the order under appeal.
19. Once again, the issue came up for
consideration before the same Court in India
Extrusion v. Commission of Commercial Taxes,
A.P., Hyderabad, (2001) 124 STC 474. In India
Extrusion, the Court was considering the item
of Cable Joining Kits. Relying on G.O.Ms.Nos.
520 and 521 and taking recourse to the list of
electronic goods prepared by Electronic
Commission, the High Court held that it could
be said to be electronic goods and was
subject to levy at the concessional rate of
tax. The Revenue accepted the judgment and had
not challenged the said decision.
20. The High Court, in our opinion, was
right in observing that when the Electronic
Commission had prepared a list which contained
the item Capacitors, it had to be accepted by
the Revenue and tax can be levied only on the
basis of such classification. The High Court
was, therefore, right when it stated:
The contention of the learned
Counsel for the petitioners is that
when the Government has issued
clarificatory memo with reference to
G.O. Ms. Nos. 520 and 521, adopting
the list prepared by the Electronics
Commission for the purpose of
concessional rate of tax as electronic
items or electronic components, the
same holds good even for the
subsequent notifications, as there was
no material variation in the contents
of the subsequent Government Orders
except variation in the rate of tax.
But, on the other hand, the contention
of the department is that unless a
particular item operates on electronic
principle the same would not be
considered as “electronic goods” or
component for the purpose of
concessional rate of tax. We are
unable to accept the said contention
of the Revenue on the first principle.
If a particular item of goods or
component, part or material is not
specified in the list either in the
Government Order or in the list of
electronic items that are prepared by
the Electronics Commission, then only
the question would arise for
consideration whether a particular
item can be treated as an electronic
goods or component or material,
depending upon its operating
principle, but not otherwise.
Admittedly, the list of electronic
items prepared by the Electronics
Commission shows that there are as
many as 16 sub-headings under which
various items that are listed or
specified. In the present case, we are
concerned with “plastic film
capacitors”. The said item finds place
under the sub-heading “electronic
components.” In the list of items
prepared by the Electronics Commission
the plastic film capacitors is
specified at 13.39. Similarly, there
are other capacitors such as paper
capacitors at 13.38, ceramic
capacitors at 13.42, and mica
capacitors at 13.43. Therefore, it is
clear that the item in question is
clearly specified as one of the
electronic items contained in the list
prepared by the Electronics
Commission. In fact, when similar
issue came up for consideration before
this Court in Amara Raja Batteries,
[1998] 111 STC 664, while considering
G.O. Ms. Nos. 520 and 521, referred
and relied upon the list prepared by
the Electronics Commission as was
ordered to be adopted by the
Government by its memo dated June 1,
1989. As batteries, which fell for
consideration, was found under item
13.93, the division Bench accepted the
claim of the assessee and upheld the
decision of the Tribunal where the
Tribunal allowed the claim of the
assessee treating the batteries as
electronic component. But, however,
this decision was distinguished by the
Tribunal in the impugned orders on
unsustainable grounds.
(emphasis supplied)
21. To us, the High Court was also right
in indicating that when the item has been
specifically included in the list prepared by
Electronic Commission, the Tribunal could not
have applied functional test, operating
principle or user test. A limited inquiry
which was required to be made by the Tribunal
was whether the item had been included in the
list prepared by the Electronic Commission. If
any item is included in the said list, it has
to be treated as such and tax has to be levied
on that basis. But if the item is not included
in the list, it is open to the Tribunal to
consider its placement on the basis of
functional test as to whether such item could
be said to be electronic goods. The item
Capacitors has been expressly included in the
list prepared by the Electronic Commission and
hence it was not open to the Tribunal to apply
operating principle or user test and the
High Court was wholly justified in interfering
with the order passed by the Tribunal.
22. The learned counsel for the assessee
also urged that the underlying object of
granting concessional rate of tax to Capacitors
was industrial development. Relying on
Commissioner of Income Tax, Amritsar v. Straw
Board Manufacturing Co. Ltd., (1989) Supp (2)
SCC 523, Commissioner of Sales Tax v.
Industrial Coal Enterprises, (1999) 2 SCC 607
and Collector of Central Excise, Meerut v.
Maruti Foam (P) Ltd., (2004) 6 SCC 722, it was
urged that whenever a concession has been
granted so as to bring about industrial
expansion and growth, the provision must be
liberally construed. In view of the fact,
however, that according to us, item relating to
Capacitors has been expressly included in the
list prepared by Electronic Commission, it is
not necessary for us to enter into larger
question as, in our judgment, the assessee had
rightly succeeded and the High Court was
justified in allowing Revisions.
23. The learned counsel for the Revenue,
no doubt, submitted that the Tribunal merely
remanded the matter to the Authorities to
decide them in accordance with law and the High
Court ought not to have interfered with the
order. In our opinion, however, the submission
is ill-founded. As rightly held by the High
Court, the Authorities were required to proceed
on the basis of list prepared by Electronic
Commission. Since the Electronic Commission
included Capacitors as one of the items, it
was not open to the Tribunal to enter into the
question as to the functions to be performed by
Capacitors and to remit the matter to decide as
to whether it would be covered by the item
electronic goods or electric goods. Hence,
though the matter was remanded, the High Court
was justified in interfering with the said
order as it was not open to the Tribunal to
pass such order.
24. Finally, it was submitted that some of
the manufacturers, dealers and traders had
collected the tax at the higher rate from their
customers and now they are seeking relief from
the Court to pay tax at concessional rate. If
the contention of the assessees is upheld and
they will be allowed to pay tax at a
concessional rate, they would thereby unjustly
enrich themselves inasmuch as on one hand they
had collected much more amount towards tax and
will now pay lesser amount of tax to the
Government. No assessee can be allowed unjust
enrichment. Where an assessee is not entitled
to a particular benefit, he cannot be permitted
to retain such benefit. [vide Mafatlal
Industries Ltd. v. Union of India, (1997) 5
SCC 536].
25. In the affidavit in reply, the
allegation has been emphatically denied by the
assessee. It was the case of the assessee that
the allegation was factually incorrect that the
assessees had collected tax at a higher rate
and they now want to pay tax at a concessional
rate. But in view of assertion by the Revenue
and denial by the assessee, it would be
appropriate if we do not enter into the said
question by granting liberty to the Revenue to
consider the question independently.
26. We, therefore, hold that the item
Capacitors is subject to payment of tax at a
concessional rate. The order passed by the High
Court, to that extent is, therefore, upheld.
It is, however, made clear that if any assessee
had collected an amount at a higher rate of tax
from its customers than the concessional rate
as held by us, it is open to the Revenue to
take appropriate proceedings in accordance with
law for the recovery of such amount. The
excess amount, if any, recovered by any
assessee towards tax shall have to be paid by
such assessee to the Government.
27. For the foregoing reasons, the appeal
deserves to be disposed of and is accordingly
disposed of subject to the observations made by
us hereinabove. On the facts and in the
circumstances of the case, however, there shall
be no order as to costs.