Case Law Details
Matangi Traders Vs Joint Commr Ct (Andhra Pradesh High Court)
In a significant ruling, the Andhra Pradesh High Court addressed the taxation of chemicals in the case of Matangi Traders Vs Joint Commissioner of Commercial Taxes. The court examined the tax applicability on Sodium Bicarbonate (Soda Ash) and Magnesium Sulphate (Epsom Salt) in relation to the Andhra Pradesh Goods and Services Tax Act, 2017. The core issue was whether these chemicals should be taxed at 8% or 12%.
The petitioners, dealers of the aforementioned chemicals, contended that their products should be taxed at a lower rate of 8%, referencing G.O.Ms.No.189 issued on February 7, 2005. This government order mandated a tax of 8% on all chemicals not classified under specific entries. Initially, the assessing authorities partially accepted this claim but later revised their decisions, imposing a 12% tax rate, stating that these goods were not covered by the earlier order.
In response, the petitioners appealed against the revision orders that directed the higher tax rate. The Appellate Deputy Commissioner (CT) in Visakhapatnam had initially ruled in favor of the petitioners, allowing the appeals and revising the assessment orders accordingly. However, upon further review, the Revisional Authority reversed this decision, leading to the current writ petitions before the Andhra Pradesh High Court.
The counsel for the petitioners argued that the nature of the goods as chemicals remained unchanged, regardless of their use as raw materials in manufacturing. They cited a precedent from a Division Bench judgment, asserting that the mere use of these chemicals as raw materials did not alter their classification as chemicals, as per the existing legal provisions.
On the opposing side, the learned Government Pleader for Commercial Tax contended that the goods could not be classified as chemicals solely based on their chemical names. The argument presented was that the purpose for which these goods were purchased warranted a classification as raw materials rather than chemicals, thereby justifying the application of the 12% tax rate.
The court evaluated G.O.Ms.No.189 and its implications on the tax structure. It underscored that the government order clearly specified a tax rate of 8% on chemicals not enumerated under Entry-9 of the state’s tax schedule. The court noted that both Sodium Bicarbonate and Magnesium Sulphate were not listed under this entry, thus falling within the purview of the 8% tax rate.
In its ruling, the High Court referenced a previous judgment concerning Sodium Hydro Sulphite, affirming that any chemical not included in Entry-9 should be subject to the lower tax rate stipulated in G.O.Ms.No.189. The court concluded that the categorization of the goods as chemicals was intact, and their use in manufacturing processes did not detract from their classification.
As a result, the court allowed the writ petitions, overturning the revision orders from the Joint Commissioner of Commercial Taxes. The ruling emphasized the need for a consistent interpretation of tax classifications to avoid unnecessary financial burdens on traders dealing in essential chemical products.
In closing, the court’s decision reinforces the legal standing that the use of certain chemicals in manufacturing does not reclassify them for tax purposes, ensuring that dealers in Andhra Pradesh can operate under the established tax framework without facing unwarranted increases in their tax liabilities. The judgment ultimately seeks to clarify and streamline the tax application process for chemicals, fostering a fair and predictable environment for businesses in the region.
FULL TEXT OF THE JUDGMENT/ORDER OF ANDHRA PRADESH HIGH COURT
As the issues raised in all these Writ Petitions are one and the same and they are being disposed of by way of this Common Order.
2. In all these cases, the petitioners are dealers dealing with Sodium Bicarbonate (Soda Ash) and Magnesium Sulphate (Epsom Salt).
3. All the petitioners, while being assessed under the Andhra Pradesh Goods and Services Tax Act, 2017 [for short “the APGST Act”] had claimed that the rate of tax payable on the sale of these goods would be 8% on the basis of G.O.Ms.No.189, dated 07.02.2005.
4. This contention was partly accepted by the Assessing However, some of these goods were sought to tax @12% on the ground that they are not covered under G.O.Ms.No.189, dated 07.02.2005. Aggrieved by the said Orders of Assessment, the petitioners had filed appeals against their respective Assessment Orders. The Appellate Deputy Commissioner (CT), Visakhapatnam accepted the contentions of the petitioners and allowed the appeals. Consequent to the said Orders, the Assessing Officers had revised their Assessment Orders.
5. At that stage, the Revisional Authority revised the Orders in appeal and, after hearing the petitioners, had held against the petitioners and directed payment of tax @12% on the sale of these goods.
6. Aggrieved by the said Orders of revision which are all dated 08.2008, the petitioners have approached this Court by way of the present set of Writ Petitions.
7. Smt. Priyanvitha, learned counsel appearing on behalf of Sri Vedula Srinivas, learned counsel for the petitioners would submit that the Revisional Order proceeded on the ground that the goods in question were used as raw material for manufacture of other goods and as such, they cannot be treated as chemicals. She would submit that the goods would not lose their character of chemicals merely because they were used as raw material in manufacture of other goods and the finding of the Revisional Authority that the nature of the goods would change from chemicals to other goods which do not fall within the purview of G.O.Ms.No.189, dated 07.02.2005 is not based on any logic or provision of law. She would also rely upon the Judgment of a Division Bench of the erstwhile High Court of Judicature, Andhra Pradesh at Hyderabad, dated 07.06.2007, in W.P.No.87 of 2007.
8. The learned Government Pleader for Commercial Tax, on the other hand, would submit that the goods in question cannot be treated as chemicals merely because they can also be called by their chemical names. He would submit that the Revisional Authority after looking at the purpose for which the goods were purchased in the market had held that these should be treated as raw materials and not chemicals. He would further submit that there is no infirmity in the said reasoning and the Order of Revisional Authority ought to be
9. G.O.Ms.No.189, dated 07.02.2005 reads as follows:-
“LEVY OF TAX ON THE SALE OF ALL CHEMICALS BESIDES CALCIUM CARBIDE @ 8% UPTO 30-09-2004-REVISED NOTIFICATION.
[G.O.Ms.No. 189. Revenue, (CT. II), 7th February, 2005.1
In exercise of the powers conferred by Sub-section (1) of Section 9 of the Andhra Pradesh General Sales Tax Act, 1957 (Act No. VI of 1957), and in partial modification of the orders issued in G.O.Ms.No.1021, Revenue, Dated 13-12-2004, the Governor of Andhra Pradesh hereby directs that the rate of tax on the sale of ‘All Chemicals’ besides “Calcium Carbide’, which are not covered under Entry (9) of Dyes and Chemicals, in the State, shall be at eight paise in the rupee, upto 30-09- 2004 only, under the said Act.
N.S. HARIHARAN,
Special Chief Secretary to Government.”
10. This G.O. directs a levy of sale tax @8% on all chemicals which are not covered under Entry-9 which is headed as dyes and A perusal of Entry-9 would show that the goods mentioned above are not enumerated in Entry-9. In a similar situation, a Division Bench of erstwhile High Court of Judicature, Andhra Pradesh at Hyderabad while dealing with the product Sodium Hydro Sulphite had, in the Judgment mentioned above, held that any chemical which is not enumerated in Entry-9 of VI Schedule would fall within the ambit of G.O.Ms.No.189, dated 07.02.2005 and would be taxable @8% only.
11. In view of the above Judgment, it would have to be held that all the goods in question would have to be taxed only @8% as they are chemicals and the usage of these chemicals as raw materials would not detract from the categorisation of these goods as chemicals.
12. Accordingly, these Writ Petitions are allowed setting aside the Revision Orders of the Joint Commissioner (CT) (Legal), Office of the Commissioner of Commercial Taxes, P, Hyderabad dated 22.08.2008. There shall be no order as to costs.
As a sequel, pending miscellaneous petitions, if any, shall stand closed.
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