Hyderabad Industries Limited vs State of Andhra Pradesh

S. Parvatha Rao, J.—In these two tax revision cases preferred by the same assessee in respect of the assessments for the assessment years 1986-87 and 1985-86 respectively under the Andhra Pradesh General Sales Tax Act, 1957 ("the Act", for short), the order dated February 8, 1995, of the Sales Tax Appellate Tribunal in T.A. Nos. 669 and 670 of 1992 is questioned.

The disputed turnover of the said two years relates to transactions whereunder the petitioner supplied asbestos cement sheets to various persons at the instance of certain nationalised banks. The petitioner contends that the said turnover has to be taxed at the concessional rate of tax by virtue of the provisions of G.O. Ms. No. 172 (Revenue) dated February 13, 1986. The department contends that the said transactions cannot have the benefit of the concessional rate of tax because they are hit by the proviso in the said G.O., which is as follows :

"Provided that the above concessional rate of tax shall be applicable only to such public sector undertaking/Government companies/co-operative societies in respect of goods that are manufactured in the State and sold to them for being used or for captive consumption by them and the concessional rate of tax shall not be applicable to such public sector undertakings/Government companies/co-operative societies in respect of goods that are purchased and sold by them (as any other trader) without subjecting to any manufacturing process." (Emphasis [Here italicised.] supplied).

It is not disputed by the department that nationalised banks are public sector undertakings. But what is contended on behalf of the department is that the asbestos cement sheets supplied by the petitioner were neither used nor captively consumed by the nationalised banks and than the nationalised banks adopted the procedure of placing direct orders to the petitioner for supply of asbestos cement sheets only to see that the loans were properly utilised for the purposes they were intended and that the goods were in fact used by the customers of the banks taking loans from them and were never used by the banks themselves.

The Tribunal held that the cement sheets supplied by the petitioner were not meant for captive consumption by the banks and observed that this fact was not disputed by the learned counsel for the petitioner. Therefore, the only question that arose before the Tribunal was, whether the cement sheets were "used" by the banks. The facts found by the Tribunal are as follows, as stated in its order :

"In the present case, it is an admitted fact that the nationalised banks sanctioned loans to some third parties to enable them to purchase cement sheets for erecting poultry sheds, etc., and that in order to ensure that the loan amounts thus sanctioned are properly utilised for the purposes for which they were meant, the banks placed orders on the appellant for purchasing the cement sheets and however, directed the appellant to deliver such cement sheets directly to the customers. As per such directions, the appellant delivered the cement sheets directly to the customers and claimed the value of the same from the banks who paid such amounts to the appellant. The banks never received the cement sheets and never took delivery of the same, and as such, there was no occasion for such banks ''to make use'' of such cement sheets for any of their purposes. The question of putting the goods to any use does not arise when the banks did not even receive and take delivery of such goods. It is only the customers that took delivery of such cement sheets and made use of those goods for erecting poultry sheds, etc. Such use made by the customers cannot be considered as use by the banks...... Therefore, both the conditions laid down in the proviso to the G.O. regarding ''use'' and ''captive consumption'' are not satisfied and as such, the concessional rate under such G.O. cannot be granted to the banks."

The learned counsel for the petitioner contends that inasmuch as the Tribunal observed that it was admitted that the petitioner effected sales of cement sheets to the nationalised banks, it cannot be said that the banks did not "use" the cement sheets for the purposes of their business, i.e., of giving loans. We find this contention fallacious and that it proceeds on an erroneous reading of the transactions. It is obvious that the banks were placing orders on the petitioner on behalf of their customers in order to see that the loans advanced for the specified purposes to their customers were utilised for those purposes only. That was the reason why the petitioner herein was required to make deliveries of the asbestos cement sheets directly to the customers of the banks to whom loans were advanced and the banks were making payments to the petitioner for supplies made on behalf of their customers. The Tribunal found as an undisputed fact that the customers of the banks used the said sheets for poultry sheds and that admittedly the banks never put to use the said sheets. These are findings of fact and no question of law is involved in these findings. The language of the proviso in G.O. Ms. No. 172 is plain and unambiguous. The intention of the said G.O. is to give the benefit of the concessional rate of tax of 4 per cent only when goods manufactured in the State are sold to public sector undertaking/Government companies/co-operative societies for their own use or for their captive consumption. In the present case the Tribunal found as a fact that that condition was not satisfied.

We therefore do not find any substance in the contention advanced by the learned counsel for the petitioner to admit these tax revision cases. The tax revision cases are therefore dismissed.

Petitions dismissed.