Holding

The Clarification Memorandum of 26‑April‑1994 makes clear that exemption is available for either certified seeds or truthfully labelled seeds, so both conditions are not required simultaneously.

Summary

Mis. Shakthi Seeds Pvt. Ltd., a registered dealer in agricultural seeds, claimed exemption from sales tax on certain seed varieties by invoking G.O.Ms. No. 604 (1991) and G.O.Ms. No. 129 (1989), asserting that the seeds were either certified or truthfully labelled. The Deputy Commissioner, after finding the seeds were purchased from unregistered dealers, revised the assessment and imposed tax. The Sales Tax Appellate Tribunal held that both certification and truthful labelling were required for exemption and dismissed the appeal; the Andhra Pradesh High Court affirmed this view. On appeal, the Supreme Court observed that the Clarification Memorandum dated 26‑April‑1994 expressly states that either certified or truthfully labelled seeds qualify for exemption, rendering the Tribunal’s interpretation erroneous. The Court allowed the appeal, directing that fresh evidence be permitted to establish that the seeds were truthfully labelled, and held that authorities may require the dealer to justify the claim.

Issues considered

Whether exemption under G.O.Ms. No. 604 dated 9‑April‑1981 applies when seeds are either certified or truthfully labelled, or whether both conditions must coexist.
Whether the assessing authority can demand proof that the seeds are truthfully labelled before granting exemption.

Legislation cited

Andhra Pradesh General Sales Tax Act, 1957s. 22(1), s. 9
Seeds Act, 1966s. 9
Seeds Rules, 1968s. Rule 7

Subjects

Sales taxExemptionCertified seedsTruthfully labelled seedsClarification memorandumAndhra PradeshGeneral Sales Tax ActSeeds ActAssessment revisionTribunal

Judgment

A MIS. SHAKTHI SEEDS PVT. LTD. ,. -
v.
. DY. COMMNR. (CT) AND ANR.
"'
MAY 30, 2007

B [DR. ARIJIT PASAYA T ANO LOKESHWAR SINGH PANTA, JJ.]

Sales Tax:

Andhra Pradesh 'General Sales Tax Act, 1957-GOM<• No. 604 Rev(s)
C dated 9.4. 1981-Exemption under"-Requirementfor-Held: Claimant required
to prove that seeds in question are either certified seeds or truthfully labelled-
C/arificatory Memorandum dated 26.4. 1994.

Appellant-assessee is a registered dealer in agricultural seeds, chillies,
paddy and other crops. The Commercial Tax Officer passed assessment orders
D in respect of turnovers granting benefit of G.O.Ms. No. 604 Rev(s) dated
9.4.1981 and G.O.Ms. No. 129 Rev. (CT II) dated 14.2.1989 issued under
Andhra Pradesh Gen('ral Sales Tax Act, 1957.

The Deputy Commissioner revised the assessment order and proposed
E tax on those .items as the appellant effected purchase from unregistered
dealers and are liable to tax as first purchasers within the State of Andhra
Pradesh.

On appeal, Tribunal held that in order to claim exemption in terms of
G.O.Ms. No 604 dated 9.4.1981, the claimant is required to establish and
F prove that the seeds in question are certified seeds as well as truthfully
labelled seeds and that the appellant-dealer has failed to adduce any
satisfactory material and evidence to establish these two conditions for grant
of exemption. High Court affirmed the order of Tribunal Hence the present
appeal

G Allowing the appeal, the Court

HELD: 1. The Tribunal proceeded on the basis that the seeds were .
required to be certified and truthfully labelled for the purpose of eligibility
for exemption. The Clarification Memorandum dated 26.4.1994 clarified that

H 844
SHAKTHI SEEDS PVT. LTD. v. DY. COMMNR. ( CT)[PASA YAT, J. ] 845
two alternatives are available i.e. either certified or truthfully labelled. The A
High Court also overlooked the clarificatory memorandum. In the
circumstances, it would be appropriate for the Tribunal to examine the factual
aspect, keeping in view the clarificatory memorandum providing alternatives.
The parties shall be free to lead fresh evidence. The appellant shall produce
evidence to show that the seeds were truthfully labelled. It cannot be said
that the authorities cannot require the dealer to satisfy the requirement that B
the seeds were truthfully labelled. There is no such blanket protection. In
order to be satisfied about the acceptability of the claim, they can require the
assessee to justify the claim and that it is entitled to the exemption.
(Para 11, 13, 14 and 15J (849-A, C, D, EJ

Gururaj Seeds (P) Ltd. v. State ofAndhra Pradesh and Ors., 18 APSTJ
c
46, referred to.

CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4649 of2002.

From the Final Judgment and Order dated 10.09.2001 of the High Court D
of Judicature of Andhra Pradesh at Hyderabad in Tax Revision Case No. 156
of2001.

Kuna! Verma, M. Mannan, C.S.N. Mohan Rao, Arjun Garg and R.
Shrivastava for the Appellant.
E
Manoj Saxena, Rajnish K. Singh, Raul Shukla and T.V. George for the
Respondents.

The Judgment of the Court was delivered by

DR. ARIJIT PASA YAT, J. 1. Challenge in this appeal is to the judgment F
of a Division Bench of the Andhra Pradesh High Court dismissing the Revision
Petition filed by the appellant under Section 22( l) of the Andhra Pradesh
General Sales Tax Act, 1957 (in short the 'Act'). Before the High Court
challenge was to the order passed by the Sales Tax Appellate Tribunal,
Andhra Pradesh (in short the 'Tribunal').
G
2. Background facts in a nutshell are as follows:

Mis. Shakthi Seeds (P) Ltd., the appellant herein, is a private limited
company and they are dealers in agricultural seeds, chillies, paddy, sun-flower
and other crops. It is an assessee and a registered dealer under the Act. The H
Commercial Tax Officer, Hyderguda Circle, Hyderabad, framed final assessment
846 SUPREME COURT REPORTS (2007] 7 S.C.R.

A orders in respect of me turnovers for the assessment year 1992-93 granting
benefit of G.O.Ms. No. 604, Rev (S), dated 9.4.198 l and G.O.Ms. No. 129
Rev(CT II), dated 14.~.1989. However, the Deputy Commissioner (en, Abids
Division, Hyderabad, on scrutiny of the assessment finalised by the Commercial
Tax Officer vide his proceedings dated 16.12.1993 noticed that the appellant
after purchasing chillies, paddy and sun-flower from unregistered dealers,
B sold those goods as "certified and truthfully labelled seeds" and on that basis
~laimed exemption in terms of G.O.No. 604 Revenue (S), dated 9.4.198 l. He,
therefore, proceeded to revise the assessment order and proposed tax on
those items as the appellant effected purchase from unregistered dealers and
therefore they are liable to tax as first purchasers within the State of Andhra
C Pradesh. Before the Deputy Commissioner (CT), the appellant contended that
they are entitled to exemption in terms of G.0.Ms. No 604 dated 9.4.1981
treating the seeds as truthfully labelled and certified seeds. In support of
.their contention, they have also placed reliance on the decision in the case
of Gururaj Seeds (P) Ltd, v. State ofAndhra Pradesh & Ors., (18 APSTJ 46).
D The Deputy Commissioner (CT), disallowed the claim of the appellant and
revised the assessment order framed by the Commercial Tax Officer, Hyderguda,
Hyderabad. Then the matter was carried before the Tribunal by the appellant.
The Tribunal opining that in order to claim exemption in terms ofG.O.Ms. No
604 dated 9.4.1981, the claimant should establish and prove that the seeds,
in question are certified seeds as well as truthfully labelled seeds and that the
E appellant-dealer has failed to adduce any satisfactory material and evidence
to establish these two conditions for grant of exemption in terms of G.O.Ms.
No. 604, dismissed the appeal by its order dated 13.3.2000. The order of the
Tribunal was challenged before the High Court by a revision petition on the
ground that view taken by the Tribunal that both the conditions should co-
F exist for getting exemption under G.O.Ms. No. 604 is on a misreading of the
G.O.Ms. Tribunal's view completely ignores the clarification issued by the
Government vide its Memorandum No. 13630/CT-11(2)/89-19, dated 26.4.1994.
By the said office Memorandum, the Government had directed the Commercial
Tax Departmental Authorities to note that both the certified seeds and/or
truthfully labelled seeds are entitled for exemption from tax in terms of GOMs.
G No. 604 dated 9.4.1981. In that context, it was submitted that the department
could not have required the appellant-dealer to produce evidence as regards
accuracy or veracity of the declaration regarding the labelling.

3. In support of the appeal, learned counsel for the appellant reiterated
H its stand before the High Court.
SHAKTHI SEEDS PVT.LTD. v. DY. COMMNR. (CT)[PASA YAT, J.) 847

4. Learned counsel for the respondent on the other.hana supported the A
findings of the authorities, Tribunal and the High Court.

5. The reasoning of the Tribunal related to certified and truthfully
labelled seeds reads as follows:

"Regarding treatment with fungicides, it has to be stated that not all B
fungicides treated are certified and truthfully labelled seeds. Because,
even ordinary and high quality pure seeds are also treated wit~
fungicides by some persons to prevent loss of seeds and future
seedlings from such seeds because of the fungal infection of the said
seeds of the seeding purpose. Besides there is prohibition to use the
said treated seeds for edible purpose also after certain periods after C
which there is no resicJual effect of such fungicides."

6. In reply to the show cause notice issued the appellant had clarified
its stand as follows:

"In this regard, we would like to bring to your kind notice, that we D
have purchased processed chilli seed, Paddy seed and Sunflower
seed from farmers, and not chillies, paddy or sunflower commoditie~.
The above cited seeds namely Chillis seed, paddy seed and Sunflower
seed have been processed, treated with fungicides and packed by us
using packing material and sold under our brand name of "Shakthi" E
as truthfully labelled seeds. Moreover the said seeds were meant for
ag,ricultural purpose only and not for food, feed or oil purpose, since
they were treated with fungicides. All seeds are first purchased only
from the farmers who are unregistered dealers."

7. There was no consideration of these aspects as apparently the High p
-
~·

'
'
Court has lost sight of the substance of the clarification.

8. The G.O.Ms. No. 604 dated 9.4.1981 reads as follows:

"In exercise of powers conferred by sub-section (I) of Section 9 of the
Andhra Pradesh General Sales Tax Act, 1957 (A.P. Act 6 of 1957) the G
Governor of Andhra Pradesh hereby exempts from the Tax payable ,
under the said Act the sales or purchases of all varieties of certifi.ed
and truthfully labelled seeds for agricultural purposes.

Sales of 'erti.fied and truthfully labelled seeds in the course of inter-
State trade of Commerce Exemption from CST". H
848 SUPREME COURT REPORTS (2007.) 7 S.C.R.

A 9. The Clarification Memorandum No. 13630/CT-11(2)/89-19 dated
26.4.1994 reads as follows:

"In the G.O.Ms. No. 604 Revenue (s) Department dated 9.4.81, the
Government issued orders exempting from the tax payable under the
A.P.G.S. T. Act the Sales or Purchases of all varieties of certified and
B truthfully labelled seeds for agricultural purposes. In the G.O. second
read above, a similar order was issued under the C.S.T. Act in respect
of the above goods sold in the course of inter-state trade also.
,/
The A.P. Seed Growers Merchants and Nurserymen Association,
Hyderabad, National Seeds Corporation, New Delhi an~ Peddireddy
c Thimmaredy Farm Foundation, Hyderabad have now represented to
the Government that even though the exemption granted in the above
G.Os. are applicable to both the categories of seeds viz. certified
seeds and or truthfully labelled seeds some of the assessing authorities
are insisting that the seeds should be certified as well as truthfully
labelled to become eligible for grant of exemption. Hence they requested
D
the Government to issue clarification in the matter to remove the .
ambiguity.

The Government has examined the matter in consultation with the
Agriculture and Co-operation Department and they hereby clarify that
both "certified seeds and/or truthfully labelled seeds" are exempt from
E
tax as per the orders issued in G.O.Ms. No. 604 Revenue (s) Department
dated 9.4.81 and G.O.Ms. No. 129 Revenue (CT-II) Department dated
14.2.89 as they are two types of seeds sold for Agricultural purposes."

IO. Rule 7 of the Seeds Rules, 1968 (in short the 'Rules') reads. as
F follows:

"Rule 7. Responsibility for marking or labelling - When seed of a
notified kind or variety is offered for sale under Sec. 7 each container
s~all be marked or labelled in the manner hereinafter specified. The
person whose name appears on the mark or label shall be responsible
G for the accuracy of the infonnation required to appear on the mark or
label so long as seed is contained in the unop~ned original container:

Provided, however, that such person shall not be responsible for the
accuracy of the statement appearing on the mark or label if the seed
is removed from the original unopened container, or he shall not be
H responsible for the accuracy of the gennination statement beyond the
SHAKTHI SEEDS PVT.LTD. v. DY. COMMNR. (CT) [PASA YAT, J.) 849

date of validity indicated on the mark or label". A
11. The Clarification Memorandum dated 26.4.1994 clarified that two
alternatives are available i.e. either certified or truthfully labelled. 'Certified
seeds' is defined in Section 9 of the Seeds Act, 1966 (in short the 'Seeds Act').
Reference in this context also may be made to the Rule 2(e) .of the Rules
dealing with certified seeds. B
12. Learned counsel for the appellant conceded that there was no claim
\ by the. appellant about sale of certified seeds. Rule 7 deals with marking or
labelling.

13. It appears that Tribunal proceeded on the basis that the seeds were C
required to be certified and truthfully labelled for the purpose of eligibility for
exemption. In reality, as clearly stated in the clarificatory memorandum they
are alternatives.

14. The High Court also proceeded on the same basis overlooking.the
clarificatory memorandum D
15. In the circumstances, it would be appropriat'! for the Tribunal to
examine the factual aspect, keeping in view the clarificatory memorandum
providing alternatives. The parties shall be free to lead fresh evidence. The
appellant shall produce evidence to show that the seeds were truthfully E
labelled. It cannot be said that the authorities cannot require the dealer to
satisfy the requirement that the seeds were truthfully labelled. There is no
such blanket protection. In order to be satisfied about the acceptability of the '
claim, they can require the assessee to justify the claim and that it is entitled
to the exemption.
F
16. The appeal is accordingly allowed with no orders as to costs.

D.G. Appeal allowed. '