Holding

The retrospective amendments to section 6 of the Andhra Pradesh Act and section 15(b) of the Central Sales Tax Act extinguish the exemption, making the appellant liable to tax and validating the Deputy Commissioner’s cancellation of the refund.

Summary

Rallis India Ltd. claimed exemption from sales tax on its inter‑state cotton purchases for the period April‑June 1969, relying on the Commercial Tax Officer’s orders under section 10 of the Central Sales Tax Act and the proviso to section 6 of the Andhra Pradesh General Sales Tax Act. The State revised the assessment after retrospective amendments to section 15(b) of the Central Act (1972) and section 6 of the Andhra Pradesh Act (1974), cancelling the refund and demanding tax. The Supreme Court examined whether the exemption could survive the amendments and whether the Deputy Commissioner had authority to set aside the refund. It held that the amendments rendered the exemption invalid, that liability under section 6 remained unchanged and that reimbursement was only available if Central Sales Tax had been paid, which was not the case. Consequently, the Deputy Commissioner was correct in cancelling the refund and the appellant was liable to pay the tax. The appeal was dismissed.

Issues considered

Whether the exemption granted under section 10 of the Central Sales Tax Act and the proviso to section 6 of the Andhra Pradesh Act is valid after the retrospective amendment of section 15(b) of the Central Act and section 6 of the Andhra Pradesh Act.
Whether the appellant is liable to pay tax under section 6 of the Andhra Pradesh General Sales Tax Act for the purchase of cotton sold in inter‑state trade, given that no Central Sales Tax was paid.
Whether the Deputy Commissioner of Commercial Taxes had the power to cancel the refund order issued by the Commercial Tax Officer.
Whether rule 27‑A can override the statutory provisions as amended.

Legislation cited

Andhra Pradesh General Sales Tax Acts. 6
Central Sales Tax Act, 1956s. 10, s. 15(b)
Central Sales Tax (Amendment) Act, 1969s. 10
Rules under Andhra Pradesh General Sales Tax Acts. 27-A

Subjects

Central Sales TaxAndhra Pradesh General Sales Taxexemptionretrospective amendmenttax refundinter‑state traderule 27-Atax liability

Judgment

1028

A RALLIS lNDIA LTD:
v.
STATE OF ANDHRA PRADESH
February 12, 1980

B [R. S. PATHAK AND A. D. KOSIIAL, JJ.]
Central Sales Tax Act 1956-Section 15(b )-Scope of.

On the ground that the dealers have not charged and collected Central'
Sales Tax during the period !st April, 1969 to 9th June, 1969 tho Commercill<l
Tax Officer, allowed exemption under section 10 of the Central Sales Tax
c Act in respect of certain turn-over of the appellant which included the price
realised on account of inter-state sales. In respect of a second set of transac-
tions which involved the purchase value of cotton sold during the: ye~r through
inter-state sales the Commercial Tax Officer held that the appellant 'vas entitled
to exemption under the proviso to section 6 of the A.P. General Sales Tax
Act.

In 1972 section 15(h) of the Central Act \\'as amended with retrospective
D
effect from 1st October, 1958 and in 1974 section 6 of the State Act was
amended with retrospective effect from the· same date.

The Deputy Commissioner of c·ommercial Taxes revised the assessment
order of the Commercial Tax Officer passed under the· State Act on the ground
that in view of the provisions of section 6 as amended in 1974 the appellant
E was not entitled to any exemption during the above period. The Sales Tax
Appellate Tribunal dismissed the ~pellant'S appeal on the view that section 6·
of the State Act did not talk of any exemption either before or after its
amendment in 1974. The High Court dismissed the appellant's appeal holding
that the exemption granted by the C.T.O. was p<itcntly \vrong.

Dismissing the Appeal,
F HELD: 1. Section 10 of the Central Act Vlhich inakcs no reference to
any tax leviable under a State Act can be of no assistance to the appellant.
Granting that the appellant did not collect any tax under the Central Act
during the period in question on the ground" that no, such tax could have
been levied or collected so that it becomes fully entitled to the benefit of
the exemption enacted by the1 section, that \Vould only niean that central sales
tax ca·nnot be charged from it in respect of sales covered by the section. No
G demand had been made from it for any tax Jeviable under the Central Act
in respect of such sales and the appellant couid not derive any benefit from
section 10 of the Central Act in the matter of its assessment under the State
Act. [I033G-H]
2. In so far as the a-ssessment under the State Ac.:t is concerned all that
the C,T.O. could have meant by granting exemption \Vas that the appellant
H became liable to pay a tax under the opening para. of the section; but that
since the appellant wa-s also entitled to a refund of sucll tax the same was
taken to have been paid by and refunded- to it. The assessment order made-

I
RALLIS INDIA LTD. v. ANDHRA PRADESH (Kasha!, ], ) 1029

under the proviso to section 6 of the State Act and section 15 (b) of the A
Central Act as they stood then was unexceptionable. [1034E-F]
3. Under section 6 as amended the. liability to tax rcn1ained uncht.·nged
but thci entitlen1ent to refund v1as abolished and was substituted by a right
to reimbur.sen1ent of the tax \\'hich arose only if the concerned goods \Vere
later on sold in the course of inter-state trade under the Central Act and tax
under that A.ct was paid in respect thereof. Such reiniburs.ement would not
B
be available merely because the goods in question had been sold in the course
of inter-state ttade or commerce when they \Ve1e not subjected to tax under
the Central Act. No such tax was paid. The proviso to section 6 as amended
in 1974 can be of no assistance to the appellant. [1035A-B]
4. The language of clau~e (b) of section 15 of ,the Central Act is the
same as that of the amended proviso to secti6n 6 of the State Act. It
clearly means that the tax under the State Act wouJd be rei1nhursible only c
to at dealer who has paid tax under the Central Act in respect of the sale
of the goods in question in the course of inter-state trade or commerce.
[1035C-D]
5. The argun1ent that the Deputy Commissioner had no power to cancel
the order of refund is fallacious. He has done nothing rnore than to revise
an order of the C.T.O. which has been varied only in so far as it was not D
in conformity with the law deemed to have been prevailing on the da·te of
the assessment by virtue of the retrospective amendment of section 6 of the
State Act. The Deputy Commissioner had not only the power but was duty
bound to strike down the order of refund as being illegal. [1035F-Gl
6. Rule 27A can be of little help to the appellant inasmuch as even if
it can be constn1ed as laying down something in its favour, the rule ca-nnot
override the. provisions of the Act. [1036A] E
Daita Suryanarayana and Con1pany v. State of Andlzra Pradesli 39 S.T.C,
500 approved.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1897 of 1978.
From the Judgment and Order dated 19-9-1977 of the Andhra
Pradesh High Court in Tax Revision Pe'.iti011 No. 66/76. F
S. T. Desai, T. A. Ra111achandra11, Mrs. J. Ramachandran and
M. N. Tandon for the Appellant.
T. S. Krishnamoorthy Iyer, and B. Parthasarthi for the Respondent.
The Judgment of the Court was delivered by
KosHAL, J. The question which falls for determination in the G
appeal by certificate granted by the High Court of Andhra Pradesh
against its judgment dated the 19th September, 1977 is whether the
appellant which is a limited company is not liable to make good to
the State Sales Tax authorities the amount of sales tax leviable under
sectio'n 6 of the Andhra Pradesh General Sales Tax Act (herein-
after referred to as the A. P. Act) in respect of the turn-over cover- H
ing the purchase by th3 petitioner of cotton during the period 1-4-1969
to 8c6-1969, which turn-over had been exempted from sales tax by
1030 SUPREME COURT REPORTS [1980] 2 S.C.R.
A the Commercial Tax Offic-cr, No. II, Guntur (C.T.O. for short) in
his assessment order dated the 30th of April, 1971.
2. Two assessment orders were passed by the C.T.O. on the
date last mentioned. One of them covered the turn-over of the
appellant liable to tax under the Central Sales Tax Act (heminafter
B referred to as the Ce:Jtral Act). That turn-over included a sum of
Rs. 2(J.61,166 which represented the price realised on account of
inter-state sale during the period 1-4-1969 to 9-6-1969. In respect
of this amount the order made by the C.T.O. was :
"The dealers have not charged and collected Cen'ral
saks Tax for the period from 1-4-69 to 9-6-69. The twn-
"'
I

411
'

c over of Rs. 26,61,166.33 upto 9-6-')9 is allowed excmpc1on
in view of section 10 of Central Sales Tax Amendment
Act."
The second assessment order was passed under the A.P. Ac'. and
therein the C.T.O., while considering a sum of Rs. 51,87,879/- being
D the purchase value of cotton sold during the year through inter-state
' sale, remarked that the appellant was entitled to 'exemption' nnder
the proviso to section 6 of the A. P. Act in respect thereof. He lina-
lisecl the assessment accordingly.
3. In the year 1972, clause (b) of section 15 of the Central Act
was amended retrospectively so as to be effective from 1st Octo-
'E
ber, 1958. Two years later, section 6 of the A.P. Act was also
amonded and made effective from the same date. On the 21st of
August, 1974, the Deputy Commissio'ner (Commercial Taxes) here-
inafter called the D.C.C.T.) issued a notice to the appellant calling
upon it to show cause why the 'exemption' granted to it by the
' F C.T.O. should not bo cancelled. After !€ceiving the appellanfs
reply, the D.C.C.T. revised the assessment order dated 30th of April,
1971, passed under the A.P. Act and held that in vi·ew of the provi-
sions of section 6 thereof as amended in 1974 the appella'nt was not
entitled to any 'exemption' in respect of the purchase price (amount-
ing to Rs. 23,00,057/-) of cotton sold by it in the course of inter-
'G state trade for Rs. 26,61,166/- during the period 1-4-1969 to
8-6-1969. The order of the D.C.C.T. was challenged by the appeal-
lant in an appeal which was diSmissed by the Sales Tax Appellate
Tribu'nal, Andhra Pradesh (hereinafter called the Tribunal) on the
30th of August, 1976, mainly on the ground that section 6 of the
AP. Act did not talk of any 'exemption' either before or after its
J H amendment in 1974. The appellant sought a revision of the Tribu-
nal's order by the High Court nnder section 22 (I) of the A.P. Act
but remained unsuccessful as the High Court was of the opinion (for
RALLIS INDIA LTD. v. ANDHRA PRADESH (Koshal, !.) 1031

which it relied upon Vadivelu Chetty v. Commercial Tax Officer, A
Tirupathi(') and Daita Suryanarayana and Company v. State of
Andhra Pradesh( 2 ) that the exempt>on granted by the C.T.O. was
'patently wrong'. The High Court however granted a certificate
declaring the case to be a fit one for appeal to the Supreme Court
under article· 133(1)(c) of the co·nstitution of India read with sec-
B
tion 109 of the Code of Civil Procedure.
4. In ord•"r to appreciate the contentions raised on behalf of the
~I" appellant it is necessary to examill'e the various relevant legislative
i( :provisions which are set out below :
Section JO of the Central Sales Tax (Amendment) Act,
1969 (hereinafter referred to as the 1969 Act). c
"10. Exemption from liability to pay tax in certain
.cases.
(1) Where any sale of goods in the course of inter-
state trade or commerce has been effected during the period
between the 10th day of November, 1961, and the 9th day D
of June, 1969, and the dealer effecting such sale has not
collected any tax under the principal Act on the ground
that no such tax could have bee·n levied or collect·ed in
respect of such sale or any portion of the turn-over pelating
to such sale ahd no such tax could have been J.cvied or
E
·collected if the amendments made in the principal Act by
this Act had not bc•cn made, then, notwithstandi'ng any-
thing contained in section 9 on the said amendments, the
dealer shall not be liable to pay any tax under the principal
Act, as ame'nded by this Act, in f'~spect of such sale or
-such part of the turn·over velating to such sale. F
(2) For the purposes of sub-scction(l), the burden of
proving that no tax was collected under the principal Act
in respect of any sale referred to in sub-section (I) or in
respect of any portion of tho turn-over relating to such
sale shall be o'.n the dealer effecting such sale."
G
Section 6 of the A. P. Act as on 30-4-1971
"6. Tax in respect of declared goods-Notwithstanding
anything contained in 5ection 5, the sale or purchase of
declared goods by a dealer shall be liable to tax at the rate,
and only at th~ point of sale or purchase, specified against
H
(I) 50 S.T.C. 176.
(2) 39 S.T.C. 500.
1032 SUPREME COURT REPORTS [1980] 2 S.C.R~

A each in the Third Scheduk, on his tur"n-over of such sales
or purchases for each year irrespective of the quantum of
his turn-over in such gocic:!s; !lnd the tax shall be assessed,
levied and collected in such manner as may be prescribed :
Provided that where any such goods on which tax has
B been so levied are 5old in the course of inter-state trade
or commerce, the tax so levied shall be refunded to such,
person, in such manher and subject to such conditions as.
may be prescribed."
The proviso to section 6 o/ the A. P. Act as amended in·
\-
1974 retrospectively wi·th effect from 1-l0-1958.
c
"Provided that whene any such goods on which a tax
has been so levied are sold in the course of inter-state trade·
or commerce and tax has been paid under the Central
Sales Tax Act, 1956. in respect of the sale of such goo~s
in the course of inter-stat•e trade or commerce the tax so
D levied shall be reimbursed to the person making such sale in
the course of inter-state trade or commerce, in such manner
and subject to such conditions as may be prescribed."
Sub-rule (I) of rule 27-A of the Rules framed under
the A.P. Act as on 30-4-1971
E "Where any tax has been levied and collected under
section 6 in respect of the sale or purchase inside the State
of any declared goods and such goods are subsequently
sold in the course of int•er.,;tate trade or commerce, the
tax so levied and collected shall be refunded to the person
in the manner and subject to the conditions specified in
sub-rules (2) to (4)."
Sub-rule (I) of the said rule 27 A after its amendment
1-8-1974

"Whef'e any lax has been levied ahd collected under
G section 6 in respect of the sale or purchase inside the
State of any declared goods and such goods are subse-
quently sold in the ccurse of inter-state trade or commerce,.
the tax so levied and collected shall be reimbursed to the
person in the manner and subject to the cohditions specified·
iu sub-rules (2) to ( 4) :
H
Provided that the refund shall not IJ.o made unless the
tax payable under !hoc Central Sales Tax Act 1s paid."
•
RALLIS INDIA LTD. r. ANDHRA PRADESH (Koshal, J.) 10 33

Clauses (a) and (b) of section 15 of the Central Act av
in force on 30-4-1971
"15. Restrictions and conditions in regard to tax 011 sale
or purchase of declared goods within a State-Every sales
tax law art' a State shall, in so far as it imposes or autho-
rises the imposition of a tax on the sale or purchase of
declared goods, be subject to the following restrictions and
conditions, namely : -
(a) the tax payable under that law in respect of any sale
( or purchase of such goods inside the Slate shall be
levied only i"n respect of the last sa1c or purchase
inside the State and shall not exceed two per cent
of the sale or purchase price.
c
(b) where a tax has be•cn levied under that law in respect
of the sal•c or purchase inside the State of any dec-
lared goods and such goods are sold in the course
of inter-state trade or commerce, the tax so kvied
shall be refunded to such person in such manner D•
and subject to such conditions as may be provided
in any law in force in that State."
Clause (b) of section 15 of the Ce11tral Act as amended
in 1972 retrospectively with effect from 1-10-1958
"(b) where a tax has been levied under that law in res- E
pect of the sale or purchas•c inside the State of any
declared goods and such goods are sold in the course
of inter-State trade or commorce, and tax has been
paid under this Act in respect of tho sale of such
goods in the course of inter-s~atc trade or con1-
metce, the tax levied under such law shall be reim-
bursed to the person making such sale in the course
of inter-state trade or commerce in such manner
and subject to such conditions as may be provided
in any law in force i"n that State."
5. Section 10 of the 1969 Act makes no reference at all to any G,
tax leviable under the State Act. It concerns itself only with the tax
payable under the Central Act which it calls the 'Principal Act' and
sayc, that a dealer shall not be liable to pay any such tax for the period
between 10-11-1964 and 9-6-1969 if certaih conditions arc satisfied.
Much reliance has been placed by learned counsel for the appellant
on this section which, in our opinion, however, is of no aSJSistance to H
him. It may be taken for granted that the appellant did not collect
any tax uhder the Central Act on the sale of goods effected by it in
•
1034 SUPREME COURT REPORTS [1980) 2 S.C.R.

the course of inter-state trade during the period 1-4-1969 to 9-6-1969
on the ground that no such tax could have been levied or collected
in respect of such sale, so that it becomes fully entitled to the bene-
fit of the exemption enacted by the section; but that would only
mean that Central sales tax cannot be charged from it in respect of
such sale. As it is, no demand has been made from it for any tax
B leviable under the Central Act in respect of such sale and we do not
see how the appel;ant could benefit from the said section 10 in the
matter of its assessment for the period in question under the A.P. Act.
All tha:t we are concerned with is the liability of the appellant to pay "'
tax on the purchase of cotton which it sold during that period in the
c course of into::r-state trade and that is a matter which has to be decid-
ed with reference to section 6 of the A.P. Act, rule 27-A extracted
above and section 15 of the Central Act.
6. As on 30-4-1971 the provisions of section 6 of the A.P. Act
laid down that if goods were sold in the course of inter-state trade
or c01mnerce and tax had been levied on the sale or purchase there-
'D of uuder that Act, the dealer concerned would be entitled to refund of
such tax. As on the date of assessment therefore the appellant was
within its rights to claim refund of any tax that it was liable to pay
on the purchase of cotton later sold by it in the course of i"nter-state
trade; and although the section did not talk of any 'exemption', all
that the C.T.O. could have meant by granting the appellant 'exemp-
tion· from the tax was that it became liable to pay a tax under the
opening para of the section but as it was also e"ntitled to a refund of
such tax, the same was tak•cn to have been paid by and refunded to
it. As the section then stood therefore the assessment order was
unexceptionable. This was also the position Ul)Cfor clause (b) of ./
F section 15 of the Central Act the language of which is practically the
same as of the proviso to section 6 of the A.P. Act.
7. The matter however docs not end there as the amendment of
section 15 of the Central Act in 1972 and that of section 6 of the' A.P.
Act in 1974 made a real difference which appears to ns to be an insur-
·G mountable hurdle in the way of the •appellant's stand being accepted. As
already stated, both the amendments were retrospective so as ta be
effective from the 1st of October, 1958. That means that the law to
be applied to the assessment finalised through the two orders dated 30th
of April, 1971, by the C.T.O. was that as modified by the two amend-
ments. Of course we are here concerned only with the order of assess-
:n ment made under the A.P. Act. That order would be good if it is in
conformity with the provisions of the amended section 6 of the A.P.
Act but not otherwise. Under the amended section the liability tb tax
-
RALLIS INDIA LTD. v. ANDHRA PRADESH (Koshal, !.) 1035

remained unchanged but the entitlement to refund was abolished and A
., was substituted by a right to reimbursement of the tax which arose only
•
if the concerned goods were later on sold in the course of inter-state
trade or commerce under the Central Act and tax under that Act was
paid in respect thereof. Such reimbursement would not be avaia!able
merely because the goods in question had been sold in the course of in-
R
ter-state trade or commerce when they were not subjected to tax under
the Central Act. Admittedly no such tax was paid by the appellant in
the course of inter-trade on goods regarding the purchase of which
, reimbnrsement of the tax leviable under the A.P. Act is claimed. The
'.'1" proviso to section 6 as amended in 1974 therefore is of no assistance
_.ill.. to it. c
~-J 8. Nor does the amended clause (b) of section 15 of the Central
Act come to the appellant's aid, as the language used therein, for all
practical purposes, is the same as that of the amended proviso to sec-
tion 6 of the A.P. Act and clearly means that the tax under the A.P.
• Act would be reimbursibk only to a dealer who has paid tax under
the Central Act in respect of the sale of the goods in question m the D
course of inter-state trade or commerce .
• 9. Faced with the above situation, Mr. Desai, Learned counsel for
the appellant, pressed into service a novel contention to the effect that
the appellant was not asking for any reimbursement or refund, that it
--: 1 was the D.C.C.T. who had cancelled the order 0! refund (inherent in E
the 'exemption' granted by the C.T.0.) and that there was no provi-
sion authorising the D.C.C.T. to force the appellant to return any
amount paid to it as a refund. The argument is obviously fallack>us.
The D.C.C.T. has done nothing more than to revise an order of the
C.T.O. which has been varied only in so far as it was not in conformity
with the law deemed to have been prevailing on the date of the assess- F
ment by virtue of the retrospective amendment of section 6 of the A.P.
Act. It is conceded by Mr. Desai that the 'exemption' has to be re-
garded as a composite order of levy plus refund. That part of it which
granted a refund was illegal under the amended proviso to section 6 of
the A.P. Act inasmuch as no reimbursement was due in respect of goods
on which tax under the Central Act had not been paid. The D.C.C.T. G
therefore had not only the power but was duty-hound to strike down the
order of refund as being illegal. The order of the C.T.0. as revised
by the D.C.C.T. thus is reduced to an order merely of levy of the tax
due under the opening paragraph of section 6 of the A.P. Act so that
the appellant becomes liable to pay such tax.
H
10. The only other argument put forward by Mr. Desai in support
•f the appeal rested on the provisions of rule 27-A above extracted in
-
1036 SUPREME COURT REPORTS [1980] 2 s.c.R.
\
its un-amended form. The rule can obviously be of no help to him
inasmuch as even if it can be construed as laying down something in
kvour of the appellant it cannot override the provisions of the Act under
.·
which it is framed. No amount of argument would make a rule over-
ride or control the legislative enactment under the authority of which
it comes into being and that is why the rule was amended in 1974 so as
to conform to the parent statute.
11. It may be stated that at one stage of the argument Mr. D~ai
drew our attention to the fact that by reason of the amendments made
in the statute law and the consequent demand by the D.C.C.T. for the
refunded amount the appellant had been placed under a burden which
·C did not fall on those who collected the Central sales tax from the pur-
chasers and paid it to the Government because they were held entitled
to refund of the tax under tke A.P. Act even though they had not paid
anything out of their own pocket as tax under the Central Act. How-
ever, as he did not challenge the constitutional validity of any of the
amended sections he did not pursue the matter further and we need •
take no further notice of it.
12. We mighl.. mention here that Daito Suryanarayana <1nd Com- •
pany's case (supra) on which the High Court rclied i11 support of the
impugned judgment takes a v.iew of the law which is in conformity with
the opinion expressed above by us and we unreservedly approve of the
same.
13. In the result the appeal fails and is dismissed but with no order
as to costs.

Appeal dismissed.