Andhra Pradesh High Courts Rejects Sales Tax Exemption Claim Over Defective Form A-5

The Andhra Pradesh High Court on 9 February, refused to interfere with orders withdrawing sales tax exemption on commission sales, holding that Form A-5 declarations not bearing the official seal of the assessing authority cannot be treated as valid under the Andhra Pradesh General Sales Tax Rules, 1957. A dealer files Form A-5 to claim sales tax exemption on commission sales.

A Division Bench of Justice R. Raghunandan Rao and Justice T.C.D. Sekhar was hearing a tax revision case filed by Bommisetty Lakshmi Narasimha Swamy & Company and Bharathi Traders, which are registered dealers engaged in the purchase and sale of tamarind and jaggery.

The Bench emphasised:

"Whenever exemption is claimed, it is incumbent for the person to place required declaration forms in tune with the statute. Admittedly, the petitioner not filed declaration form A-5 as per Rule 17 nor placed before the authority to show that its principal paid the tax on the disputed turnover, so as to claim exemption."

The dealers had claimed exemption on commission sales turnover for the assessment years 1993-94 and 1994-95, on the ground that the sales were effected on behalf of resident registered principals. They are principals are principals who are located within Andhra Pradesh and are registered under the state sales tax law. Only sales made on behalf of such principals qualify for the exemption.

These exemption claims were initially accepted by the Commercial Tax Officer, Nellore, through assessment orders passed in January and March 1996. However, in March 1999, the Deputy Commissioner (Commercial Taxes), Nellore Division, initiated suo motu revision proceedings under Section 20(2) of the APGST Act and issued show cause notices proposing to withdraw the exemption.

After considering the objections filed by the dealers, the Deputy Commissioner confirmed the assessments and withdrew the exemption by orders dated 1 May 1999.

The dealers' appeal before the Sales Tax Appellate Tribunal was dismissed in May 2006, prompting them to approach the High Court through the present revisions.

Before the High Court, the petitioners contended that once the assessing authority had accepted the Form A-5 declarations, the revisional authority could not reopen the issue on mere suspicion or doubt. They also argued that no opportunity was given to rectify defects in the declarations and that, in any event, there was no taxable event attracting levy under the relevant schedules of the Act.

The Court rejected these submissions, noting that the declarations produced by the petitioners did not contain the required seal as mandated by Rule 17-C(1) and (2) of the Andhra Pradesh General Sales Tax Rules, 1957. The Bench held that such declarations could not be treated as valid compliance with the statutory requirement.

The Bench observed:

"Neither the petitioner has filed the declaration form as per Rule 17-C (1) & (2) of Andhra Pradesh General Sales Tax Rules, 1957 nor filed anything to show that its principal has paid tax on the disputed turnover to claim exemption. Admittedly, nothing is placed on record to prove that the principal of the petitioner has paid tax in relation to the disputed turnover, so as to claim exemption by the petitioner."

The Court further noted that the burden of establishing eligibility for exemption lies squarely on the dealer claiming it. Apart from filing defective Form A-5 declarations, the petitioners had also failed to place any material on record to show that their principals had paid tax on the disputed turnover, a necessary condition for claiming exemption on commission sales.

Finding no illegality or infirmity in the orders passed by the Deputy Commissioner or the Tribunal, the High Court dismissed both tax revision cases.

For Petitioner: Advocate, D Ranganatha Kumar