M/s Prasad Seed Farm Industries v. The Commercial Tax Officer, Brodipet Circle, Guntur, Guntur District & Ors.

COMMON ORDER: (Per Hon’ble Smt. Justice T. Meena Kumari) These writ petitions are filed by the petitioner seeking to declare that the levy of disputed tax by the 1st respondent as illegal and without authority of law and jurisdiction in the light of the Circular issued by the 3rd respondent, dated 27.1.2003 and the memo of the 3rd respondent, dated 11.1.2008 and consequently, to set aside the impugned order dated 31.12.2007 passed by the 1st respondent in Form VAT 305 for the tax period from April, 2005 to March, 2006. Since the parties and the issue involved in all these writ petitions are one and the same, these writ petitions are being disposed of by this common order. The main grievance of the petitioner is that under Entry 44 of the APVAT Act, seeds for sowing and gardening purposes are exempt from tax. The seeds are generally exempted, if they are used for agricultural purpose irrespective of the fact whether the seeds are sold by the registered dealer or unregistered dealer. Hence, the sale of seeds by farmers though treated as sales by unregistered dealer, is not taxable. It is further submitted that since seeds purchased by the petitioner from the farmers are sold by the petitioner after processing and certification for sowing purpose, the sale of seeds is also exempt from tax. It is further submitted that the farmers, from whom the petitioner purchases cannot be treated as dealers at all in view of explanation II to the Definition of dealer as defined under Section 2 (10) of the APVAT Act. In this regard, the Government also issued a memo dated

11.1.2008, according to which, no purchase tax can be levied on the purchase turnover of the seeds by the petitioner and even after the implementation of the VAT Act, 2005, both purchase and sale of seeds are exempt from levy of sales tax and therefore, the order of the 1st respondent is not sustainable. Heard the learned Counsel for the petitioner and the learned Special Standing Counsel for Commercial Tax and perused the material available on record. It is the contention of the learned Counsel for the petitioner that since the seeds purchased by the petitioner from the farmers are sold by him after processing and certification for sowing purpose, the said process is exempted from tax and in this regard, on the representation made by the Seed Men Association, the 2nd respondent was pleased to recommend the Government, with a proposal to grant exemption and the said recommendation was under consideration of the Government and the Government also issued a memo in this regard.

The memo, dated 11.1.2008 issued by the Government of A.P., reads as under in the same verbatim:

A proposal to enlarge the entry (44) by adding an explanation under Schedule 1 of the APVAT Act, 2005 to extend exemption for purchase of grains in the local markets, processed and supplied as truthfully lebeled seeds to the nodal agencies is under consideration of the Government. the matter, After careful examination of Government in exercise of the powers conferred under section 76 (2) of the APVAT Act, 2005, hereby clarify that the orders issued vide Memo 2nd cited (dated 7.12.2006) and Commissioner of Commercial Taxes’s circular 1st cited (dated 27.1.2003), are applicable and shall be followed even after implementation of VAT Act 2005 i.e., from 1.4.2005.

In the peculiar facts and circumstances of the case and in view of the pendency of the recommendation of the 2nd respondent, dated 28.11.2007 with the Government proposing to exempt the transaction in question from levying the tax and also in view of the contents as mentioned in the aforesaid memo, without expressing any opinion on the merits of the case, We feel it a fit case wherein the matter in question can be remanded for fresh consideration in accordance with law.