BHADRACHALAM PAPERBOARDS LTD. AND ANR. versus THE GOVERNMENT OF ANDHRA PRADESH AND ORS.

Citation: [1998] 3 S.C.R. 968 · Decided: 04-08-1998 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
BHADRACHALAM PAPERBOARDS LTD. AND ANR. 
B 
v. 
THE GOVERNMENT OF ANDHRA PRADESH AND ORS. 
AUGUST 4,1998 
[S.P. BHARUCHA AND K. VENKATASWAMI, JJ.] 
Sales Tax-Andhra Pradesh Sales Tax Act-Refund-Agreement 
between Assessee and Government for supply of bamboo and hardwood-In 
C terms of the agreement Assessee reimbursed sales tax to Department though 
the later was exigible to tax as a Dealer-Assessee also consuming goods for 
manufacturing paper boards-Judicial decision that supply of bamboo from 
Government forest was not exigible to sales tax-Assessee 's claim for refund 
of taxes already collected-Held, permissible only for a period of 3 years 
prior to the date of filing of the Writ Petition-Presumption that the Assessee 
D must be deemed to have passed on the burden of tax to consumers-Held not 
valid. 
The appellants entered into an agreement with the respondent-state for 
supply of bamboo and hardwood from the Government forests. As a dealer the 
E Forest Department was exigible to sales tax upon the value of bamboo and 
·hardwood removed by the appellants from the forest However, in terms of the 
agreement the appellant reimbursed to the Forest Department the amount of 
sales tax. In Titaghur Paper Mills case this Court held that supply of bamboo 
from Government Forest was not exigible to tax. On the basis of this judgment 
F the appellants sought a declaration that the tax collected from them on the 
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royalty and extraction charges paid for the supply of bamboo and hardwood 
,-r . 
G 
for the period from 1978-79 onwards was illegal, null and void. It also sought 
consequential relief of refund of tax already collected from 27.3.1978 to 
30.10.1985. 
The High Court held that the transactions in question were not exigible 
to tax but denied the relief of tax refund on the ground that the appellants 
must be deemed to have passed on the burden of tax to the consumers. The 
appellants preferred appeal before this Court 
H 
Allowing the appeal, this Court 
968 
BHADRACHALAM PAPERBOARDS LTD. v. GOVT. OF A.P. [VENKATASWAMI, J.] 969 
' . 
HELD : The High Court was not right in presuming that the appellants A 
must have passed on the burden of tax to the consumers. The appellants have 
reimbursed a tax liability which was on the Forest Department and the 
appellants have consumed the goods for manufacturing paperboards, etc. 
Therefore, the question of the appellants passing on the tax liability to the 
consumers, on the facts of this case, would not arise. Consequently the B 
appellants are entitled for refund of the tax collected from them, not for the 
entire period but for the period commencing three years prior to the date of 
filing of the Writ Petition. [971-E-F) 
State of Orissa & Ors. v. Titaghur Paper Mills Co. Ltd & Anr. etc., 
(1985) Supp. SCC 280 and Mafatlal Industries Ltd. & Ors. v. Union of India c 
& Ors., I 1997) 5 sec 536, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4418 of 
1993. 
From the Judgment and Order dated 28.9.88 of the Andhra Pradesh High D 
..; 
Court in W.P. No. 13995of1985 . 
.. 
Shri Narain and Sandeep Narain for the Appellants . 
K. Ram Kumar, Santinarayan, Y. Sobba Rao and G.Prabhakar for the 
Respondents. 
E 
The Judgment of the Court was delivered by 
K. VENKA T ASW AMI, J. The appellants moved the High Court of 
Andhra Pradesh under Article 226 of the Constitution of India for the issuance 
of a Writ of Mandamus to declare the action of the respondents in demanding 
--
and collecting sales tax from them on the royalty and extraction charges paid F 
for the supply of bamboo and hardwood to them from the forest for the period 
1978-79 onwards as illegal, null and void and for a consequential relief of 
refund of the taxes so collected from them. 
The admitted facts are that the appellants entered into an agreement on G 
27.3 .1978 with the State Government for supply of bamboo and hardwood 
from the Government forest on certain terms and conditions. The Sales Tax 
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,,_. 
Department demanded and collected sales tax upon the value of the bamboo 
and hardwood removed by the appellants from the forest. Under the State 
Sales Tax Act, during the relevant period the commodity (bamboo and 
hardwood) was exigible to tax at the first sale and as such the Forest H 
970 
SUPREME COURT REPORTS 
[1998] 3 S.C.R. 
A Department, who was a dealer, was liable to pay the sales tax. However, under 
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the agreement mentioned above, the appellants undertook to reimburse the 
F

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