THE ASSOCIATED CEMENT COMPANIES LTD. versus GOVERNMENT OF ANDHRA PRADESH AND ANR.

Citation: [2006] 1 S.C.R. 149 · Decided: 04-01-2006 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Dismissed

Judgment (excerpt)

__)' 
THE ASSOCIATED CEMENT COMPANIES LTD. 
A 
v. 
GOVERNMENT OF ANDHRA PRADESH AND ANR. 
JANUARY 4, 2006 
[ASHOK BHAN AND S.H. KAPADIA, JJ.) 
B 
Y' 
Andhra Pradesh General Sales Tax Act with Amendments; Section 6-C 
and Entries 18 & 19 of the first Schedule/Constitution of India, 1950; Article 
14: 
c 
Levy of sales tax on cement and its packing material-Differential rate 
of sales tax introduced by way of aniendment made in Entry 18 of the first 
schedule to the Act-Constitutionality-Challenge 10--Upheld by High Court-
" 
On appeal, held: Taxable turnover under clause (a) of Entry 18 includes the 
value of the cement and the packing material while it is only the value of D 
cement included under clause (b)-Thus, turnove~ basis under these clauses 
differ-It is the discretion of the dealer either to sell cement along with packing 
material or to sell the packing material and the cement separately and to pay 
tax accordingly-Manufacturer would be entitled to claim set off against the 
tax paid by them on the packing material in terms of clause (a) of the Entry 
while making the purchase of packing material within the State-Higher rate E 
of the tax imposed under clause (b) of the Entry in order to check the lax 
I 
avoidance tendency by the manufacturer-Thus legislature laid down a formula 
\ 
prescribing the rate of tax basing two categories envisaged in clause (a) and 
clause (b) of Entry 18 which is regulatory in nature, thus permissible-Not 
violative of Article 14 of the Conslillltion. 
F 
The State of Andhra Pradesh was charging sales tax on the cement 
and packing material@ 16% in terms of the provisions of law in the 
Andhra Pradesh Sales Tax Act. Later, the State Government made 
amendment in Section 6-C of the Act levying sales tax on sale/purchase 
of the packing material of the goods/cement as well. The validity of the G 
>-
provisions was challenged in the case of Raj Steel v. State of Andhra Pradesh 
& Ors., 1198913 SCC 262 and this Court opined that the provisions only 
clarify the existing legal position. However, the provisions introduced so 
proved insignificant. Therefore, the State Legislature modified it further 
149 
H 
150 
SUPREME COURT REPOR rs 
[20061 I S.C.R. 
A by amending Entry 18 to the first schedule of the Ac.t relating to cement, 
categorizing the Entry into two parts viz. part (a) where the sale price of 
cement included the value of packing material and part (b) where the 
packing material and cement are sold separately and also introduced 
different rate of sale tax thereto. The amendment was challenged by the 
B appellants-cement manufacturers before the High Court, which was 
rejected by it. Hence the present appeals. 
Appellants contended that Clause (b) of Entry 18 to the First 
Schedule of Andhra Pradesh General Sales Tax Act is discriminatory and 
irrational as different rates of taxation leviable on cement when sold in 
C packing and without packing and such discriminatory treatment was not 
justified. 
Respondent submitted .that the provision of levying differential rate 
of the sales tax was not discriminatory as the object was to see that the 
tax revenue on packing material is not lost by reason of adoption of 
D artificial tax planning devices by the manufacturers. 
Dismissing the appeal, the Court 
HELD: I.I. The Legislature distinguished between two categories of 
sale of cement recorded by the dealer as in these two categories there is 
E considerable variation in the turnover base. In the category of transactions 
falling in Clause (a) Entry 18 taxable turnover includes the value of the 
cement and the value of the packing material. In the category of 
transactions falling under clause (b) the taxable turnover includes the value 
of the cement only. It does not include the value of the packing material. 
So the turnover base under Clause (a) and Clause (b) differs. The turnover 
F base under Clause (b) is inevitably higher than the turnover b~se under 
Clause (a) and would be equivalent to the value of the packing material. 
The discrimination does not arise for any dealer because the dealer can 
avail any one of the option available in Clauses (a) and (b). If the dealer 
sells cement along with the packing material and the sale price includes 
G value of packing material he continues to pay tax at the previous rate, i.e. 
16%. If the dealer opts to sell the packing material and cement separately 
he has to pay tax at higher rate i.e., 20% on cement only. The dealer

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