1972 (9) TMI 108 - SC - VAT and Sales Tax

Whether the sales made locally of yarn transferred to the Madras State from the stocks of yarn in the States of Andhra Pradesh and Kerala in respect of which sales tax had already been charged as inter-State sales are again liable to tax as first sales in the State of Madras? Held that - Appeal dismissed. Whether the provisions of section 15 makes an inroad into the texture of the local law, so that section 6 of the local Act will have to be read subject to and in conformity with the provisions of section 15 and the policy underlining that section and whether section 6 will be inapplicable to sales of declared goods, need not be considered in this case because we are clearly of the view that the sales of cotton yarn sold to the branches of the respondent in Andhra Pradesh and Kerala, though they were inter-State sales of declared goods, were the first sales inside the State of Tamil Nadu and that being so, if those goods are transferred to Madras and sold in Madras, they are exempt from being taxed again since they have already been subjected to tax on the first sale inside the State. We are, therefore, in agreement with the conclusions of the Madras High Court.

Summary

Issues:
1. Challenge to proceedings under Madras General Sales Tax Act.
2. Disallowance of exemption for subsequent sales of yarn.
3. Interpretation of provisions of the Act and Central Sales Tax Act.

Detailed Analysis:
1. The judgment pertains to three appeals challenging the Madras High Court's decision allowing three writ petitions filed by the respondent under article 226 of the Constitution. The petitions sought to quash proceedings by the Sales Tax Officer under the Madras General Sales Tax Act for the assessment years 1960-61 to 1964-65 and 1966-67. The High Court quashed the proceedings as requested by the respondent, a registered dealer with branches in various states, including Tamil Nadu, Kerala, and Andhra Pradesh. The appellant was directed to forbear from taking steps for verification and disallowing exemptions for subsequent sales of yarn purchased by the respondent from Madurai Mills Limited.

2. The central issue revolved around the tax liability of sales of cotton yarn by Madurai Mills to the respondent. The sales tax was collected under the Central Sales Tax Act for deliveries to branches outside the state, while tax under the Madras Act was collected for deliveries within the state. The controversy centered on whether subsequent sales of yarn transferred to Tamil Nadu from branches in other states were liable for tax as first sales in Tamil Nadu. The High Court held that such subsequent sales were exempt from tax as they were already taxed as first sales inside Tamil Nadu.

3. The judgment delves into the relevant provisions of the Madras General Sales Tax Act and the Central Sales Tax Act to determine the tax liability. Sections 3 and 4 of the Madras Act impose a multi-point tax on declared goods, including cotton yarn. Section 6 specifies that the tax under the Madras Act is in addition to the tax under the Central Act. The High Court interpreted these provisions in light of the inter-State sales of cotton yarn by Madurai Mills to the respondent and subsequent sales within Tamil Nadu. It concluded that the subsequent sales were not liable for tax under the Madras Act as they were considered first sales inside Tamil Nadu.

In conclusion, the Supreme Court dismissed the appeal and upheld the Madras High Court's decision, emphasizing that subsequent sales of cotton yarn within Tamil Nadu were exempt from tax as they were already taxed as first sales inside the state.