1964 (4) TMI 99 - HC - VAT and Sales Tax

Summary

Issues:
Taxability of foreign liquor under the Madras General Sales Tax Act and Central Sales Tax Act.

Analysis:
The judgment dealt with the taxability of foreign liquor under the Madras General Sales Tax Act and the Central Sales Tax Act. The petitioner, a company dealing in foreign liquor, disputed the tax levied on their turnovers for the years 1957-60 due to inter-State sales not supported by C Forms as required by the Central Sales Tax Act. The department imposed a tax at a rate of 50% under section 8(2)(b) of the Central Sales Tax Act based on the Madras Prohibition Act. The petitioner contended that foreign liquor sales were exempt under the Madras General Sales Tax Act, warranting a "nil" tax rate for inter-State sales. The court analyzed the relevant provisions of the Acts to determine the taxability of foreign liquor.

The court examined the exemption provisions under the Madras General Sales Tax Act, specifically section 8, which exempts certain goods from tax. The Third Schedule of the Act exempts goods on which duty is levied under the Madras Prohibition Act. However, since no duty is levied on foreign liquor under the Prohibition Act, the court concluded that foreign liquor was not exempted by the Madras General Sales Tax Act. Therefore, the initial contention of the petitioner regarding exemption failed.

Regarding the tax rate, the court analyzed section 8(2)(b) of the Central Sales Tax Act, which mandates a tax rate of 7% for inter-State sales of goods not falling under sub-section (1). The department relied on section 21-A of the Madras Prohibition Act to levy a 50% tax rate on foreign liquor sales. However, the court determined that the 50% rate was not applicable as it was a specific provision for certain sales under the Prohibition Act, and the general rate of 2% under the Madras General Sales Tax Act should apply to foreign liquor sales.

The court highlighted the amendment to section 8(2) of the Central Sales Tax Act, which introduced a 7% tax rate from October 1, 1958. Therefore, sales before this date were subject to a 2% tax rate, while sales after that date were taxed at 7%. The court allowed the petitions, directing the department to amend the assessments accordingly and awarded costs to the petitioner.

In conclusion, the judgment clarified the taxability of foreign liquor under the Madras General Sales Tax Act and the Central Sales Tax Act, emphasizing the exemption provisions and the applicable tax rates for inter-State sales of foreign liquor.