1972 (12) TMI 75 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability of the assessee to pay tax on the last purchase of cotton within the State under Section 4 of the Madras General Sales Tax Act, 1959.
2. Entitlement of the assessee to a refund of Rs. 33,400.89, the tax paid on the last purchase of cotton within the State.

Detailed Analysis:

1. Liability to Pay Tax on the Last Purchase of Cotton:
The assessee contended that no tax could be levied under Section 4 of the State Act on declared goods like cotton once they were sold inter-State. The argument was based on the premise that declared goods are subject to tax only once, and once sold inter-State, they should be taxed under the Central Act, not the State Act. The assessee further argued that Section 6 of the State Act, read with Section 15(b) of the Central Act, exempts declared goods from State taxation once they are sold inter-State.

The court rejected this contention, stating that the Madura South India Corporation case did not establish that inter-State sales could be treated as inside sales for State tax purposes. The court clarified that the earlier decision only addressed the characteristics of sales and their tax implications under the Central Act, not an exemption from State tax. The court referred to the Anwaraulla case, which explained that inter-State sales cannot be equated to local sales under the State Act.

The court held that the assessee, having purchased cotton locally and sold it inter-State, was liable for tax under Section 4 read with Schedule II of the State Act. The court emphasized that Section 6 of the State Act does not apply to inter-State sales and that declared goods can be subject to State tax before being sold inter-State.

2. Entitlement to Refund of Tax Paid:
The assessee sought a refund of Rs. 33,400.89, arguing that the tax collected under the State Act should be refunded once the goods are sold inter-State. The Tribunal had denied the refund, citing Rule 23(1) of the Tamil Nadu General Sales Tax Rules, 1959, which requires proof of Central sales tax payment for a refund.

The court noted that due to the retrospective amendment to Section 15(b) by Central Act 61 of 1972, the assessee was not entitled to a refund as they had not paid the Central sales tax on the inter-State transactions. The court found it unnecessary to address the validity of Rule 23(1) due to the change in the law.

The court concluded that Section 15 of the Central Act allows for multiple levies on declared goods, provided refunds are issued for taxes paid at stages other than the Central Act levy. Thus, the assessee's claim that declared goods can only be taxed once under the Central Act was unsustainable.

Conclusion:
The court dismissed both the tax case and the writ petition, affirming the assessee's liability to pay tax on the last purchase of cotton within the State and denying the refund claim. The court awarded costs to the respondent, with counsel's fees set at Rs. 250 each.