1977 (6) TMI 95 - HC - VAT and Sales Tax

Issues Involved:
1. Eligibility for concessional rate of tax under section 3(3) of the Tamil Nadu General Sales Tax Act.
2. Validity of form XVII declarations.
3. Tax liability on scrap sales.

Detailed Analysis:

1. Eligibility for Concessional Rate of Tax under Section 3(3):

The core issue is whether the assessee is eligible for the concessional rate of tax at 2% under Section 3(3) of the Tamil Nadu General Sales Tax Act for the sale of lube base stocks. The assessee sold lube base stocks to Indian Oil Corporation, which used them to manufacture lubricants. The Sales Tax Appellate Tribunal concluded that the assessee was entitled to the concessional rate of tax since proper form XVII declarations were filed by the purchasers.

Section 3(3) stipulates that the tax payable by a dealer in respect of any sale of goods mentioned in the First Schedule to another dealer for use as a component part of any other goods mentioned in that schedule, which he intends to manufacture inside the State for sale, shall be at a concessional rate of 3%. The explanation to this section, amended by Act 27 of 1970, specifies that a "component part" must be identifiable visually or by a mechanical process, not by a chemical process.

The Tribunal's decision aligns with previous judicial interpretations, notably in R.M. Krishnaswamy Naidu & Sons v. State of Madras, where it was held that the identity of the component part need not be visual, and in Premier Electro-Mechanical Fabricators v. State of Madras, which emphasized that the production of form XVII is sufficient for claiming the concessional rate.

2. Validity of Form XVII Declarations:

The State contended that the form XVII declarations required further scrutiny to ensure they were in order. The Tribunal remanded the matter to the Appellate Assistant Commissioner to verify the declarations and allow the concessional rate if they were found to be in order, without delving into whether the lube base stocks were used as component parts.

The court reiterated that once form XVII is produced, the selling dealer is entitled to the concessional rate, and any false declaration by the purchaser exposes the latter to penalties under sections 23 and 45(2)(e) of the Act. This principle is consistent with the Supreme Court's ruling in State of Madras v. Radio and Electricals Ltd., which held that the selling dealer is not obligated to verify the actual use of the goods by the purchaser beyond the representation made in form C.

3. Tax Liability on Scrap Sales:

The Tribunal applied the Supreme Court's decision in State of Tamil Nadu v. Burmah Shell Oil Storage and Distributing Co. of India Ltd. to hold that the assessee's transactions involving scrap sales are liable to be taxed. The matter was remanded to the Appellate Assistant Commissioner to investigate the details of the turnover and determine the applicability of the Supreme Court's decision. If the Supreme Court's ruling is not applicable, the case will be decided based on other provisions of the Act.

Conclusion:

The High Court upheld the Tribunal's decision, dismissing the revision petition filed by the State. The court found no reason to interfere with the Tribunal's order, which remanded the matter for verification of form XVII declarations and the investigation of scrap sales turnover. The revision petition was dismissed with costs of Rs. 250.

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