1979 (11) TMI 227 - HC - VAT and Sales Tax

Summary

Issues involved:
The appeal challenges the order of the Board of Revenue (Commercial Taxes) regarding the taxation of purchases made by the assessee under section 7-A of the Tamil Nadu General Sales Tax Act, 1959.

Assessment of Purchase Turnover:
The assessing authority determined the total and taxable turnover of the assessee, a dealer in senna leaves, senna pods, etc., at Rs. 1,24,810.62 after allowing deductions for export sales and inter-State sales. The purchases of 67,173 kilograms of senna leaves not supported by bills were considered liable to tax under section 7-A as they were made from persons not paying tax under the Act. The Appellate Assistant Commissioner initially cancelled the assessment, but the Board of Revenue, after a suo motu revision following a Supreme Court decision, restored the tax liability on the purchases. The Board held that since export sales were not taxable under the local Act, section 7-A would apply to tax the purchase turnover.

Interpretation of Section 7-A:
The Supreme Court's interpretation of section 7-A in a previous case emphasized that the provision applies when goods purchased, generally liable to tax, have not been taxed due to specific circumstances. The provision covers cases where goods are consumed in manufacturing other goods for sale or disposed of in a manner other than by sale in the State. In the present case, the assessee exported the purchased goods, arguing that clause (b) of section 7-A, which applies to disposal of goods other than by sale in the State, was not relevant. The Board of Revenue's interpretation of section 7-A was challenged, particularly regarding the requirement of a local taxable sale to trigger the liability under the provision.

Application of Legal Definitions:
The interpretation of the term "sale" under section 2(n) and Explanation (3)(a) was crucial in determining whether the purchases made by the assessee were subject to tax under section 7-A. The explanation deems a sale to have taken place in the State if specific or future goods were within the State at the time of the contract of sale or appropriation. Applying this definition to the export sales made by the assessee, it was argued that a local sale occurred, even though it was not taxable due to constitutional restrictions on taxing export sales.

In conclusion, the Court set aside the Board of Revenue's order, ruling that the assessee was not liable to be taxed on the purchases under consideration as there was a local sale within the State. The appeal was allowed, and the assessee was awarded costs.