1981 (8) TMI 213 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of demand notice for payment of tax under provisional assessment.
2. Interpretation of tax liability on raw hides and skins under the Tamil Nadu General Sales Tax Act, 1959.
3. Determination of last purchase for tax assessment purposes.
4. Consideration of completed transactions for tax imposition.

Analysis:

1. The writ petitions were filed to challenge the orders of the first respondent issuing a demand notice for the payment of tax under provisional assessment for a specific period. The petitioners, tanners and exporters, claimed exemption for local purchases of raw skins. The contention was that the demands were made without proper authority, leading to the filing of the writ petitions.

2. Under the Tamil Nadu General Sales Tax Act, 1959, raw hides and skins are taxable at the point of last purchase in the State, while dressed hides and skins are taxable at the point of first sale in the State. The petitioners argued that tax liability arises only when the purchase acquires the characteristic of the last purchase in the State. They relied on a Supreme Court decision to support their position.

3. The court emphasized that the liability to pay tax on raw hides and skins arises only when the last purchase for a particular consignment occurs during the assessment year. The court highlighted the importance of determining the last purchase conclusively before demanding tax, especially during provisional assessments. It was noted that until the assessment year ends, and if the raw hides and skins remain unsold, they retain the characteristic of the last purchase.

4. The court held that the right to demand tax arises only when there is a completed transaction regarding raw hides and skins, and the assessee is the last purchaser. The court stressed that provisional assessments should not be based on presumptions, and tax demands should only be made when there is certainty about the last purchase. The court quashed the impugned demands, stating that if there is finality regarding any stocks of hides and skins during the provisional assessment period, tax payment can be demanded in accordance with the law.

In conclusion, the judgment focused on the proper interpretation of tax liability under the Tamil Nadu General Sales Tax Act, emphasizing the need for certainty regarding the last purchase before imposing tax demands, especially during provisional assessments.