1983 (2) TMI 273 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of "total turnover" under the Tamil Nadu General Sales Tax Act, 1959.
2. Whether sales turnover and purchase turnover can be aggregated for tax assessment purposes.
3. Application of Section 7-A and its proviso in conjunction with Section 3(1) and Section 7(1) of the Act.

Issue-wise Detailed Analysis:

1. Interpretation of "total turnover" under the Tamil Nadu General Sales Tax Act, 1959:

The core issue revolves around the interpretation of "total turnover" as defined under Section 2(q) of the Tamil Nadu General Sales Tax Act, 1959. The definition of "turnover" under Section 2(r) is "the aggregate amount for which goods are bought or sold." The term "total turnover" under Section 2(q) means "the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax." The court emphasized that the terms "turnover" and "total turnover" should be understood disjunctively, meaning separate aggregates for purchase and sales turnover. The court rejected the interpretation that "total turnover" should combine both purchase and sales turnover, maintaining the distinction between the two.

2. Whether sales turnover and purchase turnover can be aggregated for tax assessment purposes:

The court examined whether sales turnover under Section 3(1) and purchase turnover under Section 7-A(1) could be aggregated to determine the total turnover for tax assessment under Section 7(1). The court concluded that combining sales turnover and purchase turnover to form a single total turnover is not permissible. The court highlighted that the Tamil Nadu General Sales Tax Act, 1959, imposes multiple taxes, including a general sales tax, single point levy, and purchase tax, each being independent. The court stated that the expression "total turnover" in Section 3(1) and Section 7(1) refers only to the total sales turnover, and in Section 7-A(1) it refers to the total purchase turnover. The court found that the aggregation of sales and purchase turnovers for tax purposes would lead to absurd results and is contrary to the statutory scheme.

3. Application of Section 7-A and its proviso in conjunction with Section 3(1) and Section 7(1) of the Act:

Section 7-A, introduced in 1970, imposes a purchase tax on dealers who purchase goods under circumstances where no tax is payable under Sections 3, 4, or 5. The proviso to Section 7-A(1) exempts dealers from this purchase tax if their total turnover is less than Rs. 50,000. The court emphasized that Section 7-A is an independent charging section and the term "total turnover" in its proviso should be understood as the aggregate of all turnovers, including both sales and purchases. However, the court clarified that for the purpose of Section 3(1) and Section 7(1), "total turnover" should be interpreted as total sales turnover only. The court held that the introduction of Section 7-A did not alter the meaning of "total turnover" in other sections, and the aggregation of turnovers for different taxes under the Act is not justified.

Judgment Summary:

The court held that the "total turnover" for the purpose of Section 3(1) and Section 7(1) of the Tamil Nadu General Sales Tax Act, 1959, refers only to the total sales turnover. The aggregation of sales turnover and purchase turnover for tax assessment is not permissible. The court found that Section 7-A is an independent charging section, and its proviso's reference to "total turnover" includes both sales and purchase turnovers, but this does not affect the interpretation of "total turnover" in other sections. Consequently, the court overturned the Tribunal's decision and restored the order of the Appellate Assistant Commissioner, confirming the tax assessment based on the combined turnovers. The court granted leave to appeal to the Supreme Court, recognizing the substantial question of law involved.