1985 (2) TMI 239 - HC - VAT and Sales Tax

Summary

Issues Involved:
The issue involves the interpretation of section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act, 1959, regarding the taxability of a turnover of Rs. 9,55,485.78 representing the purchase value of sand and blue-metal used by building contractors and engineers in the construction of buildings. The main contention is whether the said turnover can be brought to charge under section 7-A of the Act.

Judgment Details:

1. Assessment and Appeal Process:
The assessee, a building contractor, reported a taxable turnover for the assessment year 1980-81, excluding the turnover of Rs. 9,55,485.78 representing the purchase value of sand and blue-metal from unregistered dealers. The assessing authority and the Appellate Assistant Commissioner upheld the levy under section 7-A of the Act on this turnover. However, the Sales Tax Appellate Tribunal, following a decision of the Andhra Pradesh High Court, held that section 7-A(1)(a) of the Act does not apply to the disputed turnover as it was used for construction purposes and not for manufacturing goods for sale. The Tribunal set aside the assessment on the disputed purchase turnover.

2. Interpretation of Section 7-A(1)(a):
The learned Additional Government Pleader argued that the Supreme Court decision in Ganesh Prasad Dixit v. Commissioner of Sales Tax supports the application of section 7-A(1)(a) to cases where goods are consumed in the course of business. However, the Court noted that the expression "consumes such goods in the manufacture of other goods for sale" in clause (a) applies to movable properties and not to immovable property like buildings. The Court distinguished the facts of the present case from the decisions cited by the Government Pleader, emphasizing that the construction of buildings does not constitute the manufacture of goods for sale.

3. Application of Section 7-A(1)(b):
The Government Pleader also argued for the application of clause (b) of section 7-A(1) based on the disposal of goods purchased. However, the Court found that the use of goods in construction does not amount to disposal as contemplated by clause (b). Therefore, the Court upheld the Tribunal's decision that neither clause (a) nor clause (b) of section 7-A(1) applies to the case at hand.

4. Dismissal of Tax Revision Case:
Considering the above analysis, the Court dismissed the tax revision case (T.C. (R) No. 19 of 1985) filed by the revenue challenging the Tribunal's decision on the taxability of the disputed turnover.

5. Cancellation of Penalty Levy:
In a connected case (T.C. (R) No. 20 of 1985), the Tribunal cancelled the levy of penalty under section 12(5) of the Act following the setting aside of the tax assessment on the disputed turnover. The Court affirmed the Tribunal's decision, stating that since the tax on the turnover was set aside, there cannot be a levy of penalty for non-disclosure of the same. Consequently, this tax revision case was also dismissed.

This judgment clarifies the scope of section 7-A(1)(a) of the Act in relation to the taxability of purchase turnover used in the construction of buildings, emphasizing the distinction between manufacturing goods for sale and using goods in immovable property construction.