1984 (8) TMI 313 - HC - VAT and Sales Tax

Issues Involved:
1. Liability of tax on disputed turnover and rate of tax.
2. Exemption under section 5(2) of the Central Sales Tax Act.
3. Exclusion of excise duty from turnover.

Issue-wise Detailed Analysis:

1. Liability of Tax on Disputed Turnover and Rate of Tax:
The assessee reported a total turnover of Rs. 2,40,63,735.71 and a taxable turnover of Rs. 1,66,51,094.61 for the assessment year 1962-63. The assessing authority found the total turnover to be Rs. 8,80,51,093.63 and determined the taxable turnover at Rs. 2,08,54,900.60 after disallowing some exemptions. The assessee appealed, disputing the liability on a turnover of Rs. 78,99,670.61 and the rate of tax on Rs. 4,31,619.88. The Appellate Assistant Commissioner granted partial relief but dismissed the claim regarding the tax rate. The Tribunal upheld the assessing authority's decision, leading to the present challenge.

2. Exemption Under Section 5(2) of the Central Sales Tax Act:
For the assessment year 1965-66, the assessee claimed exemption on a turnover of Rs. 12,60,409.00, arguing that these were sales in the course of import. The assessing authority rejected this claim, and the Appellate Assistant Commissioner granted partial relief. The Tribunal held that the disputed turnover did not qualify as sales in the course of import, thus not exempt under section 5(2). The High Court affirmed this, relying on the Supreme Court's decision in Binani Bros. (P.) Ltd. v. Union of India, which established that only the first sale (from the foreign seller to the assessee) occasioned the import, not the subsequent sale from the assessee to the local buyer.

3. Exclusion of Excise Duty from Turnover:
The assessee claimed exclusion of excise duty from its turnover, which was initially allowed by the Appellate Assistant Commissioner but later rejected by the Tribunal. The High Court upheld the Tribunal's decision, noting that rule 6(b) of the Tamil Nadu General Sales Tax (Turnover and Assessment) Rules, which allowed such deductions, was deleted with retrospective effect from January 5, 1957. The court had previously upheld the validity of this deletion in writ proceedings.

Detailed Analysis:

Exemption Under Section 5(2) of the Central Sales Tax Act:
The High Court examined whether the goods imported by the assessee and sold to local buyers could be treated as sales in the course of import. The assessee argued that since the goods were imported based on contracts with local buyers, these sales should be exempt under section 5(2). However, the court relied on the Supreme Court's decision in Binani Bros., which clarified that only the first sale occasioned the import. The court found that the transactions involved two distinct sales: one from the foreign seller to the assessee and another from the assessee to the local buyer, thus not qualifying for exemption.

Rate of Tax on Certain Machineries:
The court addressed whether the turnover related to sales of motor generator welding sets, mobile arc welding generators, etc., could be taxed under item 41 of the First Schedule. The Tribunal had ruled that these items did not fall under item 41 and should be taxed at a multi-point rate. The High Court agreed, noting that item 41, even after amendments, did not include the term "machinery" in a general sense. The court cited several precedents, including Textool Company Limited v. State of Madras and Deputy Commissioner of Commercial Taxes v. Ravi Auto Stores, which held that the term "machinery" should take its sense from "electrical goods" and not include all types of machinery.

Exclusion of Excise Duty:
The court upheld the Tribunal's decision to reject the exclusion of excise duty from the total turnover. The deletion of rule 6(b) with retrospective effect was previously upheld, and thus, the assessee's claim for exclusion was invalid.

Conclusion:
The High Court partly allowed the petitions, affirming the Tribunal's decisions on most points but ruling that the machinery sold by the assessee should be taxed at a multi-point rate rather than under item 41 of the First Schedule. There was no order as to costs.

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