1988 (10) TMI 271 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of exemption notifications under the Tamil Nadu General Sales Tax Act, 1959 regarding taxation on scraps produced during manufacturing process.

Detailed Analysis:
The petitioner contended that the scraps obtained after the production of finished products from raw materials should be considered as "end-products" as per the government notification. The scraps were argued to be part of the raw materials that were melted to create finished products, and any remaining scraps should not be subject to additional taxation. Reference was made to sections 14 and 15 of the Central Sales Tax Act, 1956, which regulate the tax on goods of special importance in inter-State trade or commerce and the tax levied on declared goods within a State.

The Government Advocate argued that the exemption notifications issued by the government were intended for sales of end-products by steel rolling mills and not for scraps produced by the mills. It was emphasized that exemption notifications should be strictly construed to avoid increasing the tax burden on others. However, the court disagreed with this interpretation, citing that the scraps were part of the raw materials purchased by the petitioner and should be considered as "end-products" under the notification. The court highlighted that the scraps had already been taxed at the time of purchase and should not be subjected to additional taxation during the manufacturing process.

The court specifically analyzed the language of the exemption notification issued by the Governor of Tamil Nadu, which granted exemption on tax payable for end-products manufactured by steel re-rolling mills subject to certain conditions. Based on the wording of the notification and the interpretation of the term "end-products," the court concluded that the scraps left during the manufacturing process should be considered as part of the end-products and, therefore, should not be taxed separately. Consequently, the court set aside the proceedings of the respondent and quashed the garnishee notice issued against the petitioner.

In conclusion, the court allowed the writ petition, ruling in favor of the petitioner and emphasizing that the scraps obtained during the manufacturing process should be deemed as "end-products" under the exemption notification, thereby exempting them from additional taxation.