1990 (7) TMI 360 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act, 1959 regarding taxation on splints obtained from timber slicing and sale.

Analysis:
The High Court of Madras considered the question of whether splints obtained from timber slicing by the assessee and sold to match manufacturers should be taxed under section 7-A(1)(a) of the Act. The Tribunal had set aside the assessment of the purchase turnover of timber, stating that the provisions of section 7-A did not apply to the purchase turnover. The Revenue contended that the purchase of timber for splints production should be taxed as timber loses its character when sliced. The court noted that the splints sold had already been taxed, and the Revenue argued that timber was consumed in splints manufacturing, citing a Division Bench judgment. The court appointed an amicus curiae as the assessee was not represented. The amicus curiae argued that the Tribunal's decision was supported by Supreme Court and High Court judgments, making it unassailable.

The Supreme Court decision in Deputy Commissioner of Sales Tax v. Pio Food Packers was cited, where it was held that processing pineapple into slices did not amount to consumption of the original fruit for manufacturing purposes. The Court emphasized that if the processed article retained the original identity of the commodity, it could not be considered as consumed in manufacturing. The Court also referred to State of Tamil Nadu v. Subbaraj and Co. and State of Tamil Nadu v. K.M. Natarajan, where similar principles were upheld regarding the non-applicability of section 7-A(1)(a) when the processed article retained the original identity of the commodity.

The Court distinguished a previous case where timber was converted into packing cases, losing its original identity, unlike in the present case where splints retained the identity of timber. The Tribunal's decision was upheld based on the Supreme Court and Division Bench judgments, concluding that the purchase turnover of timber for splints production was not subject to tax under section 7-A(1)(a) of the Act. The tax revision cases were dismissed, with no costs awarded, and appreciation was expressed for the amicus curiae's assistance.

In conclusion, the judgment clarified the application of section 7-A(1)(a) of the Act to the taxation of splints obtained from timber slicing and sale, emphasizing the importance of the processed article retaining the original identity of the commodity to determine tax liability.