2010 (7) TMI 878 - HC - VAT and Sales Tax

Whether the purchase made by the assessee being an oil miller is liable for purchase tax or not? Held that - On consideration of the facts available on record, we are of the considered view that the Tribunal has made a total error in setting aside the assessment order as confirmed by the First Appellate Authority by relying upon the judgment of the Apex Court in SHANMUGA TRADERS v. STATE OF TAMIL NADU 1998 (4) TMI 484 - SUPREME COURT OF INDIA without appreciating the scope of Section 7-A of the Act as well as the entry 6(viii) of the II Schedule to the Act and the notification passed in G.O.Ms.No.976, Revenue, dated 28th March, 1959. Revision allowed.

Summary

Issues Involved:
1. Liability of the oil miller for purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of the exemption notification to oil millers.
3. Correctness of the Tribunal's reliance on the judgment in SHANMUGA TRADERS v. STATE OF TAMIL NADU.

Detailed Analysis:

1. Liability of the Oil Miller for Purchase Tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959:
The primary issue was whether the assessee, an oil miller, was liable for purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959. Section 7-A is both a charging and remedial provision aimed at plugging tax evasion and ensuring that goods which are otherwise taxable but not taxed due to exemptions are taxed at the point of purchase. The court emphasized that Section 7-A creates a liability against the dealer on his purchase turnover if the goods are consumed in manufacturing, dispatched outside the state, or otherwise not available for taxation.

2. Applicability of the Exemption Notification to Oil Millers:
The exemption notification in G.O.Ms.No.976, Revenue, dated 28th March 1959, exempts the sale of coconuts and copra but explicitly excludes oil millers from this exemption. The court noted that the exemption granted is partial and specific to certain classes of dealers, not including oil millers. Therefore, the purchase made by the assessee, an oil miller, does not fall under the exemption, and they are liable for purchase tax under Section 7-A.

3. Correctness of the Tribunal's Reliance on the Judgment in SHANMUGA TRADERS v. STATE OF TAMIL NADU:
The Tribunal had relied on the judgment in SHANMUGA TRADERS v. STATE OF TAMIL NADU to set aside the assessment order, arguing that the point of levy cannot be shifted to the oil miller since the first sale is exempted. However, the court found this reliance erroneous. The facts in SHANMUGA TRADERS pertained to sales, not purchases. The court clarified that the Tribunal misconceived the application of the judgment, as the assessee in this case was a purchaser, not a seller.

Conclusion:
The court concluded that the Tribunal made a total error in setting aside the assessment order based on a misinterpretation of the judgment in SHANMUGA TRADERS and without appreciating the scope of Section 7-A and the relevant exemption notification. The order passed by the Tribunal was set aside, and the assessment order confirmed by the First Appellate Authority was restored. The revision was allowed, and no costs were awarded.