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2010 (10) TMI 938 - HC - VAT and Sales TaxWhether the export sale will also be a sale which does not attract the levy of tax under Section 3(4) of the Act ? Held that - Section 3(4) of the Act will have no application since situs of the export sales of the petitioners for the purpose of said Section was the State of Tamilnadu and by virtue of the said factual position, the applicability of Section 3(4) stands excluded for the exigibility of tax. The questions are accordingly answered in favour of the petitioners/assessee.
Issues Involved:
1. Whether the Tribunal erred in failing to see that Section 3(4) had no operation since the situs of the export sales of the petitioners was the State of Tamil Nadu. 2. Whether Section 3(4) has operation when the situs of the export sales determined in accordance with Section 4 of the Central Sales Tax Act, 1956 read with Explanation (3) to Section 2 of the Tamil Nadu General Sales Tax Act, 1959, is inside the State of Tamil Nadu. Detailed Analysis: Issue 1: Tribunal's Error Regarding Situs of Export Sales The petitioners argued that the export sales took place within Tamil Nadu and thus, Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) should not apply. They purchased materials using Form-XVII for concessional tax rates and exported part of the manufactured goods. Initially, they paid a tax under Section 3(4) but later contested it, claiming no liability due to the situs of the sales being within Tamil Nadu. The court examined the legislative intent and constitutional provisions, particularly Article 286(1) of the Constitution, which restricts states from taxing export sales. The court concluded that imposing tax under Section 3(4) on export sales would contradict the constitutional embargo, as export sales are deemed to occur within the state for the purposes of the Act. Issue 2: Applicability of Section 3(4) Based on Situs Determination The court analyzed the definitions and provisions under the TNGST Act and the Central Sales Tax Act (CST Act). Section 2(n) of the TNGST Act, read with Explanation 3(a), indicates that the sale or purchase of goods within the state includes export sales. The court emphasized that the constitutional framework and legislative intent prioritize promoting exports by exempting them from state taxes. The court also discussed the interpretation of "sale" under Section 3(4) of the TNGST Act. It held that the term "sale" includes export sales, and thus, such sales should not attract additional tax under Section 3(4). The court applied the maxim Ejusdem Generis, concluding that the phrase "in any other manner" does not encompass export sales. The court referenced various judicial precedents to support this interpretation, including the decisions in Polestar Electronic (Pvt.) Ltd. vs. Additional Commissioner, Sales Tax, and Ashok Leyland Ltd. vs. State of Tamil Nadu. Other Relevant Judgments and Arguments The court considered the arguments presented by the petitioners' counsel, who relied on several Supreme Court decisions to argue that export sales should be exempt from additional tax under Section 3(4). The court found these arguments persuasive and consistent with the legislative intent to promote exports. The court also addressed the state's contention that excluding export sales from Section 3(4) would deprive the state of revenue. It rejected this argument, citing the constitutional embargo on taxing export sales and emphasizing the importance of promoting exports for national interest. Conclusion The court concluded that Section 3(4) of the TNGST Act does not apply to export sales, as such sales are deemed to occur within the state and are exempt from state taxes under the constitutional framework. The petitions were allowed, and the impugned orders were set aside. The court held that the situs of the export sales being within Tamil Nadu excludes the applicability of Section 3(4) for tax exigibility. The questions were answered in favor of the petitioners/assessees, and the petitions were allowed with no costs.
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