2009 (7) TMI 1147 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether pulpwood should be treated as timber under the Sixth schedule to the Tamil Nadu General Sales Tax Act, 1959.
2. Interpretation of Section 3(3) of the Act regarding the benefit of Form XVII declaration.
3. Liability for violation of conditions of Form XVII declaration.

Analysis:

1. The primary issue in this case was whether pulpwood should be considered as timber under the Sixth schedule to the Tamil Nadu General Sales Tax Act, 1959. The Revenue challenged the order of the Sales Tax Appellate Tribunal, arguing that the Tribunal erred in not treating pulpwood as timber. The Appellate Assistant Commissioner and the Tribunal held that the selling agent can sell any goods, including consumables, packing materials, and labels, excluding plant and machinery, under Form XVII declaration. The Court, after examining Section 3(3) of the Act along with the second proviso, agreed with the lower authorities' interpretation. The Court concluded that the Appellate Assistant Commissioner and the Tribunal were justified in their decision, and pulpwood should not be treated as timber falling under the Sixth schedule.

2. The second issue revolved around the interpretation of Section 3(3) of the Act concerning the benefit of Form XVII declaration. The Appellate Assistant Commissioner emphasized that the selling dealers' right to the benefit of Form XVII is not restricted to goods mentioned in the First Schedule. The Tribunal also supported this view based on a previous court decision. The Court, after analyzing the provisions of Section 3(3) along with the second proviso, clarified that any violation by the purchasing dealer regarding the use of purchased goods for manufacturing goods not specified in the First Schedule would lead to tax liability only for the purchasing dealer, not the selling dealer.

3. The final issue addressed the liability for the violation of conditions of Form XVII declaration. The Court referred to a previous decision where it was established that tax and penalty for contravention of Form XVII conditions could only be imposed against the purchasing dealer, not the seller, as per Section 3(3) of the Act. The Court reiterated that the selling dealer cannot be held liable for violations committed by the purchasing dealer. Consequently, the Court dismissed the revision, emphasizing that the tax liability for violations of Form XVII conditions rests solely with the purchasing dealer, not the selling dealer.