1999 (4) TMI 583 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutionality of entry 22-A of Part "E" of the First Schedule and entry 67 of Part "D" of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959.
2. Discrimination between foreign goods and locally manufactured goods.
3. Applicability of exemption under section 8 of the Tamil Nadu General Sales Tax Act.
4. Classification of synthetic fabric of artificial fur for tax purposes.
5. Applicability of Central Sales Tax Act provisions on imported goods.
6. Validity of the pre-assessment notice issued by the assessing authority.

Detailed Analysis:

1. Constitutionality of Entry 22-A and Entry 67:
The petitioners challenged the constitutionality of entry 22-A of Part "E" of the First Schedule and entry 67 of Part "D" of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, which impose taxes on imported synthetic fabric of artificial fur. The Tribunal upheld these entries, stating they are constitutionally valid. The Tribunal emphasized that the distinction made between goods produced or manufactured in India and those imported from abroad is a reasonable classification for legislative purposes.

2. Discrimination Between Foreign Goods and Locally Manufactured Goods:
The petitioners argued that taxing imported goods while exempting locally manufactured goods violates Article 14 of the Constitution of India. The Tribunal rejected this claim, citing the Supreme Court's ruling in East India Tobacco Company v. State of Andhra Pradesh, which allows for reasonable classification in taxation. The Tribunal concluded that the differentiation between imported and locally manufactured goods does not constitute discrimination.

3. Applicability of Exemption Under Section 8:
The petitioners contended that they should be eligible for exemption under section 8 of the Tamil Nadu General Sales Tax Act, which exempts certain goods specified in the Third Schedule from sales tax. The Tribunal clarified that item 16 of Part A of the Third Schedule specifies that only goods produced or manufactured in India are eligible for exemption. Since the synthetic fabric of artificial fur imported by the petitioners was not manufactured in India, they are not eligible for this exemption.

4. Classification of Synthetic Fabric of Artificial Fur:
The Special Commissioner and Commissioner of Commercial Taxes classified synthetic fabric of artificial fur under entry 22-A in Part "E" of the First Schedule, taxable at 16 percent. The Tribunal upheld this classification, confirming that the imported synthetic fabric of artificial fur falls under this entry and is subject to the specified tax rate.

5. Applicability of Central Sales Tax Act Provisions:
The petitioners argued that imported fabrics should be treated as "declared goods" under section 14 of the Central Sales Tax Act, which would limit the tax rate to 4 percent. The Tribunal rejected this argument, stating that only goods produced or manufactured in India and covered under specific headings of the Central Excise Tariff Act qualify as declared goods. Since the imported fabrics did not meet these criteria, they cannot be classified as declared goods.

6. Validity of the Pre-assessment Notice:
The petitioners sought to quash the pre-assessment notice issued by the assessing authority, which proposed to levy an 11 percent tax on the sale of artificial fur. The Tribunal held that the notice is valid and gave the petitioners four weeks to file objections with the required information. The Tribunal emphasized that the notice is a preliminary step in the assessment process and does not constitute a final decision.

Conclusion:
The Tribunal dismissed the petitions, upholding the constitutionality of the challenged tax entries and confirming that the differentiation between imported and locally manufactured goods is reasonable and does not violate constitutional provisions. The Tribunal also validated the classification and tax rate applicable to the synthetic fabric of artificial fur and confirmed the legality of the pre-assessment notice.