1998 (2) TMI 573 - HC - VAT and Sales Tax

Issues Involved:
1. Jurisdiction of Tamil Nadu Sales Tax Authorities over an inter-State sale turnover of Rs. 12,320.
2. Tax liability on the turnover of Rs. 14,441 related to sales to the Coimbatore Municipality.

Detailed Analysis:

Issue 1: Jurisdiction of Tamil Nadu Sales Tax Authorities over an Inter-State Sale Turnover of Rs. 12,320
The first item of dispute concerns a turnover of Rs. 12,320 related to an inter-State sale not covered by the declaration in form C. The Deputy Commercial Tax Officer assessed this turnover at 10% due to the lack of C form, which was upheld by the Appellate Assistant Commissioner. However, the Appellate Tribunal found that the sale did not take place within Tamil Nadu and thus held that Tamil Nadu sales tax authorities had no jurisdiction over the transaction.

Upon review, the Court found that the sale was an inter-State sale falling under section 3(b) of the CST Act. The assessee purchased goods from a dealer in Delhi and transferred them to a dealer in Andhra Pradesh. The Court emphasized that under section 6(2) of the CST Act, exemption from Central sales tax on inter-State sales is granted if the subsequent sale is effected during the movement of goods and the conditions prescribed are met, including furnishing C form and E-1 form. The assessee failed to produce C form despite several opportunities.

The Court referred to the proviso to section 9 of the CST Act, which states that the State from which a registered dealer could have obtained C form has the jurisdiction to levy tax. Since the assessee, a registered dealer in Tamil Nadu, could have obtained C form from Tamil Nadu, the State of Tamil Nadu had jurisdiction to levy tax on the subsequent sale. The Appellate Tribunal's view that Tamil Nadu had no jurisdiction was found erroneous. The Court cited several precedents supporting this interpretation, including decisions from the Madras High Court, Andhra Pradesh High Court, and Rajasthan High Court.

The Court concluded that the State of Tamil Nadu was empowered to levy tax on the subsequent inter-State sale for the assessee's failure to produce C form and comply with section 6(2) of the CST Act. Thus, the order of the Appellate Tribunal was set aside, and the order of the assessing officer was restored.

Issue 2: Tax Liability on the Turnover of Rs. 14,441 Related to Sales to the Coimbatore Municipality
The second item of dispute involves a turnover of Rs. 14,441. The assessing officer taxed this turnover at 10% due to the lack of C form, which was upheld by the Appellate Assistant Commissioner. The Appellate Tribunal, however, found that the sale was to an electricity undertaking of the Coimbatore Municipality and held it exempt under section 17 of the TNGST Act, assuming the rate of tax was 3%.

The Court noted that the Appellate Tribunal did not provide clear reasoning or reference to any exemption notification reducing the rate of tax to 3%. The letters exchanged between the assessee and the Coimbatore Municipality indicated that the sale was to the Municipality, not an electricity undertaking. The Court found no exemption notification applicable to sales to local authorities or electricity undertakings that would reduce the tax rate below 4%.

Under section 6(2) of the CST Act, the assessee must produce D form to claim exemption for subsequent sales. The assessee failed to produce either C form or D form. The Court held that the Appellate Tribunal's assumption of exemption or a lower tax rate was erroneous. The assessing officer and the Appellate Assistant Commissioner were justified in taxing the turnover at 10%.

The Court criticized the Appellate Tribunal for not providing complete references to the notifications relied upon and emphasized the need for detailed citation of exemption or concessional notifications.

Conclusion:
The Court set aside the Appellate Tribunal's order regarding both disputed turnovers and restored the order of the assessing officer, confirming the tax liabilities as assessed. The revision petition filed by the State was allowed, with no order as to costs.

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