1999 (8) TMI 932 - AT - VAT and Sales Tax

Summary

Issues:
Levy of tax under the Tamil Nadu General Sales Tax Act, 1959 on a turnover of Rs. 5,34,185 for the assessment year 1981-82.

Analysis:
The tax revision case challenged the levy of tax at 4 per cent on a turnover of Rs. 5,34,185 under the Tamil Nadu General Sales Tax Act, 1959. The assessing officer found that purchases of hoop iron and hessian cloth were leviable with purchase tax under the Act. The first appeal resulted in the deletion of purchase tax on hessian cloth but confirmed the levy on hoop iron. The second appeal and revision before the Appellate Tribunal also did not succeed. The High Court transferred the case to the Special Tribunal.

The petitioner contended that the purchases from Babu Traders were genuine and should not be burdened with tax under the Act. The issue revolved around whether the purchase of hoop iron for packing involved a transfer of property attracting purchase tax. The Tribunal had to determine if the order was legally sustainable.

The petitioner argued that the hoops purchased were consumed in works contracts and not subject to tax at the point of first sale. It was found that Babu Traders, the seller, was a bogus dealer, and no valid sale or sufferance of tax occurred. Therefore, purchase tax under section 7-A(1)(b) of the Act was applicable. The Government Advocate supported this position citing relevant case laws.

The Tribunal concluded that the turnover was liable for purchase tax under section 7-A(1)(b) of the Act due to the consumption of hoops in works contracts without prior tax payment. The purpose of section 7-A was to prevent tax evasion, and the transaction in question fell within its scope. Therefore, the order of the Appellate Tribunal confirming the levy of purchase tax was deemed valid in law, and the revision petition was dismissed.

In summary, the Tribunal upheld the levy of purchase tax on the turnover of Rs. 5,34,196, as the purchase of hoops from a bogus dealer and their subsequent use in works contracts made the transaction liable for tax under section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act, 1959. The decision was based on the legal interpretation of the Act and relevant case precedents, aiming to prevent tax evasion and ensure compliance with tax laws.