1999 (5) TMI 591 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether imported sugar has been declared to be goods of special importance and if so subject to the restrictions prescribed under the Central Sales Tax Act and article 286 of the Constitution of India?
2. Whether exemption granted to sugar produced and manufactured in India under serial number 3 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959 by Tamil Nadu Amendment Act 3 of 1994 with effect from August 11, 1993, thus imposing tax on imported sugar is violative of articles 14, 301 and 304 of the Constitution of India?

Detailed Analysis:

Issue 1: Declaration of Imported Sugar as Goods of Special Importance

The petitioner, a company engaged in the export and import of sugar, contested the imposition of sales tax on imported sugar, arguing that it should be exempt as it is declared as goods of special importance under section 14(viii) of the Central Sales Tax Act, 1956. The core of the dispute was whether imported sugar falls under the specific sub-headings mentioned in section 14(viii) of the Central Sales Tax Act, which includes sub-headings 1701.20, 1701.31, 1701.39, and 1702.11 of the Central Excise Tariff Act, 1985.

The Tribunal examined the legislative history and the specific sub-headings under the Central Excise Tariff Act. It was noted that the term "sugar" under section 14(viii) is limited to specific types of sugar as classified under the sub-headings. The Tribunal emphasized the importance of the word "covered" in section 14(viii), indicating that only the sugars falling under these specific sub-headings are declared goods of special importance.

The Tribunal concluded that the imported refined sugar from Thailand did not fall under any of the specified sub-headings in section 14(viii) of the Central Sales Tax Act. Consequently, the imported sugar could not be classified as goods of special importance, and thus, the state's imposition of sales tax on imported sugar was upheld.

Issue 2: Violation of Articles 14, 301, and 304 of the Constitution of India

The petitioner argued that the exemption granted to domestically manufactured sugar under serial number 3 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959, while imposing tax on imported sugar, was discriminatory and violative of articles 14, 301, and 304 of the Constitution of India.

The Tribunal noted that the exemption for domestically manufactured sugar was a policy decision by the state legislature, which did not extend to imported sugar. The Tribunal referenced previous judgments, including the decision of the Second Bench of the Special Tribunal in Mohd. Zackria v. State of Tamil Nadu, which supported the view that different treatment for imported and domestically manufactured sugar was permissible.

The Tribunal also highlighted that the petitioner's counsel conceded not to argue the invalidity under articles 301 and 304 of the Constitution. Therefore, the Tribunal found no violation of constitutional provisions in the differing tax treatment of imported sugar.

Conclusion:

The Tribunal dismissed both petitions, holding that imported sugar is not declared as goods of special importance under section 14(viii) of the Central Sales Tax Act, and the tax exemption for domestically manufactured sugar does not violate constitutional provisions. The petitioner was advised to challenge the assessment order dated September 16, 1998, through a regular statutory appeal on points not decided by the Tribunal. All interim orders were vacated.