2001 (9) TMI 1110 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the levy of purchase tax under section 7-A of the TNGST Act on chillies sold for export is sustainable.
2. Whether the sale of chillies to an exporter constitutes an inter-State sale or a sale in the course of export.
3. Whether the levy of tax on the sale of jaggery is permissible.
4. Whether the levy of penalty for the alleged suppression of turnover is justified.

Issue-wise Analysis:

1. Levy of Purchase Tax on Chillies Sold for Export:
The assessee sold chillies ex-godown in Ariyalur, Tamil Nadu, to buyers in Bombay for export to Odessa, USSR, from Cochin Port. The assessing authority invoked section 7-A of the TNGST Act to levy purchase tax, arguing that the sale was the penultimate sale in Tamil Nadu and goods were dispatched outside the State for export. The Tribunal confirmed this, holding that the sale was in the course of export under section 5(3) of the CST Act and that section 7-A(1)(c) was properly applied. The court upheld this, noting that the sale was completed at Ariyalur, and the movement of goods to Cochin was at the buyer's instance, making it a local sale liable for purchase tax under section 7-A of the TNGST Act.

2. Nature of Sale - Inter-State or Export:
The assessee contended that the sale should be considered an inter-State sale as the goods were dispatched outside Tamil Nadu. However, the court referred to the Supreme Court's decisions in Onkarlal Nandlal v. State of Rajasthan and Murli Manohar & Co. v. State of Haryana, which clarified that a sale could be both an inter-State sale and a sale in the course of export. The court concluded that the sale in question was a local sale that was also the penultimate sale under section 5(3) of the CST Act, thus attracting purchase tax under section 7-A(1)(c) of the TNGST Act.

3. Levy of Tax on Sale of Jaggery:
The assessee failed to provide proof of export for the sale of jaggery. As a result, the assessing authority taxed the sale at 5%, which was upheld by the Appellate Assistant Commissioner and the Tribunal. The court found no reason to interfere with this finding, as the assessee did not produce any evidence to substantiate the claim of export.

4. Levy of Penalty for Suppression of Turnover:
The assessing authority imposed a penalty for the alleged suppression of turnover. The assessee argued that the penalty was unjustified as there was no deliberate suppression and the entire turnover was disclosed. The court referred to the decision in State of Tamil Nadu v. Indian Silk Traders, which emphasized considering the bona fides of the assessee before imposing a penalty. The court set aside the penalty and remanded the matter back to the assessing authorities to reconsider the penalty in light of the observations made.

Conclusion:
The court upheld the levy of purchase tax on the sale of chillies under section 7-A of the TNGST Act, confirming that the sale was a local sale and the penultimate sale under section 5(3) of the CST Act. The tax on the sale of jaggery was also upheld due to the lack of proof of export. However, the court set aside the penalty for suppression of turnover and remanded the matter for reconsideration. The writ petition was dismissed.

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