2001 (11) TMI 1003 - HC - VAT and Sales Tax

Issues:
1. Misconstruing the scope of law related to REP licenses by the assessing officer.
2. Whether duty drawback received by the petitioner should be considered as proceeds out of sale of goods.
3. Whether duty drawback should be assessed under the TNGST Act, 1959.
4. Whether duty drawback should be included in the taxable turnover.
5. Whether money refunded as duty drawback constitutes goods for the purpose of sales tax.
6. Jurisdiction of the assessing officer to levy sales tax on duty drawback.
7. Validity of the pre-assessment notice proposing sales tax on duty drawback.
8. Legality of the penalty imposed by the assessing officer.

Analysis:
1. The judgment addresses the issue of the assessing officer misconstruing the law related to REP licenses. The court notes that the duty drawback received by the petitioner is a refund of customs duty paid and not the sale of goods. The officer's confusion in proposing sales tax on duty drawback is highlighted, and the court finds the officer's interpretation incorrect.

2. The assessing officer treated duty drawback as proceeds out of the sale of goods, considering it as an incentive for export. However, the court clarifies that money refunded as duty drawback is not traded or sold but utilized as legal tender. The court emphasizes that even if the drawback is considered part of the export consideration, it cannot be included in the taxable turnover under the sales tax law.

3. The court examines whether duty drawback should be assessed under the TNGST Act, 1959. The officer's assertion that duty drawback falls under the category of goods of incorporeal or intangible character for taxation is challenged. The court rules that money refunded as duty drawback is not goods for sales tax purposes and cannot be assessed under the Act.

4. The issue of whether duty drawback should be included in the taxable turnover is analyzed. The court determines that goods cannot form part of the taxable turnover, and money refunded as duty drawback, being legal tender, does not constitute goods under the sales tax law.

5. The judgment delves into whether money refunded as duty drawback constitutes goods for the purpose of sales tax. The court clarifies that money used to buy goods or services is not considered goods under the sales tax law. It emphasizes that the refunded amount is not sold but utilized for various purposes, making it ineligible for inclusion in the taxable turnover.

6. The court assesses the jurisdiction of the assessing officer to levy sales tax on duty drawback. It concludes that initiating proceedings based on the incorrect premise that duty drawback is goods would lead to unjust harassment of exporters. The court deems such proceedings without jurisdiction, especially when there is no sale transaction involved.

7. The validity of the pre-assessment notice proposing sales tax on duty drawback is scrutinized. The court finds the notice legally flawed and unjustified, quashing it to prevent unnecessary harassment of exporters. The court exercises its extraordinary power to intervene due to the special circumstances of the case.

8. Lastly, the judgment addresses the legality of the penalty imposed by the assessing officer. The court sets aside the penalty and quashes the order of the Tribunal, allowing the writ petition filed by the petitioner. The court's decision highlights the importance of correctly interpreting laws related to duty drawback and sales tax to prevent undue hardship on exporters.

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