2007 (2) TMI 589 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of purchase tax under Section 7A of the TNGST Act on royalty paid for mining magnesite.
2. Applicability of concessional tax rate under Section 3(4) of the TNGST Act on exported goods.
3. Inclusion of packing and forwarding charges in taxable turnover.

Issue-wise Detailed Analysis:

1. Levy of Purchase Tax under Section 7A of the TNGST Act:
The petitioner, a Tamil Nadu Government undertaking, was granted a mining lease for magnesite and dunite. For the assessment year 1999-2000, the assessing officer issued a pre-assessment notice pointing out defects, including the excavation of raw magnesite from government land and its consumption in manufacturing other goods for sale. The officer assessed the value of the quarried mineral at Rs. 8,10,20,845 and levied a purchase tax at 11% under Section 7A of the TNGST Act. The petitioner argued that the quarried magnesite was their own and not purchased, thus Section 7A was inapplicable. The court, however, noted that the lease agreement required payment of royalty, which was considered purchase consideration under Section 7A. The court referenced the Supreme Court case of State of Tamil Nadu v. M.K. Kandaswami, which outlined the conditions for invoking Section 7A. The court concluded that the assessment order was within the competence of the statutory authority and should be challenged through the appellate mechanism provided under the TNGST Act.

2. Applicability of Concessional Tax Rate under Section 3(4) of the TNGST Act:
The assessing officer also pointed out that the petitioner purchased furnace oil at a concessional rate for manufacturing finished goods, part of which were exported. The officer determined that the petitioner was ineligible for the concessional rate under Section 3(4) and levied a differential tax of 1% on the exported turnover. The petitioner contended that Section 3(4) applied only to branch transfers or agents, not to direct exports. The court held that this issue, too, involved factual determinations best addressed by the appellate authority.

3. Inclusion of Packing and Forwarding Charges in Taxable Turnover:
In the pre-assessment notice, the assessing officer proposed to include Rs. 60,63,294 towards packing and forwarding charges in the taxable turnover, citing Explanation 2(ii) of Section 2(r) of the TNGST Act. The petitioner objected, providing invoices to show that these charges were included in the sale price. The officer rejected the objections and confirmed the inclusion of these charges. The court noted that this factual finding should be contested before the appellate authority.

Conclusion:
The court dismissed the writ petitions, emphasizing that the petitioner should utilize the statutory appellate remedies provided under the TNGST Act. The court granted the petitioner two weeks to file an appeal from the date of receipt of the order. The court referenced multiple Supreme Court judgments, including State of Orissa v. Titaghur Paper Mills Co. Ltd. and Union of India v. Tata Engineering & Locomotive Company Limited, to support its decision that the issues raised were best addressed through the appellate process.