2006 (11) TMI 569 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 regarding the rate of tax applicable to goods purchased in an auction.

Detailed Analysis:

The petitioner, a registered forest contractor, participated in an auction and purchased sandalwood chips. The District Forest Officer rejected the petitioner's request to release the goods on payment of sales tax at three percent instead of eight percent, citing a lack of orders regarding sandalwood chips. The petitioner contended that, as a registered dealer, he was entitled to the concessional rate under section 3(3) of the Act. Despite paying the demanded tax under protest, the petitioner sought a refund of the excess amount collected by the respondents.

The main issue revolved around whether the petitioner could clear the goods at a concessional rate as per section 3(3) of the Act or if the higher rate should apply. The petitioner argued that he should be taxed at three percent based on the statutory provision, while the respondents claimed the petitioner had agreed to pay the prevailing rate at the time of sale confirmation.

The Court examined the legal framework, emphasizing that section 3(3) allows a dealer to pay only three percent tax on goods sold for manufacturing purposes, subject to furnishing the required declaration form. The petitioner, being a registered dealer, was entitled to the concessional rate by submitting the necessary form. The Court highlighted the importance of adhering to the prescribed procedures for tax declarations to avail the lower rate.

Based on the statutory provisions and the petitioner's status as a dealer, the Court concluded that the petitioner should have been taxed at three percent for the purchased goods. Any excess tax collected was deemed refundable to the petitioner. The writ petition was disposed of in favor of the petitioner, with no costs imposed.

In conclusion, the judgment clarified the application of section 3(3) of the Tamil Nadu General Sales Tax Act, affirming the petitioner's right to the concessional tax rate for goods purchased in the auction. The decision underscored the significance of following the prescribed declaration process to determine the applicable tax rate, ensuring compliance with legal requirements and entitlements for dealers under the Act.