2006 (11) TMI 570 - HC - VAT and Sales Tax

Summary

Issues:
1. Dispute over sales tax rate applicable to sandalwood purchase in an auction sale.
2. Interpretation of statutory provisions under the Tamil Nadu General Sales Tax Act, 1959.
3. Validity of the petitioner's entitlement to pay tax at three per cent under section 3(3) of the Act.
4. Compliance with declaration requirements for concessional tax rate.

Analysis:
The petitioner, a small-scale industry registered under various tax acts, participated in an auction sale for sandalwood and was confirmed as the successful bidder. The petitioner's grievance arose when the respondents demanded tax at 12 per cent instead of the petitioner's claim of three per cent under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959, based on the production of form XVII. The court examined the statutory provisions, emphasizing that the tax rate of three per cent is applicable under section 3(3) for goods used in manufacturing, subject to fulfilling declaration requirements.

The judgment highlighted the definition of a dealer under the Act and the charging section, section 3, which mandates tax payment based on turnover. Section 3(3) specifically addresses the tax rate for goods used in manufacturing, setting it at three per cent, provided the dealer furnishes a declaration in form XVII. The court emphasized the importance of adherence to declaration rules, ensuring that purchasing and selling dealers comply with the prescribed form requirements to benefit from the concessional tax rate.

The court referred to the Tamil Nadu General Sales Tax Rules, 1959, detailing the process for furnishing declaration forms in form XVII and the responsibilities of both purchasing and selling dealers. It emphasized that the petitioner, by furnishing the required declaration indicating the intended use of sandalwood for manufacturing purposes, is entitled to the concessional tax rate of three per cent. The judgment concluded by directing the respondents to accept the three per cent tax rate along with the declaration and deliver the goods, with provisions for refunding any excess payment received.

In conclusion, the judgment resolved the dispute by upholding the petitioner's entitlement to pay tax at three per cent under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959, based on the proper submission of form XVII. The court's decision focused on statutory compliance and the importance of adhering to declaration requirements to avail of concessional tax rates, ultimately ruling in favor of the petitioner and directing the respondents to act accordingly.