2009 (3) TMI 923 - HC - VAT and Sales Tax

Levy, demand or collecting tax on inter-State sales of pulses and grams - Held that - In the present case, the exemption relied on by the petitioners can never be held to be an exemption which will have a bearing on the Central Sales Tax Act so as to enure the benefit of an exemption. Therefore, the decisions relied on by the petitioners/assessees do not help their case. Appeal dismissed.

Issues Involved:
1. Challenge to G.O. Ms. No. 339, CT and RE Department, dated September 13, 1996.
2. Legality of levying tax on inter-State sales of pulses and grams under the Central Sales Tax Act.
3. Interpretation of exemptions under the Tamil Nadu General Sales Tax Act (TNGST Act) and their applicability to the Central Sales Tax Act (CST Act).
4. Conditional vs. General Exemption under Section 8(2A) of the CST Act.

Issue-wise Detailed Analysis:

1. Challenge to G.O. Ms. No. 339, CT and RE Department, dated September 13, 1996:
The petitioners challenged the Government Order (G.O.) Ms. No. 339, issued on September 13, 1996, which levied a 4% tax on inter-State sales of pulses and grams. The petitioners sought to set aside this G.O. and prevent the respondents from levying, demanding, or collecting this tax.

2. Legality of Levying Tax on Inter-State Sales of Pulses and Grams:
The petitioners argued that the State Government lacked the power to levy tax on the items mentioned in the impugned G.O. under the CST Act. They claimed that pulses and grams were exempt from local sales tax under the TNGST Act and, therefore, should be exempt from the CST Act as well. The respondents, however, contended that the exemption under the TNGST Act was conditional and not general, and thus did not extend to inter-State sales under the CST Act.

3. Interpretation of Exemptions under the TNGST Act and their Applicability to the CST Act:
The petitioners, registered wholesale dealers under both the CST Act and the TNGST Act, argued that pulses and grams were exempt from local sales tax under the TNGST Act. They cited Section 8 of the TNGST Act, which exempts certain commodities from tax, and Section 59(1), which allows the Government to alter the Schedules of exempt goods. The respondents countered that the exemption was conditional, as it applied only to dealers with a turnover not exceeding Rs. 100 crores, and thus did not qualify as a general exemption under the CST Act.

4. Conditional vs. General Exemption under Section 8(2A) of the CST Act:
The core issue revolved around whether the exemption under the TNGST Act was "general" or "conditional." Section 8(2A) of the CST Act states that inter-State sales are exempt from tax if the goods are exempt from tax "generally" under the State law. The petitioners relied on various judicial precedents to argue that their exemption should be considered general. However, the respondents and the court referred to the Explanation in Section 8(2A) and previous judgments to assert that the exemption was conditional, as it depended on the dealer's turnover and other specified conditions.

Judicial Precedents and Court's Reasoning:
The petitioners cited several Supreme Court and High Court judgments to support their case. They referred to:
- International Cotton Corporation (P.) Ltd. v. Commercial Tax Officer: Argued that if intra-State sales are exempt, inter-State sales should also be exempt.
- Vinod Solvent Extracts (P.) Ltd. v. State of Andhra Pradesh: Emphasized that statutory exemptions under Section 8(2A) of the CST Act apply to inter-State transactions if the same goods are exempt under State law.
- State of Uttar Pradesh v. Hindustan Safety Glass Works (P.) Ltd.: Highlighted that amendments to Section 8(2A) were meant to clarify existing provisions.

The respondents and the court, however, relied on:
- Commissioner of Sales Tax, Jammu and Kashmir v. Pine Chemicals Ltd.: Stated that exemptions must be general, not conditional.
- M.A. Abbas and Co. v. State of Madras: Clarified that goods must be totally exempt from tax to qualify for exemption under the CST Act.

The court concluded that the exemption under the TNGST Act was conditional, as it applied only to dealers with a turnover not exceeding Rs. 100 crores. Therefore, it did not qualify as a general exemption under Section 8(2A) of the CST Act.

Conclusion:
The court dismissed the writ petition, holding that the exemption claimed by the petitioners was conditional and did not extend to inter-State sales under the CST Act. The court found that the G.O. Ms. No. 339, levying a 4% tax on inter-State sales of pulses and grams, was valid. The petitioners' reliance on judicial precedents did not support their case, as the exemptions were not general but conditional. Consequently, the tax levied under the CST Act was upheld, and the writ petition was dismissed with no order as to costs.

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