2011 (4) TMI 1245 - HC - VAT and Sales Tax

Whether the petitioners have not effected the sale of raw rubber to 100 per cent export oriented unit and hence the exemption is not admissible? Held that - It is not disputed even by the respondent that the purchase was made for the manufacture. It is seen that the petitioners involved in the purchase of raw rubber for manufacturing activity. The petitioners are entitled to exemption being an export oriented unit. It is not necessary that the petitioners should involve in the sale of raw material to another export oriented unit to claim the benefit of exemption. They are entitled to exemption at the last purchase being the manufacturer. Hence the impugned order is liable to be quashed. Accordingly the impugned order is quashed. Appeal allowed.

Summary

Issues:
1. Interpretation of exemption under G.O. Ms. No. 528/CT & RE dated November 21, 1997 for 100% export-oriented units.
2. Application of tax liability on the purchase turnover of raw rubber by a registered dealer under the Tamil Nadu General Sales Tax Act, 1959.

Analysis:
1. The petitioner, a registered company under the Companies Act, sought relief through a writ petition to quash an order issued by the respondent in 2008 regarding the imposition of tax on the purchase turnover of raw rubber. The petitioner, recognized as a 100% export-oriented unit, claimed exemption under G.O. Ms. No. 528/CT & RE dated November 21, 1997. The dispute centered around whether the petitioner was entitled to exemption under this Government Order.

2. The respondent contended that the petitioners were liable to pay tax at the point of the last purchase of raw materials, citing entry 33(ii) of Part C of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The respondent argued that the petitioners did not qualify for exemption under G.O. Ms. No. 528 as they had not sold raw rubber to another export-oriented unit. However, the petitioners maintained that as a manufacturer purchasing raw rubber for their manufacturing activities, they were entitled to the exemption, even without selling to another export-oriented unit.

3. The Court analyzed the provisions of the Act and G.O. Ms. No. 528, emphasizing that the petitioners, as an export-oriented unit, were entitled to exemption on the purchase of raw materials for manufacturing activities. The Court found that the petitioners were involved in manufacturing and exporting rubber compounded rings, making them eligible for the exemption under the Government Order. It was clarified that the petitioners did not need to engage in the sale of raw materials to another export-oriented unit to claim the exemption, as they were entitled to it at the last purchase as manufacturers.

4. Consequently, the Court allowed the writ petition, quashed the impugned order, and directed the respondent to pass an appropriate order related to the exemption under G.O. Ms. No. 528/CT & RE dated November 21, 1997. The judgment highlighted that the petitioners, being a 100% export-oriented unit, were entitled to the exemption for purchasing raw materials for manufacturing activities, and the respondent's decision to impose tax on the last purchase turnover of raw rubber was incorrect.