2012 (11) TMI 743 - HC - VAT and Sales Tax

Refund of input-tax credit - 100 per cent export oriented unit - zero rated sale under CST - sale in the course of export - Tamil Nadu Value Added Tax Act- Held that - By virtue of section 18(1) of the TNVAT Act, 2006 the petitioner is entitled to input-tax credit or refund of tax if it is a sale specified under sub-sections (1) and (3) of section 5 of the CST Act, 1956, by treating it as zero rated sale - No provision of law has been shown as to how the sale to 100 per cent EOU cannot be termed as zero rated sales - petitioner has established that the sale was in the course of export supported by the bill of lading, export invoice, etc., (i.e) the documents in support of the export, the Department cannot contend that section 18 of the TNVAT Act, 2006, will not apply. The term 100 per cent EOU is self-explanatory and it has not been properly appreciated by the authority. All that section 18 of the TNVAT Act, 2006, provides for is that sale should be in the course of export. If the EOU has made the export and proof of export has already been brought on record, section 18 of the TNVAT Act, 2006, has to automatically apply. refund claim allowed

Summary

Issues:
1. Refund of input-tax credit under TNVAT Act, 2006 for the years 2006-07 and 2007-08.
2. Interpretation of zero rate sale under section 18 of the TNVAT Act, 2006.
3. Whether sales to a 100 per cent Export Oriented Unit (EOU) qualify as zero rated sales.
4. Application of section 5(3) of the Central Sales Tax Act, 1956 to determine sales in the course of export.

Analysis:
1. The petitioner, a registered dealer under the TNVAT Act, 2006, sought a refund of input-tax credit for the years 2006-07 and 2007-08 due to selling raw granite to an exporter, a 100% EOU. The petitioner claimed the sales were zero rated under section 18 of the TNVAT Act, 2006.

2. The key contention revolved around whether the sales to the 100% EOU qualified as zero rated sales under section 18 of the TNVAT Act, 2006, which allows for input-tax credit or refund for specified sales under section 5(1) and (3) of the CST Act, 1956. The petitioner argued that the sales were in the course of export, satisfying the conditions for zero rating.

3. The Court analyzed the provisions of section 5(3) of the CST Act, 1956, which deems the last sale preceding the export sale as part of the export transaction. It was established that the sales to the 100% EOU were indeed in the course of export, meeting the criteria for zero rating under section 18 of the TNVAT Act, 2006.

4. The Court found that the authority's rejection of the petitioner's claim was erroneous as the sales to the 100% EOU were clearly intended for export, supported by relevant export documentation. The Court emphasized that the provisions of section 18(1) of the TNVAT Act, 2006, should apply when sales are in the course of export, as in this case.

5. Ultimately, the Court held that the authority's decision was based on a misinterpretation of the law and set aside the orders, allowing the writ petitions and granting the petitioner the entitlement to the refund as sought. The judgment highlighted the importance of correctly applying the provisions related to zero rate sales and exports under the relevant tax laws.