2014 (2) TMI 101 - HC - VAT and Sales Tax

Exemption under Section 2(r) of the TNGST Act - Disposal of Cardamom and coffee as the agricultural produce - Exemption for agricultural produce produced within state or brought from outside - Held that - merely because the agricultural products was brought from other State and therefore, not entitled for exemption cannot be countenanced. On the other hand, it has to be taken note as to whether it is the own produce of the assessee. In order to establish the same, the assessee at the first instance, while submitting their reply dated 28.03.1998 to the show cause notice issued under Section 34 of the Act submitted that they are agriculturists and the liability to pay tax is only on the purchaser, viz., M/s.Brooke Bond India Limited. Along with the explanation, the assessee filed documents, which have been filed before this Court, viz., the statement of details of raw coffee sold during the year 1994-95; copy of Form No.26 under the Kerala General Sales Tax Rules, 1963; copies of invoices raised by the assessee and copy of the sale invoices of M/s.Brooke Bond India Limited. These documents would show that it is their own produce and the goods,viz., coffee was brought to Tamil Nadu on stock transfer. Further more, the invoices raised from Kerala also states that it is their own estate produce and first agricultural sale despatch from the estate - Decided in favour of assessee.

Summary

Issues:
1. Validity of the order passed by the Joint Commissioner under Section 34 of the TNGST Act.
2. Interpretation of Section 2(r) of the TNGST Act regarding exemption for agricultural produce grown within the State.

Issue 1:
The appeal was directed against the order passed by the Joint Commissioner under Section 34 of the TNGST Act. The assessee, a registered dealer, claimed exemption for the disposal of Cardamom and coffee during the assessment year 1994-95. The Assessing Officer rejected the claim, leading to a series of legal proceedings. The Appellate Assistant Commissioner allowed the appeal regarding the sale of raw coffee but the Joint Commissioner revised the order, prompting the appeal before the High Court.

Issue 2:
The main issue involved the interpretation of Section 2(r) of the TNGST Act regarding the exemption for agricultural produce grown within the State. The Special Tribunal held that the words "within the State" in Section 2(r) were discriminatory and violated constitutional provisions. The Tribunal ruled that denial of exemption to out-State agricultural products sold in Tamil Nadu was unconstitutional. The High Court, after considering the documents submitted by the assessee, concluded that the coffee sold was their own produce brought from Kerala to Tamil Nadu on stock transfer. The Court applied the Special Tribunal's decision and held that the assessee was entitled to the claimed exemption.

In conclusion, the High Court allowed the Tax Case(Appeal) by setting aside the Joint Commissioner's order and restoring the order of the First Appellate Authority. The Court emphasized that the exemption should be based on whether the produce is the assessee's own, rather than its origin state.