2014 (2) TMI 579 - HC - VAT and Sales Tax

Assessment u/s 7A of the Tamil Nadu General Sales Tax Act - Levy of tax on purchase of edible oil - Held that - where the goods does not suffer tax at the point of first sale for some reason or other, as per second proviso to Section 3(2), the said goods are brought under the net of taxation. The second proviso to Section 3(2) states that in the case of goods taxable at the point of first sale, the tax shall be payable at least once either by the first seller or by the second earliest of the successive dealers who is liable to tax under the section. This proviso does not shift the liability, but only the payability to tax. In the circumstances, this Court held that Section 7A of the Act stood attracted to cases of conditional exemption and there was no shift in the policy of taxation - edible oil sold to the assessee had enjoyed the exemption under the Government Order by reason of the sellers turnover being below ₹ 300 crores limit and that the goods sold to the assessee was consumed in the manufacture of biscuits thus the edible oil is no longer available for further tax treatment as per proviso to Section 3(2), rightly the assessment was brought to tax under Section 7A of the Act. Given the object of introduction of Section 7A, to plug the leakage and to prevent evasion of tax, even though there is no evasion of tax as such in the sense in which evasion is understood - Decided against assessee.

Issues:
1. Reopening of assessments under the Tamil Nadu General Sales Tax Act for assessment years 1999-2000 and 2000-01.
2. Interpretation of Section 7-A of the Act regarding tax liability on the purchase of edible oil.
3. Applicability of exemption notifications under Section 17 of the Act to shift tax liability under Section 7-A.
4. Consideration of previous court decisions and dismissal of appeals based on similar arguments.
5. Assessment of penalty and its revision by the Deputy Commissioner (Appeals) and the Sales Tax Appellate Tribunal.

Analysis:
1. The assessments for the years 1999-2000 and 2000-01 were reopened under Section 16(1)(a) of the Tamil Nadu General Sales Tax Act due to the purchase of edible oil by the assessee for the manufacture of biscuits. The Assessing Authority viewed that the purchase of edible oil, which had not suffered tax, attracted a charge under Section 7A of the Act. The Deputy Commissioner (Appeals) upheld the assessment, except for a specific turnover amount, which was remanded back for fresh consideration.

2. The Sales Tax Appellate Tribunal confirmed the assessment under Section 7-A for the year 2000-01, rejecting the contention that exempted transactions under a Government Order would not attract tax liability under Section 7-A. The Tribunal highlighted that the restricted nature of the exemption notification led to the applicability of Section 7-A. However, the Tribunal set aside the penalty, stating that there was no wilful non-disclosure of assessable turnover by the assessee.

3. The petitioner argued that Section 7-A should only apply in cases of tax evasion and that the phrase 'tax payable' should include situations covered under Section 17 of the Act, thus negating the need for purchase tax. The court referred to a previous decision and held that Section 7A applied to cases of conditional exemption, emphasizing that there was no shift in the policy of taxation.

4. The court rejected the petitioner's submission that the exemption granted should exclude the charge under Section 7-A. Previous court decisions were cited to support the rejection of this argument, emphasizing the objective of Section 7A to prevent tax evasion. The dismissal of Special Leave Petitions by the Apex Court further reinforced the validity of the previous decisions.

5. Ultimately, the court dismissed the Tax Case (Revision) Nos. 9 and 10 of 2011, concluding that the issues raised did not merit fresh consideration, and no costs were awarded.

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