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2015 (11) TMI 1079 - HC - VAT and Sales TaxLevy of purchase tax on the Inter State stock transfer effected from warehouse located in SEZ to DTA u/s 12 of the Tamil Nadu Value Added Tax Act, 2006 - whether the petitioner company, being a SEZ unit, is entitled to exemption from levy of purchase tax on the interstate stock transfer effected from warehouse located in SEZ - Held that - The petitioner company sent a proposal for setting up a unit in the Nokia Special Economic Zone by making an application dated 17.2.2011 to MEPZ Special Economic Zone, which accorded approval for the same by proceedings, dated 7.3.2011 subject to the provisions of the Special Economic Zones Act, 2005 and the rules and orders made thereunder for undertaking authorized operations, namely, trading and warehousing services for mobile phone handsets and mobile phone parts and accessories. Thus, the petitioner company became a part of larger scheme of operation by the NOKIA group in the State. The above said approval dated 7.3.2011 is subject to various terms and conditions both in regard to the export of the goods/services as well as clearances and supply of goods/services in the domestic tariff area. It is explicit that if any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties. Further, it is also relevant to extract Section 15 of the TNSEZ Act, which deals with domestic clearances by Units - if the goods are removed from SEZ to the domestic tariff area, such transaction is liable to sales tax. The supply of goods by the dealer of Domestic tariff area to SEZ unit is treated as export of the dealer and import of the SEZ unit vice versa the sale of goods by SEZ unit to a dealer of Domestic tariff area will be import of the dealer and export of the SEZ unit. Thus all sales effected by SEZ unit to a dealer situated anywhere in India is export sales of SEZ unit because SEZ territory is deemed to be a foreign territory. The petitioner cleared the goods from SEZ unit to domestic tariff area and such removal of goods claimed as branch transfers under Section 6(A) of the CST Act, exempt from tax, however, such domestic tariff area clearances consequently attract provisions of Section 15 of TNSEZ Act. Therefore, Section 2(1(b) of the TNVAT Act stands attracted justifying levy of purchase tax. - proposal for levy of purchase tax on the entire purchase effected from SEZ to SEZ, viz., Tvl.Nokia India Private Limited to the petitioner (Tvl.Nokia India Sales Private Limited) has been dropped, however, considering the fact that the petitioner effected stock transfer to other states having imported the goods from outside India to its warehouse located in SEZ area, which is nothing but domestic tariff area sales and such transaction is liable to sales tax, as if the goods are imported goods and in terms of Section 15 of the TNSEZ Act, the first respondent has confirmed the liability of purchase tax under Section 12 of the TNVAT Act at 14.5%. It is very deplorable to note that being a SEZ unit, having availed the hospitality and resources of the State of Tamil Nadu, the petitioner had diverted significant part of the turnover to other States by effecting interstate stock transfers which would not only defeat the very object of the SEZ Policy but also would have a considerable impact both on the revenue and economic growth of State of Tamil Nadu. In order to avoid these kind of repercussions, Section 15 has been brought into TNSEZ Act, which specifically insists that any goods removed from SEZ to domestic tariff area, shall be chargeable to tax. Further, Section 30 of the SEZ Act also provides specifically that any goods removed from a SEZ area to Domestic Tariff area shall be liable for import duty as is leviable on import of such goods as per the provision of Custom Tariff Act. - petitioner had accepted the terms prescribed in the approved letter dated 7.3.2011 for its setting up in SEZ unit, of which, one of the conditions is that the petitioner can supply/sell the goods or services in the domestic tariff area in terms of the provisions of the Special Economic Zones Act, 2005 and rules and orders made thereunder. Therefore, levy of purchase tax confirmed by the first respondent on the interstate stock transfer effected from warehouse located in SEZ by the petitioner, in my opinion, is perfect in order. - Decided against assessee.
Issues Involved:
1. Imposition of purchase tax on Inter-State stock transfer from a warehouse located in SEZ under Section 12 of the TNVAT Act, 2006. 2. Challenge to the rectification orders under Section 84 of the TNVAT Act, 2006. Issue-wise Detailed Analysis: 1. Imposition of Purchase Tax on Inter-State Stock Transfer from SEZ Warehouse: The petitioner challenged the orders dated 25.6.2014, which revised assessments for 2012-13 and 2013-14, imposing purchase tax on Inter-State stock transfers from a SEZ warehouse under Section 12 of the TNVAT Act, 2006. The petitioner contended that under Section 12 of the TNSEZ Act, goods purchased by the SEZ warehouse are exempt from purchase tax, arguing that Section 12(1) of the TNSEZ Act should be read with Section 87 of the TNVAT Act, exempting SEZ units from such taxes. The respondents argued that the SEZ Act's intention is to exempt taxes on exports, not on domestic clearances, including Inter-State stock transfers. They cited Section 15 of the TNSEZ Act, which mandates tax on goods removed from SEZ to the domestic tariff area. The respondents also noted that the petitioner had accepted the terms of the approval letter dated 7.3.2011, which included provisions for domestic clearances to be taxed. The court noted that the SEZ policy aims to promote exports and economic growth by providing tax exemptions within SEZs. However, it clarified that exemptions do not extend to domestic clearances. The court upheld the imposition of purchase tax on Inter-State stock transfers, emphasizing that such transactions are liable to tax under Section 15 of the TNSEZ Act and Section 12 of the TNVAT Act. The court dismissed the petitioner's argument that branch transfers should not attract VAT/CST, stating that the SEZ unit's operations must align with SEZ policy objectives, which include taxation on domestic clearances. 2. Challenge to Rectification Orders under Section 84 of the TNVAT Act, 2006: The petitioner also challenged the rejection of rectification petitions under Section 84 of the TNVAT Act, 2006. The court noted that the first respondent rejected the rectification petitions on 30.7.2014, stating that they lacked jurisdiction to re-open the assessment under Section 84 and that the petitioner should seek remedy through an appeal. The court upheld the rejection of the rectification petitions, emphasizing that the petitioner had an efficacious remedy by way of appeal against the original orders dated 25.6.2014. The court found no irregularity or illegality in the rejection of the rectification petitions, affirming that the first respondent's orders dated 25.6.2014 were well-considered and valid. Conclusion: The court dismissed the writ petitions, upholding the imposition of purchase tax on Inter-State stock transfers from the SEZ warehouse and rejecting the challenge to the rectification orders. The court emphasized that SEZ exemptions do not extend to domestic clearances, aligning with the SEZ policy's objectives to promote exports and economic growth while ensuring tax compliance for domestic transactions.
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