2016 (10) TMI 1225 - HC - VAT and Sales Tax

Levy of tax - sale by way of export - Section 3(4) of the TNGST Act 1959 - Held that - In cases where the manufactured goods are sold by way of export, no such transfer of goods can be construed to have taken place outside the State to attract the requirement of payment of additional tax at 1% as provided for in Sub-Section 4 of Section 3 of the Act - In Tube Investments of India Ltd., vs. State of Tamil Nadu reported in (2010) 36 VST 67 (Mad), a Division Bench of this Court has held that Section 3(4) of the Act will have no application to export sales. The sales effected by the petitioner by way of export sub-section (4) of Section 3 of the Act would not get attracted - tax case revision allowed.

Summary

Issues:
1. Interpretation of the word "sell" in Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959.
2. Application of Section 3(4) in cases of export sales.

Analysis:

Issue 1:
The petitioner, a manufacturer of Shoes and Shoe uppers in Tamil Nadu, avails concessional tax rates under Section 3(3) of the Act. However, Section 3(4) requires additional tax payment if goods are dispatched outside the State for sale after availing the concessional rate. The key issue is whether the sale has taken place outside the State for the additional tax to apply. The Tribunal's interpretation of the word "sell" in Section 3(4) is challenged, alleging that it amounts to rewriting the law by the Revenue. The Tribunal's reliance on a Supreme Court judgment for a different statute is also questioned. The Court clarifies that for export sales, where goods are sold outside the State, Section 3(4) does not apply, as established in a previous Division Bench decision. Therefore, the Tribunal's decision to sustain the tax levy on the petitioner's export sales is overturned.

Issue 2:
The Court references the case of Tube Investments of India Ltd. vs. State of Tamil Nadu, where it was held that Section 3(4) does not apply to export sales. The Court agrees with this precedent and rules that the petitioner's sales by way of export are not subject to the additional tax under Section 3(4) of the Act. Consequently, the Tax Case Revision is allowed, and the substantial questions of law are answered in favor of the petitioner, confirming that the sales by way of export do not fall under the purview of Section 3(4) of the Act.

In conclusion, the High Court of Madras rules in favor of the petitioner, holding that the additional tax under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 does not apply to sales made by the petitioner through export. The Court's decision is based on the interpretation of relevant statutory provisions and established case law, ensuring that the petitioner is not liable for the additional tax on export sales as per the provisions of the Act.