2018 (12) TMI 1743 - HC - VAT and Sales Tax

Levy of purchase tax - purchase of pulses, grams and chillies from vendors whose turn over admittedly does not exceed ₹ 5,00/- crores in an assessment year - sale of goods to other States to their branches/agents for making consignment sales - Section 12 of the TNVAT Act, 2006. The pointed contention of the petitioners counsel is that even though the goods on hand can be brought within the purview of Entry No.41 Part B of the First Schedule, applying the general principle of law that the special will prevail over the general, the goods in question will have to be necessarily treated as exempted goods. HELD THAT - The IV Schedule is in two parts. Part A and B. Part A has been omitted by Tamil Nadu Act No.30 of 2011. There is only Part B now. There are as many as 81 Entries in part B. If one runs through the various entries, it can be seen that Entry 1(i) to Entry 64(A) refer only to goods - Entry 68, does not exempt the goods as such. It only exempts the transactions, namely, sale of the goods referred to therein if purchased from any dealer whose turn over in respect of the goods does not exceed ₹ 5,00/- crores in a year. For the said provision of section 12 to apply, a sale or purchase in respect of the goods must be liable to tax. The goods on hand can obviously be not brought within the scope of Entry 41 of Part B of First Schedule only because of the specific entry, namely, Entry 68 in Part B of the IV Schedule. They are not levied with tax in the turn over of the seller is below ₹ 5,00/- crores. Therefore, the phrase in circumstances in which no tax is payable will get attracted - It can be seen from Section 12(1) of the Act and it can be seen from the counter affidavit filed by the respondents that there is a larger object behind incorporation of Section 12 of the Act. It was introduced to ensure that the State will not lose its revenue at least at one stage. The petitioners after purchasing the goods in question have transferred the same to their branches/agents, who are in other States by effecting consignment sales. The stand of the respondent authority will have to be sustained - Petition dismissed.

Summary

Issues: Challenge to pre-revision notices and assessment orders under TNVAT Act, 2006 regarding liability to pay purchase tax for dealers in pulses, grams, and chillies transferring goods to other states.

Analysis:

1. Legal Issue: Interpretation of Section 12 of TNVAT Act, 2006 regarding liability to pay purchase tax for dealers transferring goods to other states.

- Summary: The petitioners, dealers in pulses, grams, and chillies, challenge pre-revision notices and assessment orders alleging liability to pay purchase tax under Section 12 of the TNVAT Act, 2006. The primary contention is whether the petitioners are liable to pay purchase tax for transferring goods to other states.

- Detailed Analysis: The petitioners argue that the goods fall under Entry 68 of Part B of the 4th Schedule, exempting them from tax as per Section 15 of the Act. They rely on a Himachal Pradesh High Court decision stating that specific entries prevail over general ones. The petitioners assert that since the goods fall under Entry 68, they are not taxable. They distinguish a previous Madras High Court decision on taxable goods, emphasizing the exemption in their case. Additionally, they cite a Supreme Court decision outlining conditions for tax liability under the Act, arguing that none apply to their situation.

2. Legal Issue: Examination of the provisions of Section 12(1) of the TNVAT Act, 2006 and its applicability to the petitioners' case.

- Summary: Section 12(1) of the Act pertains to the levy of purchase tax on goods purchased under specific circumstances. The key question is whether the petitioners' transactions fall within the purview of this section.

- Detailed Analysis: Section 12(1) outlines conditions for levying purchase tax, including the consumption or disposal of goods in certain ways. The petitioners argue that their case falls under Section 12(1)(c) and, therefore, they are not liable to pay purchase tax. They emphasize that the Act must be construed strictly as a charging section. The court is tasked with determining if the petitioners' dealings involve exempted goods, which would exclude them from the tax net.

3. Legal Issue: Interpretation of Entry 68 of Part B of the 4th Schedule and its impact on the liability of the petitioners to pay purchase tax.

- Summary: Entry 68 of the 4th Schedule exempts the sale of specified goods under certain conditions. The court must analyze whether this entry absolves the petitioners from the obligation to pay purchase tax.

- Detailed Analysis: The court examines Entry 68 and its focus on exempting sale transactions rather than goods themselves. Referring to a Supreme Court decision, the court distinguishes between exempted goods and exempted transactions, emphasizing that the exemption applies to specific sales under certain turnover conditions. The court concludes that the petitioners' transactions, falling under Entry 68, do not absolve them from tax liability, as the Act aims to preserve state revenue.

In conclusion, the court dismisses the writ petitions, upholding the respondent authority's stand on the liability to pay purchase tax. The petitioners are granted the liberty to offer replies and file appeals, with specific timelines provided for compliance.