2019 (10) TMI 1319 - HC - VAT and Sales Tax

Levy of Sales Tax - Fried Gram - exempt sale or not - applicability of Entry 68 of Schedule 4 of the TNVAT Act - HELD THAT - The rates of taxes shall be at the rate applicable inside the appropriate State and Sales Tax Act of the State - Since the appropriate tax is nil, in view of sub-section 2 of Section 8 of CST Act, the inter-State sale of Fried Gram does not attract sales tax. It is repeatedly held by the Honourable Supreme Court in various judgments that the sale or purchase of any goods is exempted from tax generally under Sales Tax Law of the appropriate State that the rate of tax payable is in respect of the turn over of goods under this Act. The finding of the Assessing Authority that the inter-State sales of Fried Gram are liable for tax is not sustainable, in view of exemption granted under Entry 68 of TNVAT Act - Petition allowed.

Summary

Issues:
1. Interpretation of tax liability on inter-State sales of Fried Gram under TNVAT Act and CST Act.
2. Assessing Authority's decision on tax liability.
3. Application of relevant case laws in determining tax liability.

Issue 1: Interpretation of tax liability on inter-State sales
The petitioner, a dealer in Fried Gram, claimed exemption from tax under Entry 68 of the TNVAT Act for local sales and under the CST Act for inter-State sales. The petitioner argued that as per Section 8 of the CST Act, the tax rate applicable should be nil for inter-State sales of Fried Gram. However, the Assessing Authority issued assessment orders against the petitioner, disregarding the exemption claimed.

Issue 2: Assessing Authority's decision
The Assessing Authority, in the impugned orders, stated that inter-State sales of Fried Gram are liable for tax despite the conditional exemption under Entry 68 of the TNVAT Act. The Authority cited instructions from the Commissioner of Commercial Taxes, Chennai, supporting the tax liability on inter-State sales of Fried Gram under the CST Act. The petitioner's turnover being below ?500 crores was not considered, leading to the issuance of assessment orders.

Issue 3: Application of relevant case laws
The High Court referred to the judgment in the case of State of Gujarat Vs. Reliance Industries Limited, where it was held that the tax payable on inter-State sales should be as per the sales tax law of the State, and there should not be a separate tax rate for inter-State sales. Citing the judgment of Bashir Oil Mills Vs Maharashtra Sales Tax Tribunal, the High Court emphasized the importance of correctly applying exemption notifications to determine tax liability on inter-State sales.

In conclusion, the High Court set aside the impugned orders, stating that the Assessing Authority's decision to tax inter-State sales of Fried Gram was not sustainable, given the exemption granted under Entry 68 of the TNVAT Act. The writ petitions were allowed, and no costs were imposed.