2016 (6) TMI 1065 - HC - VAT and Sales Tax

Levy purchase tax under Section 12 of the TNVAT Act on the turnover of goods sold to the dealer located in a SEZ - contradiction with the provisions of Tamil Nadu Special Economic Zones (Special Provisions) Act, 2005 - Held that - Admittedly, the notification granting exemption issued by the Government of Tamil Nadu vide G.O.Ms.No.75, dated 28.06.2005, continued to be in force on the date immediately before the commencement of the TNVAT Act and therefore, it shall continue to be in force. Unless, it is stated that the notification is inconsistent with the provision of the TNVAT or the Rules framed thereunder and even in such cases, it shall continue in force till, it is repealed or amended. There is nothing on record to show that the said notification in G.O.Ms.No.75, stood amended or rescinded. In fact, this legal position was rightly construed and the Secretary to the Commercial Taxes and Registration Department issued a Government letter, dated 29.12.2006, to the first respondent stating that by virtue of Section 88(3)(i), the notification, granting exemption already issued under TNGST shall continue to be in force under TNVAT Act. - Benefit of exemption to be granted - Decided in favor of assessee.

Summary

Issues:
Challenge to assessment orders under TNVAT Act for multiple assessment years based on purchase tax in SEZ.

Analysis:
The petitioner, a private limited company, challenged assessment orders under TNVAT Act for six years, alleging purchase tax on goods bought in a Special Economic Zone (SEZ). The petitioner argued that TNSEZ Act exempts them from TNVAT tax on goods used for authorized operations. The respondents rejected this, citing repeal of TNGST Act and lack of TNVAT Act amendment in TNSEZ Act.

The court noted a 2005 notification granting tax exemption for SEZ activities under TNGST Act, continuing under TNVAT Act. The respondents' denial of exemption due to TNVAT Act not being substituted in TNSEZ Act was deemed untenable. Sections 87 and 88(1) of TNVAT Act ensure continuity of exemptions from TNGST Act under TNVAT Act.

The court held that the exemption notification under TNGST Act continued under TNVAT Act, as per Section 88(3)(i), unless inconsistent with TNVAT Act provisions. The government letter affirmed this continuity. Consequently, the respondents' interpretation denying exemption under TNSEZ Act was deemed unsustainable.

As a result, the Writ Petitions were allowed, quashing the assessment orders and remitting the matter for reassessment by extending the exemption benefit to the petitioner. No costs were awarded, and connected Miscellaneous Petitions were closed.