2018 (3) TMI 818 - HC - VAT and Sales Tax

Levy of tax on purchase of goods - the Assessing Authority found that the dealer has exported finished goods after using raw materials purchased against Form XVII and therefore, the Assessing Authority levied tax under Section 3(4) of the TNGST Act on a turnover of ₹ 1,06,000/- at the rate of 1% - Held that - Following the decision of this Court in Tube Investment of India Ltd., v. State of Tamil Nadu 2010 (10) TMI 938 - MADRAS HIGH COURT , the Appellate Tribunal by its order dated 19.05.2014 allowed the appeal filed by the dealer stating that since the export sale is fully covered by the definition of sale under Section 2(n) read with Explanation 3(a) of the TNGST Act, the Assessing authority cannot levy tax under Section 3(4) of the Act - revision dismissed.

Issues:
1. Interpretation of the expression "does not sell the goods so manufactured" under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959.
2. Invocation of the principle of situs for interpreting the said expression.
3. Distinction between deemed export sale and interstate sale.
4. Constitutionality of levy of tax on export sale under Section 3(4) and its compliance with Article 286.
5. Inclusion of export sale within the ambit of the expression "in any other manner" under Section 3(4).
6. Understanding the nature of Sections 3(3) and 3(4) as charging provisions.
7. Purpose of the Tamil Nadu General Sales Tax Act, 1959.

Interpretation of Expression "Does Not Sell the Goods So Manufactured":
The High Court analyzed whether the expression "does not sell the goods so manufactured" in Section 3(4) of the Act includes both intra-state and export sales. The Court referred to the definition of sale under Section 2(n) read with Explanation 3(a) of the Act and held that the Assessing authority cannot levy tax under Section 3(4) for export sales fully covered under the definition of sale.

Principle of Situs and Interpretation:
The Court examined whether invoking the principle of situs as per Explanation 3(a) to Section 2(n) was correct for interpreting the expression "does not sell the goods so manufactured" in Section 3(4). It was determined that the Appellate Tribunal was correct in applying this principle to bring export sales within the scope of the explanation.

Distinction Between Deemed Export Sale and Interstate Sale:
The judgment addressed the distinction between a sale deemed to be in the course of export under Section 5(3) of the Central Sales Tax Act, 1956, and an interstate sale. It was questioned whether the Tribunal correctly distinguished the judgment in State of Karnataka vs. B.M.Ashraf & Co. The Court evaluated this distinction in the context of export sales under the Act.

Constitutionality of Levy on Export Sale:
Regarding the levy of tax under Section 3(4) on export sales, the Court assessed whether it directly contravenes Article 286 of the Constitution. The Tribunal's interpretation of the levy as a direct tax on export sales was scrutinized to determine its compliance with constitutional provisions.

Inclusion of Export Sale in "In Any Other Manner":
The Court deliberated on whether the expression "in any other manner" in Section 3(4) encompasses export sales within its ambit. This analysis aimed to clarify the scope of the provision concerning the levy of tax on goods sold in any manner other than those specified.

Nature of Sections 3(3) and 3(4) as Charging Provisions:
The judgment examined whether Sections 3(3) and 3(4) of the Act should be construed as charging provisions. The Court considered the non-obstante clause in Section 3(3) to determine the design and purpose of these sections within the framework of the Act.

Purpose of the Tamil Nadu General Sales Tax Act, 1959:
Lastly, the Court emphasized the legislative intent behind the enactment of the Tamil Nadu General Sales Tax Act, 1959. By evaluating the pre-factory explanation to the Act, the Court highlighted that the legislation was intended to levy taxes solely on sales or purchases within the State of Tamil Nadu, providing context to the interpretation of relevant provisions.

In conclusion, the High Court dismissed the instant Tax Case (Revision) based on the similarity with previous judgments and the application of legal principles established in prior cases. The substantial questions of law were answered against the Revenue, and no costs were awarded in this matter.

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