2018 (3) TMI 1104 - HC - VAT and Sales Tax

Liability under Section 3(4) of TNGST Act - Form XVII - According to the Revenue, subsequently, it was found that the respondent had purchased goods against Form XVII declarations and used the same, in the manufacture of goods, sold to a place outside the State - Held that - identical issue decided in the decision of this Court in Tube Investment of India Ltd., v. State of Tamil Nadu 2010 (10) TMI 938 - MADRAS HIGH COURT , where it was held that Section 3(4) of the Act will have no application since situs of the export sales of the petitioners for the purpose of said Section was the State of Tamilnadu and by virtue of the said factual position, the applicability of Section 3(4) stands excluded for the exigibility of tax - revision dismissed - decided against Revenue.

Issues involved:
Appeal against order of Sales Tax Appellate Tribunal regarding taxation on goods sold outside the State under Tamil Nadu General Sales Tax Act, 1959.

Analysis:
1. Interpretation of expression "does not sell the goods so manufactured" in Section 3(4) of the Act:
The key issue revolves around whether the Tribunal correctly interpreted the expression "does not sell the goods so manufactured" to include not only intra-state but also export sales. The State challenged this interpretation, arguing that the Tribunal's decision was incorrect.

2. Application of situs principle and Explanation 3(a) to Section 2(n) for interpretation:
Another significant issue is whether the Tribunal was correct in applying the principle of situs as per Explanation 3(a) to Section 2(n) of the Act to interpret the expression "does not sell the goods so manufactured" in Section 3(4). The State contested this application, questioning the correctness of the Tribunal's approach.

3. Distinction from Supreme Court judgment on export sales:
The State raised a question regarding the Tribunal's distinction from a Supreme Court judgment in the case of State of Karnataka vs. B.M.Ashraf & Co., where it was held that a sale deemed to be in the course of export under the Central Sales Tax Act cannot be considered an interstate sale. The issue here is whether the Tribunal erred in its interpretation in light of this judgment.

4. Constitutional validity under Article 286:
A critical issue is whether the Tribunal correctly construed the levy of tax under Section 3(4) on export sales as a direct levy on the export sale itself, potentially contravening Article 286 of the Constitution. This raises concerns about the constitutional validity of the taxation imposed by the Tribunal.

5. Inclusion of export sales under Section 3(4):
The State questioned whether the Tribunal was correct in excluding export sales from the ambit of the expression "in any other manner" in Section 3(4) of the Act. This issue pertains to the scope of taxation under the Act concerning export sales.

6. Nature of Sections 3(3) and 3(4) as charging provisions:
An issue raised is whether the Tribunal failed to appreciate that Sections 3(3) and 3(4) of the Act are not designed as charging provisions, as indicated by the non-obstante clause in Section 3(3). This involves a nuanced understanding of the legal framework governing taxation under the Act.

7. Purpose of Tamil Nadu General Sales Tax Act, 1959:
The State argued that the Tribunal overlooked the primary purpose of the Tamil Nadu General Sales Tax Act, 1959, which was enacted to levy tax on sales or purchases within the State alone. This issue questions the legislative intent behind the Act and its application to transactions outside the State.

In conclusion, the High Court dismissed the Tax Case Revision based on the precedent set in a previous case and answered the substantial questions of law against the Revenue. The judgment highlights the complexities involved in interpreting tax laws, especially concerning transactions crossing state boundaries, and underscores the importance of legal precision in tax assessments.

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