2018 (4) TMI 372 - HC - VAT and Sales Tax

Liability of purchase tax - Section 3(4) of the Act - Export sale - Form XVII - Held that - reliance placed in Tube Investment of India Ltd., v. State of Tamil Nadu 2010 (10) TMI 938 - MADRAS HIGH COURT , where Tribunal allowed the appeal filed by the dealer by stating that export is also a sale as contemplated in the first part of section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 and consequently held that purchase turnover of raw materials by issue of Form XVII declaration availing concessional rate of tax under Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 corresponding to the export of manufactured goods could not be assessed to tax under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 - appeal dismissed - decided against Revenue.

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 expression in Section 3(4) of the Act.
3. Distinction from the judgment in State of Karnataka vs. B.M.Ashraf & Co.
4. Whether the levy of tax on export sale contravenes Article 286 of the Constitution.
5. Inclusion of export sale within the ambit of the expression "in any other manner" under Section 3(4).
6. Understanding of Sections 3(3) and 3(4) as charging provisions.
7. Consideration of the scope of the Tamil Nadu General Sales Tax Act, 1959.

Analysis:

1. The primary issue in this case was the interpretation of the expression "does not sell the goods so manufactured" under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959. The Appellate Tribunal allowed the appeal by stating that export is considered a sale as per the Act, thereby holding that the purchase turnover of raw materials used in manufacturing goods for export could not be assessed to tax under Section 3(4).

2. The second issue involved the invocation of the principle of situs for interpreting the expression in Section 3(4) of the Act. The Tribunal's decision was based on the principle that export sales should not be taxed under this provision, aligning with the interpretation of relevant legal principles.

3. The third issue raised was the distinction from the judgment in State of Karnataka vs. B.M.Ashraf & Co. The Tribunal differentiated its decision by emphasizing that a sale deemed to be in the course of export cannot be regarded as an interstate sale, thus supporting its interpretation in the present case.

4. Another significant issue was whether the levy of tax on export sale would contravene Article 286 of the Constitution. The Tribunal construed the levy under Section 3(4) as a direct tax on export sale, raising concerns about potential constitutional violations.

5. The fifth issue addressed was the inclusion of export sale within the ambit of the expression "in any other manner" under Section 3(4). The Tribunal held that this expression did not encompass export sales, further supporting its decision in favor of the appellant.

6. The understanding of Sections 3(3) and 3(4) as non-charging provisions was also a point of contention. The Tribunal's interpretation focused on the specific language and intent of these sections, emphasizing that they were not designed as charging provisions.

7. Lastly, the consideration of the scope of the Tamil Nadu General Sales Tax Act, 1959 was crucial. The Tribunal highlighted the Act's purpose to levy tax on sales or purchases within the state alone, providing context for its decision in this case and aligning it with previous rulings.

In conclusion, the High Court dismissed the Tax Case (Revision) based on similar precedents and interpretations, answering the substantial questions of law against the Revenue and emphasizing consistency with previous decisions.

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