2019 (10) TMI 363 - HC - VAT and Sales Tax

Concessional rate of tax - default on the part of purchasing dealer - various goods including Low Sulphur Heavy Stock, but barring Motor Spirit, High Speed Diesel Oil and Light Diesel Oil - denial of concessional rate on the ground that no Register of Declarations maintained in the prescribed manner, has been filed in support of the petitioners claim - TNGST Act - principles of natural justice. HELD THAT - Section 3(3) of the TNGST Act stipulates only two conditions. The first, in regard to the nature of the goods, meaning thereby, that the benefit is available in respect of sale of any goods including consumables, packing material and labels but excluding capital goods such as plant and machinery, and secondly the use of the goods in manufacture, assembling, packing or labelling of any goods other than alcohol and spirits. Admittedly these two conditions are satisfied in the present case and there is no dispute raised by the Revenue in this regard. The proviso restricts such benefit to the sale of specified commodities, that is, High Speed Diesel Oil, Light Diesel Oil and Molasses, in respect of which, admittedly exemption has not been sought for by the petitioner. Thus there is no dispute on the factual position that all conditions as laid down by section 3(4) and the proviso thereunder have been complied with in this case. This issue has been considered and decided in a slew of decisions rendered by various Benches of this Court culminating in a decision of the First Bench of this Court in the case of M/S. SREE MURUGAN ENGINEERING PRODUCTS VERSUS THE COMMERCIAL TAX OFFICER 2006 (10) TMI 384 - MADRAS HIGH COURT , wherein this Court has categorically held that the manner in which a purchasing dealer deals with the goods is not the concern of the seller and if they are violations/misuse of the Form that come to the notice of the Department, liability in such case can be fastened only upon the purchasing dealer and not the seller. The petitioner is entitled to the benefit of concessional rate of tax in terms of Section 3(3) of the Act - Petition allowed.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Eligibility for concessional rate of tax under Section 3(3) of the Tamil Nadu General Sales Tax Act, 1959.
3. Applicability of the Supreme Court judgment in Hindustan Transmission Products Limited V. State of Kerala to the present case.

Detailed Analysis:

1. Violation of Principles of Natural Justice:

The petitioner, Hindustan Petroleum Corporation Limited, challenged the assessment order for the period 2003-04 under the Tamil Nadu General Sales Tax Act, 1959. The Assessing Authority issued a notice on 25.05.2009 proposing to withdraw the concessional rate of tax due to discrepancies in the declarations filed. The petitioner requested time to rectify these discrepancies but was only given four days. Despite the Joint Commissioner's instruction to grant more time, the Assessing Authority passed the impugned order on 13.07.2009. The court found this to be a violation of natural justice, noting the petitioner's cooperation and the arbitrary denial of reasonable time. Consequently, the assessment was set aside on these grounds.

2. Eligibility for Concessional Rate of Tax:

The petitioner claimed a concessional rate of tax on goods sold to registered dealers in Tamil Nadu under Section 3(3) of the Act. This section allows a 3% tax rate on specific goods used in manufacturing, excluding High Speed Diesel Oil, Light Diesel Oil, and Molasses. Initially, the Commercial Taxes Department restricted this benefit for fuels, but a clarification in 2000 confirmed the eligibility of fuels like Low Sulphur Heavy Stock (LSHS) for the concessional rate. The court confirmed that the petitioner met all conditions under Section 3(3) and was entitled to the concessional rate, as the goods were used in manufacturing and the statutory declarations were filed.

3. Applicability of the Supreme Court Judgment:

The Assessing Authority relied on the Supreme Court judgment in Hindustan Transmission Products Limited V. State of Kerala, which interpreted Section 5(3) of the Kerala General Sales Tax Act. However, the court noted significant differences between the Kerala and Tamil Nadu statutes. Section 5(3) of the Kerala Act applies only to component parts used in manufacturing, while Section 3(3) of the Tamil Nadu Act includes consumables and other materials. The court held that the Tamil Nadu provisions should be interpreted independently, and the Supreme Court judgment did not apply. The court also referenced a series of decisions, including Sree Murugan Engineering Products V. Commercial Tax Officer, which established that the seller is not responsible for the purchasing dealer's use of goods. The court concluded that the petitioner was entitled to the concessional rate.

Conclusion:

The court set aside the assessment order due to the violation of natural justice and confirmed the petitioner's eligibility for the concessional tax rate under Section 3(3) of the Tamil Nadu General Sales Tax Act. The case was remanded for de novo assessment on other issues, with instructions for the Assessing Authority to complete the process within six weeks from the date of the personal hearing. The writ petition was allowed, and the connected miscellaneous petitions were closed.