2019 (12) TMI 172 - HC - VAT and Sales Tax

Levy of Sales Tax - agriculturist, producer of raw rubber could be treated as dealers or not - effect of Amendment brought to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959 - inter-state sale of the raw rubber latex / rubber sheets - assessment under CST Act. Whether the activities done by the respondent would fall within the definition of sale in terms of the provisions of the General Sales Tax Act? - HELD THAT - This issue was considered by this Court in the case of Kanyakumari District Planter's Association Vs. Deputy Commercial Tax Officer, Nagercoil-Rural and others 2001 (7) TMI 1273 - MADRAS HIGH COURT in the said decision it was held that the respondent carrying of business in selling his produce something more is necessary to be established than pointing out that he systematically raises the produce in his lands, converts it into a marketable commodity and then sells the commodity at a profit in the market. It was held that though there was an amendment to the definition of 'turnover' in Section 2(r) of the GST Act, there was no corresponding amendment to the Central Sales Act, 1956 - Hence, it was held that the notice calling upon the members of the Kanyakumari District Planters Association to get themselves registered as dealers under the CST Act was without authority and liable to be quashed. The raw rubber is sold from the estate by raising estate bills. Apart from the same bill, the transport is also covered by 'Form N1' issued by the Rubber Board and the Village Administrative Officer's certificate to evidence the transport of agricultural produce and in their estate the respondent have sold only their produce and have not engaged in supplying and selling of any other produce of similar nature or otherwise. Further the First Appellate Authority concluded that the sale of the produce of the respondent is the culmination of their agricultural activity. The questions raised for consideration has to be necessarily answered against the Revenue and in favour of the respondent - Petition dismissed.

Summary

Issues:
1. Whether an agriculturist-producer of raw rubber can be treated as a dealer under the CST Act?
2. Whether the inter-state sale of raw rubber latex/rubber sheets is assessable under the CST Act?

Analysis:
Issue 1:
The case involves a Tax Case filed by the State against the order of the Tamil Nadu Sales Tax Appellate Tribunal regarding the treatment of an agriculturist-producer of raw rubber as a dealer under the CST Act. The Court referred to a previous decision stating that more than just systematic production and sale is required to establish a business for taxation purposes. The Court noted that the respondent did not have selling associations, sales offices, or warehouses outside the estate. The Tribunal found that the respondent only sold their own produce from their estate, concluding it was part of their agricultural activities. As the Revenue did not dispute these facts, the Court ruled in favor of the respondent, dismissing the Tax Case.

Issue 2:
The second issue pertained to the inter-state sale of raw rubber latex/rubber sheets under the CST Act. The Assessing Officer had levied tax on the interstate sale of rubber latex, which was later appealed by the respondent. The Appellate Assistant Commissioner allowed the appeals, and the Tribunal upheld this decision. The Tribunal found that the respondent's activities did not qualify them as dealers under the CST Act as they only sold their own produce from their estate. As the Revenue did not present evidence to the contrary, the Court ruled in favor of the respondent on this issue as well, dismissing the Tax Case.

In conclusion, the High Court of Madras dismissed the Tax Case filed by the State against the order of the Sales Tax Appellate Tribunal. The Court ruled in favor of the respondent, stating that the respondent, an agriculturist-producer of raw rubber, could not be treated as a dealer under the CST Act. Additionally, the Court held that the inter-state sale of raw rubber latex/rubber sheets by the respondent was not assessable under the CST Act. The decision was based on the lack of evidence showing the respondent engaged in activities beyond selling their own produce from their estate, which was considered part of their agricultural activities.