2022 (6) TMI 99 - HC - VAT and Sales Tax

Exemption from tax - point of second sale - cassette manufacturers purchase blank cassettes from the registered dealers within the State upon payment of sales tax and record the devotional songs/film songs etc., in the blank cassettes and thereafter, sell the pre-recorded cassettes to the appellant by charging the total value of the prerecorded cassettes and the sales tax - HELD THAT - Without going into the merits of the case as well as the issue with regard to the validity of the circular impugned in the writ petition, this court, by setting aside the assessment alone, directs the appellant to furnish all the required documents in support of their claim to the first respondent, within a period of four weeks from the date of receipt of a copy of this order. On such submission, the first respondent shall consider the same in the light of the circulars issued by the Commissioner and pass appropriate orders, on merits and in accordance with law, after affording an opportunity of hearing to the appellant, within a period of four weeks thereafter. Appeal disposed off.

Summary

Issues:
Challenging order of dismissal in W.P.No.33462 of 2005 regarding second sale exemption for pre-recorded audio cassettes based on Circular dated 16.05.2003.

Detailed Analysis:

Issue 1: Second Sale Exemption
The appellant contended that the transaction with cassette manufacturers should be considered a second sale, eligible for exemption, as the pre-recorded cassettes had already suffered tax at the first sale. Referring to the circular dated 12.04.2001, the appellant argued that the assessment should not have been reopened under Section 16 of the Act. The appellant relied on legal precedent and emphasized that the first sale was tax-suffered, warranting exemption for the subsequent sale.

Issue 2: Circular Validity
The appellant challenged the Circular dated 16.05.2003, arguing that the transaction between the appellant and cassette manufacturers did not qualify as a works contract as per Section 2(u) of the TNGST Act. Citing the Symphony Recording Company case, the appellant asserted that the cassette manufacturers' activity constituted a first sale, making the appellant's sale a second sale eligible for exemption. The appellant highlighted that the business of selling audio cassettes had ceased in 2006.

Judgment:
The High Court directed the appellant to provide all necessary documents supporting their claim to the Assessing Officer within four weeks. The Assessing Officer was instructed to consider the documents and issue appropriate orders in line with the circulars issued by the Commissioner. The court refrained from delving into the circular's validity, focusing on setting aside the assessment and facilitating a re-evaluation based on the provided materials. The writ appeal was disposed of without costs, and the connected miscellaneous petition was closed.