2001 (11) TMI 101 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of imported sugar under the Tamil Nadu General Sales Tax Act, 1959.
2. Classification of imported sugar as declared goods under the Central Sales Tax Act, 1956.
3. Specification of the rate and stage of levy for imported sugar.
4. Applicability of residuary entry for taxing imported sugar.
5. Legislative intent and interpretation of "covered under" in Section 14 of the Central Sales Tax Act.

Issue-wise Detailed Analysis:

1. Taxability of Imported Sugar:
The primary issue was whether the non-specification of the rate and stage at which imported sugar is to be taxed disentitles the State from levying sales tax on sugar imported by the petitioner in March and April 1994. The court noted that the State Legislature had not specified the rate and stage of levy for imported sugar until May 4, 1998, when Tamil Nadu Act 21 of 1998 introduced item 71A in Part B of the First Schedule to the Act, making the sale of such imported sugar taxable at the first point of sale at the rate of 4 percent.

2. Classification as Declared Goods:
The petitioner argued that imported sugar is an item of declared goods under entry (viii) in Section 14 of the Central Sales Tax Act, 1956, as it falls under sub-heading No. 1701.39 of the Central Excise Tariff Act, 1985. The court affirmed that imported sugar with a sucrose content exceeding 90 percent fits the description of declared goods under the Central Sales Tax Act.

3. Specification of Rate and Stage of Levy:
The court highlighted the essential requirement of specifying the rate and stage of levy for declared goods under Section 4 of the Tamil Nadu General Sales Tax Act, 1959. Without such specification, the dealer cannot be held liable to pay tax. This principle was supported by the Apex Court's decision in Govind Saran Ganga Saran v. Commissioner of Sales Tax, which emphasized the necessity of clear and definite ascertainment of the components of tax levy.

4. Applicability of Residuary Entry:
The State contended that imported sugar should be taxed under the residuary Entry 68 at the rate of 8 percent. However, the court rejected this argument, noting that the assessing officer had treated imported sugar as declared goods and taxed it at 4 percent based on an administrative circular. The court found that the assumption that imported sugar would automatically be taxable due to the exemption of domestically produced sugar was erroneous.

5. Legislative Intent and Interpretation of "Covered Under":
The court examined the legislative intent behind the use of "covered under" in Section 14 of the Central Sales Tax Act. It concluded that this expression was meant to denote goods described in the specified sub-headings of the Central Excise Tariff Act, irrespective of their place of manufacture. The court rejected the argument that only domestically manufactured goods could be declared goods, noting that the purpose of the declaration was to promote consumer interest and ensure smooth inter-State trade and commerce.

Conclusion:
The court held that imported sugar is declared goods and cannot be subjected to tax without the specification of the rate and stage of levy. The writ petitions were allowed, and the State was disentitled from levying sales tax on the imported sugar in question due to the lack of such specification.