2025 (1) TMI 218 - HC - VAT / Sales Tax

Whether the benefit of exemption under the provisions of the Tamil Nadu Value Added Tax (TNVAT) Act, 2006 would ennure for exemption under Section 8(2) of the Central Sales Tax (CST) Act, 1956? - HELD THAT - Identical issue arose for consideration in NATESAN VERSUS THE STATE TAX OFFICER, ATTUR 2025 (1) TMI 135 - MADRAS HIGH COURT where it was held that 'the petitioner is entitled to the benefit of exemption under Notification No.II(1)/CTR/30(a-2)/2007 (TNGG Extraordinary/March 23, 2007 G.O.Ms.No.79, Commercial Taxes and Registration (B2) Department dated 23.03.2007 with consequential relief.' Conclusion - The petitioner is entitled to the exemption under the TNVAT Act for interstate sales under the CST Act, as no notification to the contrary was issued under Section 8(5) of the CST Act. Petition allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the benefit of exemption under the Tamil Nadu Value Added Tax (TNVAT) Act, 2006, would extend to provide an exemption under Section 8(2) of the Central Sales Tax (CST) Act, 1956.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework primarily involves the interpretation of the CST Act, 1956, particularly Section 8(2), and its interaction with the TNVAT Act, 2006. The judgment also references the Supreme Court's decision in Collector of Central Excise, Hyderabad Vs. Vazir Sultan Tobacco Co. Ltd., which clarified the principles of tax levy and collection.

Court's Interpretation and Reasoning:

The Court analyzed whether the exemption under the TNVAT Act could be applied to interstate transactions under the CST Act. It concluded that the precedent set by the Supreme Court in Vazir Sultan Tobacco Co. Ltd. was not directly applicable to the facts of the present case. The Court emphasized that the levy of tax is distinct from its collection, and the exemption under the TNVAT Act is applicable to interstate transactions under the CST Act, provided certain conditions are met.

Key Evidence and Findings:

The Court found that the product traded by the petitioner was exempt under the TNVAT Act and that no specific notification under Section 8(5) of the CST Act was issued to alter this exemption for interstate sales.

Application of Law to Facts:

The Court applied the provisions of Section 8(2) of the CST Act, which states that the tax payable on interstate sales not covered by Section 8(1) should be at the rate applicable within the state. Since the goods were exempt under the TNVAT Act, this exemption applied to interstate sales as well.

Treatment of Competing Arguments:

The respondent argued that the exemption under the TNVAT Act did not automatically apply to interstate transactions. However, the Court rejected this argument, noting the absence of a specific notification under Section 8(5) of the CST Act to counter the general exemption under the TNVAT Act.

Conclusions:

The Court concluded that the petitioner is entitled to the exemption under the TNVAT Act for interstate sales under the CST Act, as no notification to the contrary was issued under Section 8(5) of the CST Act.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"Therefore, there is no legal basis on which, the Impugned Demand can be sustained."

"Consequently, the petitioner is entitled to the benefit of exemption under Notification No.II(1)/CTR/30(a-2)/2007."

Core Principles Established:

The judgment establishes that exemptions under state VAT laws can apply to interstate sales under the CST Act unless a specific notification under Section 8(5) of the CST Act is issued to alter this application.

Final Determinations on Each Issue:

The Court set aside the impugned orders and allowed the writ petitions, granting the petitioner the benefit of the exemption under the TNVAT Act for interstate sales under the CST Act.

The judgment effectively clarifies the application of state VAT exemptions to interstate sales and underscores the necessity for specific notifications to alter such exemptions under the CST framework.

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