2014 (5) TMI 370 - HC - VAT and Sales Tax

Exemption of Tax Grant of Exemption - Export of cotton Yarn - Notice of pre-assessment - Under the Tamil Nadu General Sales Tax Act - Held that - There is no justifiable ground found even to maintain this Tax Case for the simple reason that admittedly the assessee is a unit enjoying IFST Waiver Scheme, in which event, the tax effect on the sales effected by the assessee is nil - All that the Assessing Authority had to see in the matter of considering the claim on the benefit of IFST Waiver is to find out as to whether the assessee had complied with the terms of the waiver scheme - Given the fact that the Assessing Authority had passed an order of assessment recognising the claim of the assessee for IFST waiver of the liability on the first sales of cotton yarn, it matters very little as to whether the notification would have any application to the case of the assessee herein Thus, the tax case filed before this Court is a superfluous one and merits to be dismissed on the simple issue itself. Exemption Notification - Compliance with the terms of scheme under the Tamil Nadu General Sales Tax Act - Held that - In contra distinction to the proviso to Section 9, the notification which preceded the introduction of the proviso to Section 9 left the subject of export open, in the sense, there is no insistence of export of what was purchased by the registered exporter - Thus in the absence of any specific restriction seen in the notification, one has to read it as an open ended clause on export There is no hesitation in accepting the case of the assessee that the notification leaves no restriction as to the subject of export to condition the grant of exemption In the face of the registration granted to the ultimate exporter as a registered exporter and the conditions of the notification thus satisfied, the Tribunal held that the assessee had rightly claimed the benefit of exemption. Reference to Sec 5(3) of CST Act with proviso Sec 9 of TNGST Act Held that - As far as the reference to Section 5(3) of the Central Sales Tax Act, which is same as proviso to Section 9 of TNGST Act is concerned, the Tribunal pointed out that the exemption granted herein is of a general nature with reference to the goods which are exported as such and are no different from what was purchased - Thus, in contrast to Section 9 proviso, when the conditions prescribed in the notification are in specific terms as referable to sale of cotton yarn to registered exporters, that the assessee has to produce the proof of export before the final check of accounts and the documents produced by the assessee clearly substantiated the compliance of the conditions under the notification, the Tribunal rightly accepted the case of the assessee Therefore, Revision stands dismissed Decided against Revenue.

Summary

Issues Involved
1. Whether the Tribunal erred by holding that in the absence of a specific provision under the respective Acts, the modification has to be followed while a specific provision by way of section 5(3) of the Central Sales Tax Act exists.
2. Whether the Tribunal overlooked the legal position that the conditions stipulated in a notification should be scrupulously complied with to avail benefits.
3. Whether the Tribunal's order is correct given there was no proof that the goods exported and the goods sold to the exporter by the assessee were one and the same.

Issue-wise Detailed Analysis

Issue 1: Absence of Specific Provision and Section 5(3) of the Central Sales Tax Act
The Revenue challenged the Tribunal's interpretation, arguing that the Tribunal erred by not considering section 5(3) of the Central Sales Tax Act, which was enacted by Central Act 103 of 1976. The Tribunal, however, maintained that the principles under Section 5(3) of the Central Sales Tax Act and the proviso to Section 9 of the Tamil Nadu General Sales Tax Act were not applicable to the notification issued under Section 17 of the Tamil Nadu General Sales Tax Act. The Tribunal emphasized that the notification granted exemption based on the sale of yarn to registered exporters without specifying that the exported goods must be the same as those sold.

Issue 2: Compliance with Notification Conditions
The Revenue argued that the conditions stipulated in the notification should be scrupulously complied with, implying that the export must be of the same goods (cotton yarn) sold to the registered exporter. The Tribunal, however, found no such restrictive condition in the notification. The notification required only that the sale be to a registered exporter and that proof of export be provided. The Tribunal concluded that the notification did not insist that the exported goods be the same as those sold, thus granting the exemption based on the conditions met by the assessee.

Issue 3: Proof of Goods Exported and Sold
The Revenue contended that there was no proof that the goods exported and the goods sold by the assessee were the same. The Tribunal, however, noted that the assessee had produced necessary documents, including invoices, bills of lading, contracts, and certificates showing that the purchasers were registered exporters. The Tribunal held that these documents were sufficient to prove compliance with the notification's conditions. The Tribunal further pointed out that the notification did not require the exported goods to be the same as those sold, thus supporting the assessee's claim for exemption.

Conclusion
The High Court dismissed the Revenue's revision, stating that the assessee was entitled to the exemption under the notification. The Court emphasized that the notification did not impose a condition that the exported goods must be the same as those sold and that the assessee had complied with the conditions of the notification by providing proof of export by registered exporters. The Court also noted that the revenue implication was zero due to the IFST Waiver Scheme, making the tax case superfluous. The Tribunal's decision to grant the exemption was upheld, and the Revenue's appeal was rejected.