2015 (4) TMI 317 - HC - VAT and Sales Tax

Valuation of goods - assessee had purchased raw materials against Form XVII declarations and used the same in the manufacture of chemicals and made export sales in addition to domestic sales - Assessing Officer arrived at the proportionate value of purchases made against Form XVII which were used in the manufacture of chemicals exported and assessed the same at 1% under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 - Held that - Following decision of Tube Investments of India Ltd. (Formerly known as M/s. TI Diamond Chain Ltd.) Versus The State of Tamil Nadu, represented by the Commercial Tax Officer 2010 (10) TMI 938 - MADRAS HIGH COURT and The State of Tamil Nadu rep. By Joint Commissioner (CT) Versus Sri Ranganathar Valves (P) Ltd. 2015 (3) TMI 747 - MADRAS HIGH COURT - no tax can be collected without the authority of law. - Decided against Revenue.

Issues:
1. Interpretation of the expression "does not sell the goods so manufactured" in Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959.
2. Application of the principle of situs for interpreting the said expression.
3. Distinction between intrastate sale and sale deemed to be in the course of export.
4. Levy of tax on export sale and its compliance with Article 286 of the Constitution.
5. Construction of the expression "in any other manner" in Section 3(4) regarding export sale.
6. Understanding of Sections 3(3) and 3(4) as charging provisions.
7. Scope of the Tamil Nadu General Sales Tax Act, 1959, in relation to sales or purchases within the state.

Detailed Analysis:
1. The case involved a dispute regarding the interpretation of the expression "does not sell the goods so manufactured" in Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959. The Tribunal had to determine whether this expression included export sales along with intrastate sales. The Court analyzed previous decisions and held that the imposition of tax on export sales would contradict the intention of the Parliament and the Constitutional restriction under Article 286.

2. The Appellate Tribunal's use of the principle of situs for interpreting the expression was also questioned. The Court referred to a hierarchy of laws, emphasizing that the Constitution prevails over conflicting statutory provisions. It concluded that applying Section 3(4) to export sales would go against established legal principles and, therefore, could not be accepted.

3. The judgment discussed the distinction between intrastate sales and sales deemed to be in the course of export. It cited relevant legal theories and previous court decisions to support the argument that tax liability on export sales cannot be indirectly created through provisions like Section 3(4) of the Act.

4. The Court examined whether the levy of tax on export sales under Section 3(4) complied with Article 286 of the Constitution. It highlighted the importance of adhering to Constitutional restrictions on state taxation powers, especially concerning export transactions.

5. The construction of the expression "in any other manner" in Section 3(4) in relation to export sales was also deliberated. The Court emphasized that any interpretation that includes export sales within the ambit of this provision would be contrary to established legal principles and Constitutional restrictions.

6. The judgment addressed the understanding of Sections 3(3) and 3(4) as charging provisions. It emphasized that these sections were not designed as charging provisions, as evident from the non-obstante clause in Section 3(3) of the Act.

7. Finally, the scope of the Tamil Nadu General Sales Tax Act, 1959, in relation to sales or purchases within the state was discussed. The Court reiterated that the Act was enacted to levy tax on transactions within Tamil Nadu alone, as indicated by the pre-factory explanation to the Act. Based on the legal precedents and analysis, the Court dismissed the Tax Case (Revision) as no substantial question of law arose for consideration.

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