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TMI Blog2019 (3) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17(1)(ii), as it is for a specified class of person, in regard to the whole of their turnover. Section 7-A of the TNGST Act clearly provided for levy of purchase tax and the contingencies provided therein clearly fell within the said parameters and accordingly, the contention of the assessee was rejected. If the said decision is applied to the facts of the present case, we need to be conscious of the subtle yet marked distinction between the language employed in Section 7-A and an amended Section 3(2) of the TNGST Act - the charging section which stood prior to the amendment, did not contain any clause as contained in Section 7-A of the TNGST Act making the purchaser liable to pay purchase tax when they fall within any one of the contingencies in Section 7-A(1) of the TNGST Act. The order passed by the Tribunal is not sustainable and the point of taxation cannot be shifted - this tax case revision is allowed and the substantial questions of law are answered in favor of the assessee. - Tax Case (Revision) No.91 of 2015 - - - Dated:- 21-2-2019 - Mr. Justice T.S. Sivagnanam And Mrs. Justice V. Bhavani Subbaroyan For the Petitioner : Mr.N.Prasad For the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -E of the First Schedule to the TNGST Act, sanitarywares were taxable at the point of first sale in the State. 5.The assessee's case is that M/s.WORTH Trust was their first seller and the sale at the hands of WORTH Trust was exempted by G.O.Ms.No.436 and no tax can be levied on the re-sale effected by the assessee in respect of sanitary fittings purchased from WORTH Trust. The Assessing Officer, namely, the respondent issued show cause notice in which, among other things invoked Section 7-A of the TNGST Act and proposed to levy purchase tax on the assessee. The assessee submitted a reply stating that the said provision can have no application to the assessee's case, as none of the contingencies stipulated in sub-Clauses (a) to (c) under Section 7-A(1) of the TNGST Act stand attracted to the assessee's case. However, when the assessment was completed vide order dated 25.10.2002, the Assessing Officer while accepting the stand taken by the assessee that they have sold the sanitaryware locally as such without affecting the manufacturing activity levied the tax at the rate of 12% under Section 3(2) of the TNGST Act and the claim of exemption made by the assessee was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of V.Guard Industries Ltd. vs. Commercial Tax Officer and another [(2004) 136 STC 562] and therefore, the correct legal position is what has been laid down by the Division Bench in V.Guard Industries Ltd. [(2004) 136 STC 562] (supra). 8.The learned counsel also referred to the decision of the Hon'ble Supreme Court in the case of Shanmuga Traders, ETC. vs. State of Tamil Nadu and others [(1999) 114 STC 1]. The learned counsel placed a caveat by stating that the decision dealt with declared goods under Section 14 of the CST Act, yet the Court has taken into consideration the various decisions of this Court, namely, State of Madras vs. T.Narayanaswami Naidu [(1965) 16 STC 29], Vasu General Trader (supra), Royal Steel Traders [(1992) 1 MTCR 580] and held that the Second Schedule of the State Act specifies the single point; it is the point of first sale in the State and the first sale of the State was the sale by the Electricity Board to the appellant therein and the same was exempt from tax by reason of the notification dated December 1, 1982 and the iron and steel sold by the Electricity Board to the appellants therein was therefore not liable to tax either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel sought for setting aside the order passed by the Tribunal and answering the question of law in favour of the assessee. 13.Mr.Mohammed Shaffiq, learned Special Government Pleader for the respondent had referred to the statutory provisions, more particularly, Section 3(2) of the TNGST Act and the amendment which was brought out in the year 1996 by Act 38 of 1996. It is submitted that in respect of assessments which arose out of declared goods, the rigor of Article 286 of the Constitution of India would come into play and therefore, the State is obligated to fix the point of taxation as well as the rate of tax and hence it is submitted that those decisions would not be pressed into service by the assessee. It is further submitted that the Court, more particularly, in the decision in the case of Shanmuga Traders, ETC. [supra] had specifically pointed that they were dealing with the goods which pertain to declared goods and in the background of those facts, the said decision was rendered. 14.The learned Special Government Pleader placed reliance on the decision of the Division Bench of this Court in the case of Govindan Co. vs. State of Tamil Nadu [(197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 17 of the TNGST Act is the power of the Government to notify exemption and redemption of tax. Under sub-Section (1) of Section 17 of the TNGST Act, the Government may, by notification issued whether prospectively or retrospectively, make an exemption or reduction in rate, in respect of any tax payable under the TNGST Act. Three types of exemptions have been provided for in Section 17(1) of the TNGST Act, which are as hereunder:- (i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales by successive dealers; or (ii) by any specified class of persons, in regard to the whole or any part of their turnover; (or) (iii) on the sale or purchase of any specified classes of goods by specified classes of dealers in regard to the whole or part of their turnover. 19.In the instant case, the petitioner's seller, WORTH was granted exemption in regard to the whole of turnover relating to the sale of its products manufactured and on all sales incidental or ancillary to such manufactures in their various centres by notification published under the Government Gazette. The exemption, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral Sales Tax Act, 1961. Thus, it was held that exemption presupposes a liability and unless there is a liability, the question of exemption does not arise. 23.As pointed out earlier, the seller of the assessee, WORTH, had been granted exemption. In terms of Entry 10 of Part-E of the First Schedule to the TNGST Act, the transaction, viz., ceramic sanitarywares and sanitary fittings of every description including sinks, wash basins, etc., are taxable at 12% and the point of taxation is the first sale in the State. Admittedly, the first sale in the State was the sale effected by WORTH to the assessee. But for the exemption, the transaction was taxable. As pointed out by the Hon ble Supreme Court, exemption only protects the seller from estimating the tax, but the liability is not whipped of. Thus, the grant of exemption itself presupposes a liability. 24.The question would be whether, the Revenue would be justified in contending that because the first sale within the State was exempted from tax, the sale effected by the assessee to third parties is taxable. In our considered view, if this interpretation is to be accepted, then it would amount to shifting the point of taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted to the assessee s case. Probably, realising that Section 7-A of the TNGST Act would not be attracted, the Assessing Officer proceeded to levy tax under Section 3(2) of the TNGST Act and rejected the claim for exemption. Section 3(2) of the TNGST Act at the relevant time, i.e., during the period 1994-95 reads as follows:- Section 3(2) Subject to the provisions of subsection (1), in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable by a dealer, at the rate and only at the point specified therein on the turnover in each year relating to such goods. Provided that all spare parts, components and accessories of such goods shall also be taxed at the same rate as that of the goods if such spare parts, components and accessories are not specifically enumerated in the First Schedule and made liable to tax under that Schedule. 27.The language employed in the said provision is clear, as it states that tax under the TNGST Act shall be payable by a dealer at the rate and only at the point specified therein on the turnover in each year relevant to such goods. If the argument of the Revenue is to be accepted, then the words only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-writing Section 3(2) of the TNGST Act by substituting the word point of sale with that of point of first taxable sale . This is wholly impermissible and no taxation statute can be read in the manner as proposed by the Tribunal. 32.Mr.Mohammed Shaffiq placed reliance on the decision in the case of Pine Chemicals Ltd. (supra) to buttress his submission that the exemption granted is not a general exemption, that is, the products manufactured by WORTH were not exempted, but the said organisation was granted exemption and therefore, the interpretation given by the Revenue, as accepted by the Tribunal, requires to be confirmed. 33.We have perused the decision in the case of Pine Chemicals Ltd. (supra), and the factual position in the said case is slightly different in the sense that exemption was granted for manufacture of a particular product by industrial units, which are of large or medium scale and commences sale within five years of its going into production. The effect of such exemption was considered vis-a-vis Section 8(2) of the CST Act, which pertains to the 'rate of tax' and in the background of the said facts, the Hon ble Supreme Court held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Division Bench of this Court in the case of V.Guard Industries Ltd. [(2004) 136 STC 562] (supra) and restricted itself only to the aspect, where the Division Bench discusses about the scope of Section 55 of the TNGST Act in respect of rectification of an order passed by the Assessing Officer or the Appellate Authority or for that matter, the Taxation Special Tribunal. 37.In Ruchi Soya Industries Limited (supra), the assessee purchases sunflower oil and other oils from various registered dealers enjoying benefit of exemption issued by the Government. The assessee therein was made liable to pay tax in terms of Section 7-A of the TNGST Act and therefore, they approached the Court by challenging the vires of Section 7-A of the TNGST Act. The assessee s contention was that in Section 7-A, the expression used is in circumstances in which no tax is payable under Sections 3, or 4 and therefore, argued that Section 7-A can operate only in cases where there is no liability. It was the submission of the assessee that the provisions of Section 7-A was introduced as an anti-tax evasion measure, an exempted sale by no logic, carries with it the stamping of tax evasion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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