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TMI Blog2023 (3) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ealer on the purchase of goods. However in the case of purchase tax under Section 12 of the TNVAT Act, the taxes are not paid by the purchasing dealer to the selling dealer instead the levy/ charge is on the purchasing dealer and he is required to discharge the obligation/liability. But for the non-obstante clause in sub-section (2) to Section 12 of the TNVAT Act the taxes paid under section 12 of TNVAT Act may not qualify as Input Tax Credit within the meaning of Section 2(24) of the TNVAT Act. As a matter of fact, there are provisions under the TNVAT Act which provides for a non-obstante clause which are much wider in its scope and operation. It may also be relevant to note that there are instances/provisions under the TNVAT Act where the legislature intended to give an over-riding effect over more than one provision, it had been expressly provided for as would be evident if one gleans through the TNVAT Act. Statue to be Constructed to make it Effective and Workable - HELD THAT:- A statute or any enacting provision therein must be so construed as to make it effective and operative. If one construes the non-obstante clause in sub-section (2) to Section 12 as extending to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as it imposes penalty are liable to be set-aside. Petition disposed off. - And W.M.P(MD).Nos.18930, 18931, 19243, 14083, 14084, 14758, 14760, 14761, 17596, 17597, 18600, 18601, 18602, 18603, 18604, 18909, 18910, 18912, 18928, 18929, 18932, 18935, 18936, 18937, 19240, 19245, 19256, 19472 and 19473 of 2022 Honourable Mr.Justice Mohammed Shaffiq For the Petitioner : Mr.R.D.Ganesan For the Respondents : Mr.M.Prakash, Additional Government Pleader Mr.S.Siddharthan Additional Government Pleader COMMON ORDER The common question that arises for consideration in this batch of writ petitions is whether the exemption granted on the basis of the turnover of a dealer is conditional exemption and would attract the levy of purchase tax under Section 12 of the Tamil Nadu Value Added Tax, 2006 (hereinafter referred to as the TNVAT Act ). 2. It is submitted by the Counsel for the Petitioners and the respondents that the facts and issues are common in all the writ petitions. 3. The Petitioners in this batch of Writ Petitions purchased Pulses and Grams from registered dealers. Entry 68 of Part B to the Fourth Schedule to the TNVAT Act exempts sales of pulses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase tax U/S 12(1) Assessment demand Assessment order passed by STO Exemption U/S.15 Penalty was not imposed 5. Tvl.Sri Ramalakshmi and Co 25150/2022 2015-16 Pulses and grams purchase tax U/S 12(1) Assessment demand Assessment order passed by STO Exemption U/S.15 Penalty was not imposed 6. Tvl.Sri Ramalakshmi and Co 25151/2022 2016-17 Pulses and grams purchase tax U/S 12(1) Assessment demand Assessment order passed by STO Exemption U/S.15 Penalty was not imposed 7. N.V.R. and Co 23516/2022 2013-14 Pulses and grams purchase tax U/S 12(1) Assessment demand penalty Assessment order passed by AC Exemption U/S.15 No SCN Penalty was imposed 8. N.V.R. and Co 23517/2022 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Durgaiamman Traders 24847/2022 2017-18 Pulses and grams purchase tax U/S 12(1) Assessment demand Assessment order passed by STO Exemption U/S.15 Penalty was not imposed 17. Tvl.C.Marimuthu 19298/2022 2010-11 Pulses and grams purchase tax U/S 12(1) Assessment demand penalty Assessment order passed by STO Exemption U/S.15 No SCN Penalty was imposed 18. Tvl.C.Marimuthu 19299/2022 2011-12 Pulses and grams purchase tax U/S 12(1) Assessment demand penalty Assessment order passed by STO Exemption U/S.15 No SCN Penalty was imposed 19. Tvl.C.Marimuthu 20363/2022 2012-13 Pulses and grams purchase tax U/S 12(1) Assessment demand penalty Assessment order passed by STO Exemption U/S.15 SCN not filed (but in impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petitions. In this regard, it may be relevant to refer to the following extracts/portions of the said judgments: i) Ruchi Soya Industries Limited vs. CTO, 2008 (12) VST 546: 2.The Petitioner has preferred W.P.No.29700 of 2004 before this Court for a Writ of Declaration that the power of the State to levy purchase tax under Section 7A on goods purchased, the sale of which enjoyed exemption under the notification issued under Section 17 and sent on consignment basis to outside the State otherwise by way of sale under Section 7A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 is unconstitutional and beyond the legislative competence of the State under Entry 54, List II of the Seventh Schedule to the Constitution of India and ultra vires Entry 92B of List I of the Seventh Schedule to the Constitution and void as repugnant to Article 14.... 29. A reading of the various decisions of the Supreme Court on the question of purchase tax show that every aspect projected in this case has been considered right from (1969) 24 STC 343 (SC) (Ganesh Prasad Dixit V. Commissioner of Sales Tax, Madhya Pradesh), (1972) 30 STC 537 (Ker); ... and there is hardly any justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under the said notification as the turnover of the selling dealer was less than the turnover stipulated in the said notification viz., Rs. 300 crores and consumed/used the said oil/goods purchased in the manufacture of biscuits. Purchase tax was levied under Section 7A of the TNGST Act, such levy of purchase tax was challenged. The challenge was rejected by the Division Bench holding that the exemption with reference to turnover of a dealer is conditional and section 7A of the TNGST Act stood attracted to cases of conditional exemption as held in Ruchi Soya and the contention by the assessee's do not deserve any further consideration as could be seen from the following extracts:- ..5. We do not think that the contention taken by the learned counsel for the assessee survives any more or for our consideration since the same was considered by this Court in the decision reported in (2008) 12 VST 546 Ruchi Soya Industries Ltd. V. Commercial Tax Officer, to which one of us is a party. A contention similar to what is now argued was made by the learned counsel herein in the said reported decision relating to the very same assessment year 1999-2000, 2000-01. The contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. State of Tamil Nadu and Another, 2012 (51) VST 286 (Mad): The Division Bench proceeded to hold that a purchase made against a conditional exemption would fall within the meaning of the expressions, in circumstance in which no tax is payable , employed in Section 7A of the TNGST , thereby attracting the charge under Section 7A of the TNGST Act as could be seen from the following extract:- ..9. A reading of these decisions of this court and in the context of the decision reported in [1993] 88 STC 98 (SC) (Hotel Balaji v. State of Andhra Pradesh) and [1975] 36 STC 191 (SC) (State of Tamil Nadu v. M. K. Kandaswami), it is thus clear that the scheme of purchase tax levy under section 7A of the Act does not cover cases of sale or purchase of goods totally exempted from tax at all points under section 8 or section 17(1). However, where the exemption is a qualified one, be it goods related or dealer related, purchase or sale of goods subjected to any of the contingencies enumerated under section 7A, would certainly attract the charge under section 7A of the Act. Going by these decisions, we have no hesitation in rejecting the plea of the assessee that the notification gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2021 and W.A.(MD)Nos. 557, 611 to 614, 647 to 653, 666 and 667 of 2019, the finding/observations rendered by the learned Judges in both the matters were vacated and the assessing officer was directed to take an independent decision uninfluenced by any of the observations contained in the orders of the learned Single Judges. 7. Now in the background of the above judicial pronouncements, I shall proceed to examine the submissions made by the Counsel for the assessees/petitioners and Revenue: 8. Case of the Assessee's/Petitioners: a. Learned counsel for the petitioners Mr.R.D.Ganesan and Mr. A.Chandrasekaran, would contend that the above judgments relied upon by Respondents are not relevant as those judgments dealt with provisions under the TNGST Act in the context of exemption granted by way of notification under Section 17 of the TNGST Act. On the other hand, the subject exemption is granted under an Entry to the Schedule to the TNVAT Act. The Schedule to an Act is part of the enactment and thus exemption under a Schedule cannot be equated with exemption by way of a notification. It was submitted that the exemptions having been granted under the Schedule to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V.R. Co 9. Case of the Respondents: To the contrary, the learned counsel for the Respondents reiterated their preliminary objection that the issues raised are no longer res integra and have been examined on more than one occasion by Division Benches of this Court in the case of Ruchi Soya , Britannia Industries Limited and India Cements Limited. The attempt to revisit the same is without reason and must be rejected. Further, the distinction sought to be made between exemption by way of notification and exemption under Entry in the Schedule is artificial, misconceived and non-existent. The submission that the petitioners would be entitled to Input Tax Credit in terms of sub-section (2) to Section 12 of the TNVAT Act, independent of the restrictions under Section 19 of TNVAT Act is baseless, unfounded and would distort the Scheme of Input Tax Credit under the TNVAT Act. Pulses and grams are declared goods and would normally fall under Entry 41 of Part B to the I Schedule of the TNVAT Act liable to tax at 5%. Thus the argument that there is no rate of tax provided is misplaced. 10. Heard both sides. Perused the material on record. 11. Object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which no tax is payable under 2 (sections 3 or 4,) as the case may be, not being a circumstance in which goods liable to tax under sub-section (2), (2- A) or (2-C) of section 3 or section 4, were purchased at a point other than the taxable point specified in the First, the Fifth, the Eleventh or the Second Schedule], respectively, and either, (a) consumes or uses such goods in or for the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than by way of sale in the State, (c) despatches or carries them] to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, or (e) installs and uses such goods in the factory for the manufacture of any goods shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in sections 3 or 4, as case may be. Section 7-A(2). Notwithstanding anything contained in sub-section (1), the provisions of section 7 shall apply to a dealer referred to in sub-section (1) who purchases goods the sale of which is liable to tax under sub-section (1) of section 3 and whose total turnover for a yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale in the course of interstate trade or commerce. 11.3 Relevance of Instrument under which exemption is granted to decide the nature of exemption: 11.3.1. The thrust of the petitioner's contention is that the subject exemption is not conditional inasmuch as the exemption flows from the Schedule to the Act unlike in the judgments rendered under the TNGST Act, which were case of exemptions under notifications. 11.3.2. The question is would that make any difference. I would think it would not, for the above submission overlooks the fact that those judgments rendered under the TNGST Act, turned on the basis that exemptions were conditional, which was found to be a circumstance in which no tax is payable attracting the levy of purchase tax. Importantly, Section 12 of the TNVAT Act employs the very same expressions in circumstances in which no tax is payable , which was considered and explained by Division Bench judgment of this Court. Thus the above judgments would continue to bind insofar as interpretation of the said expressions employed in Section 12 of the TNVAT Act. 11.3.3.That the above contention is misplaced would also be clear from the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Civil Appeals Nos. 1051 to 1053 of 1973), the purchasing dealers transported these goods outside the State for sale on consignment basis, their case would also be covered by clause (b) or (c) of Section 7- A(1) and such dealers would be liable to tax on the purchase-turnover of these goods . (emphasis supplied) Purchases made from an entity which in terms of the provisions under the primary enactment are outside the purview of the charging provision, has been explained as a circumstance in which no tax is payable , attracting the levy of purchase tax . If so, the contention that the judgments rendered under the TNGST Act would have no bearing as it dealt with exemptions by way of notifications while the present exemption is granted under the Schedule to the Act on the premise which forms part of the Act is misplaced and liable to be rejected. Yet another reason to why the above contention is misplaced is in view of Section 15 of the TNVAT Act which reads as under: 15. Exempted Sale.-- Sale of goods specified in the Fourth Schedule and the goods exempted by notification by the Government by any dealer shall be exempted from tax. A reading of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the selling dealers turnover in respect of each item mentioned in Entry 68 of Part B of the Fourth Schedule to the TNVAT Act, does not exceed Rs.500 Crores in a year. That the exemption is conditional would also be clear from the fact that the sales of the very same pulses and grams by a dealer with a turnover in excess of Rs. 500 Crores in a year in respect of the said goods would not be entitled to exemption but liable to tax under Section 3(2) of the Act read with Entry 41 of Part B of the First Schedule to the TNVAT Act at 5%. The fact that the exemption is conditional would also be evident by contrasting it with some of the other exemptions ( conditional/unconditional) granted under the Schedule to the TNVAT Act. The following Table is relevant:- TABLE A. GENERALLY EXEMPTED GOODS Entry no Description Commodity code Number 4 Appalam, pappad, vadam and vathal 704 8 Bagasse 708 13 Broom sticks 713 14 Candles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... user of goods, mode of manufacture etc., Such exemptions are conditional. Keeping in view the varied nature of exemptions granted under the Fourth Schedule, it is clear that exemption to pulses and grams under Entry 68 of Part B of the Fourth Schedule to the TNVAT Act, is a conditional exemption inasmuch as it is with reference to a class of dealers viz., dealers with a turnover of less than Rs. 500 Crores in a year in respect of such goods. The exemption being conditional the same would fall within the meaning of the expressions in circumstances in which no tax is payable employed in Section 12 of the TNVAT Act. 12. Mr.Chandrasekar, learned counsel for the petitioner would draw the attention of this Court to the judgment of the Hon'ble Supreme Court in Associated Cement Companies Ltd. v. State of Bihar, (2004) 7 SCC 642, to submit that there is a distinction between exigibility, liability and payability. While exigibility is with reference to the charge, liability depends on computation. The above distinction may not be relevant for the present purpose. What is to be enquired is whether the purchases was made in circumstances in which no tax is payable . A conditiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause. (Union of India vs. G.M.Kokil, (1984) (Supp) SCC 196) It is equivalent to saying that in spite of the provision or Act mentioned in the non obstante clause, the enactment following it will have its full operation or that the provisions embraced in the non obstante clause will not be an impediment for the operation of the enactment. (South India Corporation (P) Ltd., vs. Secretary, Board of Revenue, Trivandrum, AIR 1964 SC 207) Thus a non obstante clause may be used as a legislative device to modify the ambit of the provision or law mentioned in the non obstante clause or to override it in specified circumstances. 15. Keeping the above principles in mind the non-obstante clause contained in Section 12 of the TNVAT Act, is limited in its operation only with reference to definition of Input Tax Credit under Section 2(24) of the TNVAT Act. Apparently, there was an need to provide for a non-obstante clause with reference to Sub-section (24) to Section 2 of the TNVAT Act, inasmuch as input tax was defined to mean tax paid by a registered dealer to another registered dealer on the purchase of goods. However in the case of purchase tax under Section 12 of the TNVAT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the following settled rules of construction. a. Statue to be Constructed to make it Effective and Workable The courts strongly lean against a construction which reduces the statute to a futility. A statute or any enacting provision therein must be so construed as to make it effective and operative [CIT v S Teja Singh, 1959 (35) ITR 408.] . If one construes the non-obstante clause in sub-section (2) to Section 12 as extending to Section 19 which governs the conditions for claiming input tax credit, it would result in taxes paid under Section 12 of the TNVAT Act, being automatically available as credit thereby neutralizing the charge and thus the provisions meaningless. The above construction thus ought to be avoided. b. Avoiding additional or substitution of words/Judicial Legislation The attempt by the revenue to extend the operation of the nonobstante clause in Section 12 (2) of the TNVAT Act, would result in rewriting sub-section (2) to Section 12 which reads as notwithstanding anything contained in sub-clause (2) to Section 2 as notwithstanding anything contained in sub-clause (2) to Section 2 and 19 . Such construction ought to be avoided for the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laces outside the State would attract the levy of purchase tax under Section 12 of the TNVAT Act. Thus the challenge to the levy of purchase tax is liable to be rejected. Input tax credit of the purchase tax would be subject to Section 19 of the TNVAT Act. 17. However, insofar as penalty is concerned it was submitted that there was no proposal to levy penalty under the show cause notice in the following cases thus the levy of penalty in the impugned order cannot be sustain in the following cases: S.No. Writ Petition Nos. Petitioners 1. WP (MD) No. 19298 of 2022 Mr C Marimuthu 2. WP (MD) No. 19299 of 2022 Mr C Marimuthu 3. WP (MD) No. 20363 of 2022 Mr C Marimuthu 4. WP (MD) No. 20364 of 2022 Mr C Marimuthu 5. WP (MD) No. 20365 of 2022 Mr C Marimuthu 6. WP (MD) No. 23516 of 2022 N.V.R. Co 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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