1972 (4) TMI 92 - HC - VAT and Sales Tax

Supreme Court defines 'component part' retrospectively; assessee denied tax benefits

The Supreme Court analyzed the retrospective effect of a legislative amendment clarifying the definition of 'component part' under section 3(3) of the ... - Issues:Interpretation of section 3(3) of the Tamil Nadu General Sales Tax Act in light of subsequent legislative amendments and judicial decisions.Analysis:The case involved a dispute between the State and the assessee regarding the applicability of the provision in section 3(3) of the Tamil Nadu General Sales Tax Act. The Sales Tax Appellate Tribunal had held in favor of the assessee based on previous decisions of the Madras High Court and the Supreme Court. The Supreme Court had ruled that if a component can be identified as part of a finished product, it qualifies for concessional tax treatment under section 3(3).Subsequently, the Madras Legislature enacted Act 27 of 1970 to clarify the definition of 'component part' in the explanation to section 3(3). The amendment specified that a component must be visually identifiable or separable by a mechanical process, not necessarily by a chemical test. The amendment was given retrospective effect from the commencement of the principal Act in 1959.The court analyzed the retrospective effect of the legislative amendment and emphasized that the intention of the Legislature must be considered. Referring to legal principles, the court held that the amended explanation should be deemed to have been included in the principal Act from the beginning. Therefore, the court concluded that the assessee could not benefit from section 3(3) as the groundnut oil was not visually identifiable in the finished product.Consequently, the Tribunal's decision was set aside, and the assessee was deemed not entitled to the benefits of section 3(3) for the transactions in question. The tax case was allowed with no costs, and the petition by the State was allowed.