Customs-linked tax classification of Sikkim liquor turnover failed, limiting liability to the lower sales tax rate.

Turnover on liquor brought from Sikkim was held not to fall under item 70(a) of the Tamil Nadu General Sales Tax Act because that higher rate applied only where the goods were foreign liquor, imported from foreign countries, and dealt with under customs law or a corresponding customs framework. The liquor was manufactured in Sikkim and treated as Indian-made foreign liquor, and the treaty arrangement for Sikkim meant the goods were not subject to the customs treatment required by item 70(a). The 24 per cent levy was therefore set aside, and the turnover was taxable only at 12 per cent under item 70(b).

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Issues: Whether the turnover relating to liquor brought from Sikkim was liable to tax at 24 per cent under item 70(a) of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, or only at 12 per cent under item 70(b).

Analysis: Item 70(a) applied only if all the stated conditions were cumulatively satisfied, namely, that the goods were foreign liquor, imported into India from foreign countries, and dealt with under the Indian Tariff Act, 1934, or any other law in force relating to customs duties on goods imported into India. The liquor in question was manufactured in Sikkim and treated by the excise authorities as Indian-made foreign liquor. The record also showed that the import was permitted under the Tamil Nadu Prohibition Act and that, under the treaty arrangement relating to Sikkim, goods of Sikkimese origin brought into India were not required to be dealt with under customs law in the manner contemplated by item 70(a). The expression "dealt with" was treated as referring to import or export governed by the relevant customs framework, which was absent here.

Conclusion: Item 70(a) was inapplicable. The levy at 24 per cent was set aside and the turnover was liable only to tax at 12 per cent under item 70(b).

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