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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the purchase turnover of hoop iron used as packing material in the execution of a works contract was liable to purchase tax under section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act, 1959.
Analysis: The assessee purchased hoop iron for use in pressing and packing. The material was declared goods, but on the facts found by the lower authorities, the supplier was a bogus dealer and the transaction did not suffer tax at the earlier point of sale. The goods were consumed in the execution of the works contract and were not sold in a manner attracting tax under sections 3 or 4 at the relevant time. Section 7-A(1)(b) was applied as a charging provision to fasten liability where the purchase had not suffered tax and the subsequent disposal fell within the mischief the provision was intended to prevent.
Conclusion: The turnover was validly exigible to purchase tax under section 7-A(1)(b) of the Tamil Nadu General Sales Tax Act, 1959, and the assessee's challenge failed.
Final Conclusion: The Tribunal upheld the levy and found no ground to interfere with the purchase tax assessment on the disputed turnover.
Ratio Decidendi: Where goods purchased from a dealer found to be bogus or unregistered do not suffer tax at the earlier point and are consumed in a works contract, purchase tax may be levied under section 7-A(1)(b) as a charging provision intended to prevent tax leakage.
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