Purchase tax on penultimate export sales upheld, while penalty was remitted for reconsideration of bona fide disclosure.

A penultimate sale of chillies in the course of export did not prevent levy of purchase tax on the earlier local purchase from non-dealers under the State purchase-tax provision, and the absence of an express export exemption did not defeat that liability. The assessee also failed to prove export of jaggery because the record lacked supporting documents such as a bill of lading or Form H, so tax on that turnover was upheld. Penalty for alleged suppression was not sustained mechanically on the basis of tax liability alone; the assessee's bona fides and disclosure of turnover had to be examined, so the penalty was set aside and remitted for fresh consideration.

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Issues: (i) Whether purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959 was leviable on the purchase turnover of chillies where the assessee's sale to the exporter was a penultimate sale in the course of export; (ii) whether tax was payable on the jaggery turnover for want of proof of export; (iii) whether the penalty for alleged suppression was sustainable.

Issue (i): Whether purchase tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959 was leviable on the purchase turnover of chillies where the assessee's sale to the exporter was a penultimate sale in the course of export.

Analysis: The sale by the assessee to the exporter was completed ex-godown within the State, and the subsequent movement of goods to Cochin Port was held not to have been occasioned by an inter-State sale made by the assessee. The transaction was treated as the last sale within the State and as a penultimate sale deemed to be in the course of export under section 5(3) of the Central Sales Tax Act, 1956. The Court held that the absence of an express exemption for export sales in section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 did not exclude liability on the earlier purchase from non-dealers.

Conclusion: The levy of purchase tax on the chillies purchase turnover was upheld and was against the assessee.

Issue (ii): Whether tax was payable on the jaggery turnover for want of proof of export.

Analysis: The record did not contain supporting material such as a bill of lading or Form H to establish that the jaggery sale was for export. On the facts found, the assessee failed to prove entitlement to exemption from tax on that turnover.

Conclusion: The tax on the jaggery turnover was upheld and was against the assessee.

Issue (iii): Whether the penalty for alleged suppression was sustainable.

Analysis: Penalty could not be imposed mechanically merely because purchase tax liability was found. The assessee's bona fides had to be considered, and the assessee had disclosed the turnover. In that setting, the penalty was set aside and the matter was remitted to the assessing authority for reconsideration in the light of the governing principle on bona fide belief and penalty.

Conclusion: The penalty was set aside and remanded for fresh consideration in favour of the assessee.

Final Conclusion: The writ petition failed on the tax demands, but the penalty component was interfered with and sent back for reconsideration.

Ratio Decidendi: Where the assessee's sale is only the penultimate sale in the course of export, the earlier local purchase from non-dealers remains liable to purchase tax under the State purchase-tax provision, and penalty cannot be sustained without examining the assessee's bona fides.

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