High Court overturns tax on inter-State sales of Fried Gram under TNVAT Act Entry 68, cites exemption law

The High Court set aside the Assessing Authority's decision to tax inter-State sales of Fried Gram, citing the exemption under Entry 68 of the TNVAT Act. The court referenced relevant case law emphasizing the correct application of exemption notifications in determining tax liability. The impugned orders were overturned, and the writ petitions were allowed without costs.

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Issues:
1. Interpretation of tax liability on inter-State sales of Fried Gram under TNVAT Act and CST Act.
2. Assessing Authority's decision on tax liability.
3. Application of relevant case laws in determining tax liability.

Issue 1: Interpretation of tax liability on inter-State sales
The petitioner, a dealer in Fried Gram, claimed exemption from tax under Entry 68 of the TNVAT Act for local sales and under the CST Act for inter-State sales. The petitioner argued that as per Section 8 of the CST Act, the tax rate applicable should be nil for inter-State sales of Fried Gram. However, the Assessing Authority issued assessment orders against the petitioner, disregarding the exemption claimed.

Issue 2: Assessing Authority's decision
The Assessing Authority, in the impugned orders, stated that inter-State sales of Fried Gram are liable for tax despite the conditional exemption under Entry 68 of the TNVAT Act. The Authority cited instructions from the Commissioner of Commercial Taxes, Chennai, supporting the tax liability on inter-State sales of Fried Gram under the CST Act. The petitioner's turnover being below Rs. 500 crores was not considered, leading to the issuance of assessment orders.

Issue 3: Application of relevant case laws
The High Court referred to the judgment in the case of State of Gujarat Vs. Reliance Industries Limited, where it was held that the tax payable on inter-State sales should be as per the sales tax law of the State, and there should not be a separate tax rate for inter-State sales. Citing the judgment of Bashir Oil Mills Vs Maharashtra Sales Tax Tribunal, the High Court emphasized the importance of correctly applying exemption notifications to determine tax liability on inter-State sales.

In conclusion, the High Court set aside the impugned orders, stating that the Assessing Authority's decision to tax inter-State sales of Fried Gram was not sustainable, given the exemption granted under Entry 68 of the TNVAT Act. The writ petitions were allowed, and no costs were imposed.

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