High Court affirms tax exemption for export packing materials & reinstates Additional Sales Tax for specified turnover limits

The High Court upheld the Tribunal's decision in a tax case involving exemption on sales of packing materials used for export and the levy of Additional Sales Tax for a turnover exceeding specified limits for the year 1996-97. The Court affirmed that the respondent was eligible for exemption on sales of packing materials to exporters under the CST Act, as the required certificate was produced, and the goods were used for export purposes. Additionally, the Court reinstated the Additional Sales Tax for the period up to 31.07.1996, as the turnover did not exceed Rs.100 crores for the entire year, aligning with the unamended provisions.

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Issues Involved:
1. Exemption on sales of packing materials used for export.
2. Levy of Additional Sales Tax based on turnover exceeding specified limits.

Detailed Analysis:

1. Exemption on Sales of Packing Materials Used for Export:
The respondent was assessed by the Deputy Commercial Tax Officer-IV, Sivakasi, for the year 1996-97, determining a taxable turnover of Rs.68,66,088/-, rejecting the exemption claimed on the export sales of duplex board to Tvl. Limtex (India) Ltd. The Assessing Officer also levied a penalty under Section 12(3)(b) and Section 22(2) of the TNGST Act, 1959.

The respondent appealed to the Appellate Assistant Commissioner (CT) Virudhunagar, who deleted the turnover assessed to tax for sales of packing materials to exporters amounting to Rs.18,58,807/- and the penalty of Rs.6,03,253/-, while remanding the turnover arrived from records recovered to an extent of Rs.33,91,442/-. The revenue appealed against this deletion.

The Tribunal upheld the Appellate Assistant Commissioner's decision, noting that the sale of packing materials to exporters is exempt under Section 5(1) of the CST Act, 1956, provided a certificate from the exporter is produced. The Tribunal found that the respondent had produced the required certificate, and the paper board was used for packing goods intended for export, thus eligible for exemption.

2. Levy of Additional Sales Tax Based on Turnover Exceeding Specified Limits:
The revenue contended that the taxable turnover for the year 1996-97 was Rs.68,66,088/-, exceeding Rs.10 lakhs but not Rs.100 crores, making the respondent liable for Additional Sales Tax for the period from 01.04.1996 to 31.07.1996. The Tribunal initially deleted the Additional Sales Tax, but the revenue cited the Tamil Nadu Taxation Special Tribunal's decision in Sri Murugan Timber Traders, which upheld the levy of Additional Sales Tax for turnovers exceeding Rs.10 lakhs up to 31.07.1996.

The Tribunal, upon review, restored the Additional Sales Tax of Rs.27,401/-, aligning with the decision that the taxable turnover for the year cannot be split for the purpose of additional sales tax, and the threshold limit of Rs.100 crores came into effect only from 01.08.1996.

Final Judgment:
The High Court dismissed the Tax Case Revision, upholding the Tribunal's decision. The Court referenced the decision in State of Tamil Nadu v. National Time Co. [2011] 39 VST 247 (Mad), which clarified that for the assessment year 1996-97, the additional sales tax liability should be calculated based on the unamended provisions up to 31.07.1996, and the amended provisions thereafter. The Court found no error in the Tribunal's order and concluded that the respondent's turnover did not exceed Rs.100 crores for the entire year, thus validating the Tribunal's decision to restore the Additional Sales Tax for the period up to 31.07.1996.

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