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Issues: Whether the purchase turnover of raw materials acquired against Form XVII declarations and used in the manufacture of goods exported out of the State could be brought to tax under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959, and whether the consequential penalty could be sustained.
Analysis: The revision was considered in the light of the earlier decision in Tube Investment of India Ltd. and the settled position that export is also a sale for the purpose of the first part of Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959. On that basis, purchase turnover of raw materials used in the manufacture of exported goods was held not liable to tax under Section 3(4). The challenge to the deletion of penalty also did not survive once the substantive levy itself was held unsustainable.
Conclusion: The export-related purchase turnover was not taxable under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959, and the deletion of penalty was upheld; the revision failed.
Ratio Decidendi: Where goods are manufactured for export, the purchase of raw materials against concessional declarations cannot be subjected to levy under Section 3(4) merely because the resulting sale is an export sale, and the related penalty cannot stand once the primary levy is displaced.
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