2018 (4) TMI 651 - HC - VAT and Sales Tax

Interpretation of Export Sales Exclusion under Sales Tax Act: Tribunal's Decision

The Appellate Tribunal interpreted the expression 'does not sell the goods so manufactured' under Section 3(4) of the Tamil Nadu General Sales Tax Act, ... Assessment of tax - Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 - chemicals - proportionate value of purchases made against Form XVII - Bearings - Held that: - identical issue decided in the case of Tube Investments of India Ltd. (Formerly known as M/s. TI Diamond Chain Ltd.) Versus The State of Tamil Nadu, represented by the Commercial Tax Officer [2010 (10) TMI 938 - MADRAS HIGH COURT], where it was held that Section 3(4) of the Act will have no application since situs of the export sales of the petitioners for the purpose of said Section was the State of Tamilnadu and by virtue of the said factual position, the applicability of Section 3(4) stands excluded for the exigibility of tax - revision dismissed. Issues:1. Interpretation of the expression 'does not sell the goods so manufactured' under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959.2. Invocation of the principle of situs for interpreting the expression in Section 3(4) of the Act.3. Distinction from the judgment in State of Karnataka vs. B.M.Ashraf & Co.4. Levy of tax on export sale and its compliance with Article 286 of the Constitution.5. Inclusion of export sale within the ambit of Section 3(4) of the Act.6. Understanding of Sections 3(3) and 3(4) as charging provisions.7. Purpose of Tamil Nadu General Sales Tax Act, 1959.8. Deletion of penalty under Section 23 read with Section 45(2)(e) of the Act.Analysis:1. The case involved the interpretation of the expression 'does not sell the goods so manufactured' under Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959. The Appellate Tribunal held that export is also a sale as contemplated in the provision, thereby concluding that the purchase turnover of raw materials for exported goods could not be taxed under this section.2. The Tribunal invoked the principle of situs as per explanation 3(a) to Section 2(n) of the Act to interpret the expression in Section 3(4). This led to the inclusion of export sales within the ambit of the provision, aligning with the decision in Tube Investment of India Ltd. v. State of Tamil Nadu.3. The Tribunal distinguished the judgment in State of Karnataka vs. B.M.Ashraf & Co. by emphasizing that a sale deemed to be in the course of export under a different Act cannot be equated to an intrastate sale, supporting their interpretation of Section 3(4) in the present case.4. The issue of levy of tax on export sales and its compliance with Article 286 of the Constitution was raised. The Tribunal construed the levy under Section 3(4) as a direct tax on export sales, raising concerns about its conformity with constitutional provisions.5. The Tribunal addressed whether export sales should be included in the phrase 'in any other manner' under Section 3(4) of the Act. Their construction excluded export sales from this provision, further supporting their interpretation of the expression in question.6. The Tribunal clarified that Sections 3(3) and 3(4) of the Act are not charging provisions, as evident from the non-obstante clause in Section 3(3). This understanding influenced their decision regarding the taxation of export sales.7. The purpose of the Tamil Nadu General Sales Tax Act, 1959, was considered to determine the scope of its application. The Tribunal highlighted that the Act was enacted to levy tax on sales or purchases within the state alone, emphasizing the legislative intent behind its provisions.8. Lastly, the Tribunal's decision to delete the penalty under Section 23 read with Section 45(2)(e) of the Act was questioned. The Tribunal's rationale for this deletion was not explicitly discussed in the summary, but it formed a part of the substantial questions of law raised in the case.