2018 (5) TMI 530 - HC - VAT and Sales Tax

Court upholds tax exemption on export sales of corrugated boxes under Tamil Nadu Sales Tax Act

The High Court dismissed the Tax Case (Revision) concerning the interpretation of Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 on tax ... Levy of Purchase tax on export sale - Section 3(4) of TNGST Act - Form XVII - Held that: - this Court in Tube Investment of India Ltd., v. State of Tamil Nadu [2010 (10) TMI 938 - MADRAS HIGH COURT], allowed the appeal filed by the dealer by stating that since the export sale is fully covered by the definition of sale under Section 2(n) read with Explanation 3(a) of the TNGST Act, the Assessing authority cannot levy tax under Section 3(4) of the Act - tax cannot be levied - appeal dismissed - decided against Revenue. Issues:1. Interpretation of the expression 'does not sell the goods so manufactured' in Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959.2. Application of the principle of situs for the interpretation of the expression 'does not sell the goods so manufactured.'3. Distinction of judgment in State of Karnataka vs. B.M.Ashraf & Co. regarding export sales.4. Levy of tax under Section 3(4) on export sale and its compliance with Article 286 of the Constitution.5. Inclusion of export sale within the scope of 'in any other manner' in Section 3(4).6. Understanding of sections 3(3) and 3(4) as not charging provisions.7. Consideration of the territorial scope of the Tamil Nadu General Sales Tax Act, 1959.Analysis:1. The case involved a dispute regarding the assessment of tax liability under the Tamil Nadu General Sales Tax Act, 1959 on a manufacturer of corrugated boxes. The Assessing Officer determined the turnover based on purchases against Form XVII declarations. The Tribunal allowed the appeal, citing that export sales fall under the definition of sale, thus exempting the dealer from tax under Section 3(4) of the Act.2. The State challenged the Tribunal's decision on substantial questions of law, including the interpretation of the expression 'does not sell the goods so manufactured' in Section 3(4). The Tribunal's reliance on the situs principle from Explanation 3(a) to Section 2(n) was also questioned in the context of export sales.3. The State further contested the Tribunal's distinction from the judgment in State of Karnataka vs. B.M.Ashraf & Co. regarding the treatment of export sales as interstate sales and the applicability of tax under Section 3(4).4. The legality of levying tax under Section 3(4) on export sales and its compliance with Article 286 of the Constitution was a significant issue raised by the State in the appeal.5. The interpretation of 'in any other manner' in Section 3(4) to include or exclude export sales within its ambit was a point of contention in the appeal.6. The understanding of sections 3(3) and 3(4) as not being charging provisions was debated, emphasizing the non-obstante clause in Section 3(3) of the Act.7. Lastly, the territorial scope of the Tamil Nadu General Sales Tax Act, 1959 was discussed in relation to the purpose of levying tax on sales or purchases within the state alone.In conclusion, the High Court dismissed the Tax Case (Revision) based on precedents and interpretations from earlier cases, answering the substantial questions of law against the Revenue and highlighting the application of relevant legal principles in determining tax liability on export sales under the Tamil Nadu General Sales Tax Act, 1959.