2018 (5) TMI 1283 - HC - VAT and Sales Tax

Old newspapers exempt from sales tax: High Court clarifies in landmark ruling.

The State of Tamil Nadu Versus P.S. Sambandam Mudaliar & Co.

The High Court upheld the Tribunal's decision that the sale of old newspapers is exempt from sales tax under Entry 54 of List II and Entry 92 of List I of ... Inter-state sales - exemption from tax - whether 'old newspaper' would be covered within the term 'newspaper' or not - levy of tax at 10% instead of 4% - Whether in the facts and circumstances of the case, the Tribunal is legally correct in having held that sale of old newspaper would be covered by the Entry 54 of List II and entry 92 of List of the Seventh Schedule to the Constitution of India even when old newspapers were sold as waste paper and not with reference to their news content or for the purpose of reading? Held that: - In Indian Express (P) Ltd. vs. State of Tamilnadu [1986 (4) TMI 321 - SUPREME COURT OF INDIA], the issue before the Hon ble Supreme Court was whether the sale of Old Newspapers is exempt from payment of tax. It was argued that when surplus copies of the news papers were sold, they possessed the character of newspaper and were exempt from sales tax - it was held by the Supreme Court that when newspapers are sold to the reading public, they are sold as medium containing information regarded as news. They are purchased by members of public to acquaint themselves with the current news. Information is news when it is fresh and new. So when newspaper becomes old, it loses its characteristic as newspaper. When unsold surplus copies of newspapers are disposed of by weight, their sale cannot be regarded as the sale of newspapers. However in the case of Sait Rikhaji Furtarnal v. State of Andhra Pradesh [1990 (8) TMI 344 - SUPREME COURT OF INDIA], it was held that, old newspapers would be covered by the word newspapers in entry 54 of list II and entry 92 of list I of the Seventh Schedule to the Constitution of India and it is, therefore, beyond the competence of the State Legislature to impose Sales Tax on the sale of old newspapers. In case of conflict between earlier and later decisions of Supreme Court, each consisting of equal number of Judges, later decision prevails. - Govindanaik G.Kalaghatigi v. West Patent Press Company Ltd and Anr. [1979 (2) TMI 202 - KARNATAKA HIGH COURT] (Five Judge Bench) There are no manifest illegality, warranting reversal of the order of the Tribunal - Tax Case (Revision) is dismissed. - Decided against the revenue. Issues Involved:1. Whether the sale of old newspapers is exempt from sales tax.2. Whether the sale of old newspapers as waste paper affects their tax exemption status.3. Consideration of conflicting judgments on the taxability of old newspapers.4. Applicability of 'C' form declaration for interstate sales of old newspapers.Detailed Analysis:Issue 1: Exemption of Old Newspapers from Sales TaxThe primary issue revolves around whether old newspapers sold by the respondent are exempt from sales tax. The Tribunal, referencing the Supreme Court's decision in *Sait Rikhaji Furtarnal v. State of Andhra Pradesh*, held that old newspapers continue to retain their character as newspapers and are thus exempt from sales tax under Entry 54 of List II and Entry 92 of List I of the Seventh Schedule to the Constitution of India. The Tribunal concluded that the sales turnover of Rs. 7,61,710/- from old newspapers is not liable to sales tax.Issue 2: Sale of Old Newspapers as Waste PaperThe petitioner argued that the intention behind the transactions was to sell and purchase waste paper, not newspapers, and thus should be taxed accordingly. The Tribunal, however, found that the sales of old newspapers, even if sold in bulk or by weight, do not lose their character as newspapers. The Tribunal relied on the Supreme Court's judgment which stated that old newspapers are still considered newspapers and are exempt from sales tax, irrespective of their sale as waste paper.Issue 3: Conflicting Judgments on TaxabilityThe Tribunal addressed the conflicting judgments by noting that the later decision of the Supreme Court in *Sait Rikhaji Furtarnal* should prevail over the earlier decision in *Indian Express (P) Ltd. v. State of Tamilnadu*. The Tribunal emphasized that when there are two conflicting judgments of equal authority, the latter judgment, which has considered the earlier decisions, should be followed. The Tribunal thus upheld the exemption based on the later Supreme Court ruling.Issue 4: 'C' Form Declaration for Interstate SalesThe Tribunal also dealt with the issue of interstate sales of old newspapers and the requirement of 'C' form declarations. It was observed that the respondent had filed 'C' forms for a portion of the sales but not for the entire turnover. The Tribunal concluded that since old newspapers are exempt from sales tax, the lack of 'C' form declarations for the remaining turnover does not affect their tax-exempt status. The assessment of Rs. 70,134/- without 'C' form declarations was set aside, and the sales were deemed fully exempt from tax liability.Conclusion:The High Court upheld the Tribunal's decision, confirming that the sale of old newspapers is exempt from sales tax, regardless of their sale as waste paper or the absence of 'C' form declarations for interstate sales. The High Court dismissed the Tax Case (Revision) filed by the State, finding no manifest illegality in the Tribunal's order. The judgment emphasized the precedence of the later Supreme Court decision and the consistent application of the exemption provided under the Constitution.