Exemption at the first taxable point cannot shift sales tax liability to a later resale; later amendment applies prospectively only.

Where the statute fixed sanitary fittings tax at the first sale in the State, exemption of that first sale under a notification did not permit the Revenue to shift the point of levy to a later resale; the resale was therefore not taxable on that basis. The later proviso inserted into Section 3(2) by Tamil Nadu Act 38 of 1996 was held to operate prospectively from 17.07.1996 and not to apply to assessment year 1994-95. On both issues, the assessee's position was accepted and the statutory point of taxation was not altered by the exemption or by the later amendment.

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Issues: (i) Whether resale of sanitary fittings by the assessee was liable to tax under Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 when the first sale by the original seller was exempt under a notification issued under Section 17 of that Act. (ii) Whether the proviso inserted to Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 by Tamil Nadu Act 38 of 1996 applied retrospectively to the assessment year 1994-95.

Issue (i): Whether resale of sanitary fittings by the assessee was liable to tax under Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 when the first sale by the original seller was exempt under a notification issued under Section 17 of that Act.

Analysis: The charging scheme under Section 3(2) fixed tax only at the point specified in the First Schedule, which for sanitary fittings was the first sale in the State. The exemption granted to the original seller under Section 17 protected that sale from collection of tax, but did not alter the statutory point of levy. The Court held that an exemption does not shift the point of taxation to a later resale and that the Revenue could not rewrite the charging provision by treating the subsequent sale as the first taxable sale.

Conclusion: The resale by the assessee was not liable to be taxed by shifting the point of levy from the exempt first sale; the issue was decided in favour of the assessee.

Issue (ii): Whether the proviso inserted to Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 by Tamil Nadu Act 38 of 1996 applied retrospectively to the assessment year 1994-95.

Analysis: The amendment introducing liability on the first and earliest successive dealer was brought into force only from 17.07.1996. The assessment year in question was 1994-95, which predated the amendment. The Court therefore treated the amendment as prospective and inapplicable to the assessment under revision.

Conclusion: The amended proviso did not apply to the assessment year 1994-95; this issue was also decided in favour of the assessee.

Final Conclusion: The revision succeeded, the tribunal's order was set aside, and the substantial questions of law were answered for the assessee on the basis that the statutory point of levy could not be shifted by reason of the exemption granted to the original seller.

Ratio Decidendi: Where the statute fixes tax at a particular point of sale, an exemption to the dealer at that point does not authorise the Revenue to shift the levy to a subsequent sale, and a later amendment creating such liability operates only prospectively unless expressly made retrospective.

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