2023 (3) TMI 687 - HC - VAT and Sales Tax

High Court confirms tax liability on turnover, rejects stock transfer exemption, and upholds penalty.

Tvl. S.L.N. Exports Versus The Secretary, Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), The Appellate Assistant Commissioner (CT) (Now designated as Appellate Deputy Commissioner), The Deputy Commercial Officer (Now designated as Commercial Tax Officer)

Tvl. S.L.N. Exports Versus The Secretary, Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), The Appellate Assistant Commissioner (CT) (Now ... Issues Involved:1. Maintainability of the Review Application under Section 36(6)(a) of the TNGST Act.2. Applicability of Section 7-A(1)(c) of the TNGST Act to the claimed stock transfer.3. Compliance with Section 5(3) of the CST Act, 1956 for tax exemption on the turnover.Issue-wise Detailed Analysis:1. Maintainability of the Review Application under Section 36(6)(a) of the TNGST Act:The primary contention is whether the Review Application filed by the State under Section 36(6)(a) of the TNGST Act is maintainable. The dealer/assessee argued that the grounds raised do not fall within the scope of this section, which allows review only on the discovery of new and important facts not known at the time of the original order. The dealer claimed that no new facts were discovered and that the Review Application was essentially an appeal in disguise. However, it was found that a new fact came to light upon verification of the CST files, revealing the dealer's inconsistent stand under the State and Central Acts. This justified the maintainability of the Review Application.2. Applicability of Section 7-A(1)(c) of the TNGST Act to the claimed stock transfer:The dealer claimed exemption from tax on the turnover of Rs.2,24,00,783/- asserting it was an inter-State stock transfer for export, not subject to Section 7-A of the TNGST Act. The Assessing Authority initially disallowed this claim, which was later reversed by the Appellate Authority, accepting the transfer as a stock transfer exempt from tax. However, the Tribunal in the Review Application found that the purchase and subsequent transfer to Karnataka were distinct transactions. The Tribunal held that the dealer failed to produce necessary documents, such as Form-H, to substantiate the claim that the transfer was solely for export purposes. Consequently, the Tribunal reversed the Appellate Authority's decision, reinstating the tax and penalty.3. Compliance with Section 5(3) of the CST Act, 1956 for tax exemption on the turnover:For the dealer to claim exemption under Section 5(3) of the CST Act, the purchase must be directly linked to an export order. The dealer argued that the purchase was made on instructions from its Karnataka Branch and was meant for export, thus falling under Section 5(3) of the CST Act. However, the Tribunal found that the dealer did not furnish the required agreement or order for export, nor did they use Form-H for the transfer. Instead, the transfer was accompanied by Form-XX, which does not qualify for exemption under Section 5(3). Therefore, the Tribunal concluded that the dealer could not claim tax exemption on the turnover.Conclusion:The High Court upheld the Tribunal's findings, dismissing the Tax Case and confirming the tax and penalty on the turnover of Rs.2,24,00,783/-. The Court ruled that the Review Application was maintainable due to the discovery of new facts, the transfer did not qualify as a stock transfer exempt from tax under Section 7-A(1)(c) of the TNGST Act, and the dealer failed to comply with the requirements of Section 5(3) of the CST Act for tax exemption.