High seas sale proof and compliance with conditional manufacturing-use exemptions determine State sales tax liability.

Imported-car sales were taxable under the Tamil Nadu General Sales Tax Act because invoices were raised after the cars entered India, customs duty was paid by the dealer, and no reliable evidence showed transfer of title on the high seas. A conditional exemption for locally purchased goods required their use for the declared manufacturing purpose; failure to prove such use or correlate the goods with exports triggered the prescribed tax consequence. The notes state that an alternative export-sale claim or compounding mechanism could not replace tax liability arising from breach of the exemption conditions.

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Issues: (i) Whether tax was leviable under the Tamil Nadu General Sales Tax Act, 1959 on imported cars claimed to have been sold in the course of high seas sales; (ii) Whether the Tribunal could restore the assessment of tax for breach of conditions under G.O.Ms.No.381 despite no departmental appeal against the first appellate order.

Issue (i): Whether tax was leviable under the Tamil Nadu General Sales Tax Act, 1959 on imported cars claimed to have been sold in the course of high seas sales.

Analysis: The import and sale records showed that the dealer's sale invoices were raised after the cars entered Indian territory and from its Tamil Nadu factory address. The dealer paid customs duty, while no reliable evidence established that title passed while the cars were on the high seas. Transport documents did not prove that the sales occurred before entry into the customs frontier or outside Tamil Nadu. The place of transfer, in the absence of contrary evidence, was determinable from the sale invoices.

Conclusion: The sales were not high seas sales and were taxable under the Tamil Nadu General Sales Tax Act, 1959. This issue was decided against the assessee.

Issue (ii): Whether the Tribunal could restore the assessment of tax for breach of conditions under G.O.Ms.No.381 despite no departmental appeal against the first appellate order.

Analysis: The exemption granted under G.O.Ms.No.381, issued under Section 17 of the Tamil Nadu General Sales Tax Act, 1959, required the purchased goods to be used for the declared manufacturing purpose; its third proviso imposed tax where the goods were otherwise disposed of. The dealer failed to establish that the goods purchased against declarations were used in manufacture or correlate them with exports. The exemption under Section 5(3) of the Central Sales Tax Act, 1956 was unavailable to a dealer that had obtained the State exemption by declaration and breached its conditions. The Tribunal was entitled, in the dealer's appeal, to correct the apparent legal error in substituting compounding fees for the tax consequence expressly prescribed by the exemption notification.

Conclusion: The Tribunal rightly restored the assessment of tax for violation of the conditions of G.O.Ms.No.381. This issue was decided against the assessee.

Final Conclusion: The claimed import-sale exemption and the conditional exemption for locally purchased goods were unavailable on the established facts, and the tax liability under the State regime remained enforceable.

Ratio Decidendi: A dealer that avails a conditional State tax exemption on a declaration must satisfy its stipulated use condition; upon breach, the prescribed tax consequence applies and cannot be displaced by an alternative export-sale claim or compounding mechanism.

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