TaxTMI 
TaxTMI 
2016 (8) TMI 633
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....d Slurry in the job work factory of HLL at Ranipet. 2. The controversy which led to the petitioner seeking for the clarification arose under the following circumstances. HLL are engaged in the manufacture of detergents and they are registered dealers on the file of the Assistant Commissioner (CT), Fast Track Assessment Circle-II, Greams Road, Chennai under the provisions of the TNGST Act and the Central Sales Tax Act, 1956, (CST Act). HLL placed purchase order dated 15.06.2000, for sale of LAB and for delivery of the same at M/s.Ultra Marine and Pigments Limited, Ranipet, (Job Worker). The said purchase order was raised by HLL from their Mangalore office. The job worker is required to manufacture Acid Slurry from LAB and such product is stock transferred to the factory of HLL at Mangalore. Therefore, the question arose as to whether the petitioner can avail the concessional rate of tax on production of form-XVII declaration. As there appeared to be some controversy, the petitioner thought fit to seek for a clarification from the Commissioner under Section 28A of the TNGST Act, requesting to clarify as to whether the subject transaction is to be treated as a local sale or int....
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....ture of Acid Slurry was made within the state by the job worker of HLL at Ranipet. Further, it was stated that HLL is a company with location and presence all over India including Tamil Nadu and the sale effected by the petitioner is for the manufacturing activity of HLL within Tamil Nadu. This was followed by representations to the second respondent, dated 04.06.2004 and 12.08.2004, enclosing a letter dated 20.07.2004, given by HLL, wherein among other things, HLL stated that their principal place of business was at Chennai during the assessment years 1999-2000 and 2000-2001. After all these representations, the second respondent by letter dated 09.09.2004, informed the petitioner that HLL, Mangalore, cannot make purchase of LAB against form-XVII declaration from the petitioner, though the job work was carried in Tamil Nadu by their job worker. It was further stated that as per the conditions stipulated in Section 3(3) of the TNGST Act, the registered dealers in Tamil Nadu alone can purchase goods for the purpose of manufacturing inside the State of Tamil Nadu. Accordingly, the petitioner's request to permit HLL, Mangalore, to purchase against form-XVII, from petitioner was no....
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....e would be transported to HLL, Mangalore for further processing and manufacturing as detergents. Referring to the purchase order dated 15.06.2000, it is submitted that it clearly shows the dealer at Mangalore had placed the purchase order and in pursuance to the same, the petitioner had effected sale to the dealer at Mangalore and the transaction is clearly an interstate sale and the only difference being delivery has been made to the job worker at Ranipet and after completion, for onward transmission to the purchaser at Mangalore. It is further submitted that merely because HLL Ltd, had business transactions and registration under TNGST Act at Chennai, the impugned transaction cannot be treated as a local sale and the petitioner will not be eligible for concessional rate of tax at 3% against form-XVII, declaration. Referring to sub-section 3 of Section 3 of the TNGST Act, it is submitted that the provision clearly stipulates that there should be a manufacture inside the state for sale in order to avail concessional rate of tax at 3%. Inasmuch as the Acid Slurry converted by job worker at Ranipet, is stock transferred to Mangalore for further processing, the manufacturing of the fi....
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....ithin the State of Tamil Nadu. What was stock transferred to Mangalore by HLL was not LAB, but a commercially different product namely, Acid Slurry. 10. Sub-section (3) of Section 3 of the TNGST Act, states that notwithstanding anything contained under Section 5, [sub-section 2, 2-A, 2-C], but subject to the provision of sub-section (1), the tax payable by a dealer in respect of sale of any goods including consumables, packing material and labels, but excluding plant and machinery, to another dealer for use by the latter in the manufacture inside the State, for sale by him of any goods other than ethyl alcohol, absolute alcohol, etc., shall be at the rate of rate of only 3% on the turnover relating to such sale. Thus, for a dealer to be entitled to the benefit under sub-section (3) of Section 3, he has to show that the sale of goods to another dealer was for the use by the latter in the manufacture inside the state for sale. 11. As mentioned above, the undisputed fact is that the petitioner had sold LAB to HLL based on a purchase order placed from Mangalore with specific instruction to deliver the product at a factory in Ranipet. The specific stand of the HLL is that the factory ....
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....into a commercially different product is an independent transaction and the transaction could not be treated as an interstate element. 15. The Revenue does not dispute the fact that the delivery of LAB was effected within the State of Tamil Nadu and what moves out from the factory of the job worker is only Acid Slurry and not LAB. Thus, it cannot be disputed that there was manufacturing activity inside the State of Tamil Nadu in as much as the product sold namely LAB was converted into Acid Slurry at Ranipet in the factory of the job worker. Thus, sofar as the manufacturing activity done by the job worker, the product which emerges upon manufacture namely Acid Slurry is infact, a final product in such process though in the chain of manufacturing activities, it may be an intermediary product. The contention of the respondent that payment of tax by HLL at 1% under Section 3(4) of the TNGST Act is irrelevant cannot be countenanced. This is a very relevant factor, which goes to show that the HLL is a manufacturer. 16. Having come to such a conclusion, it has to be seen as to whether the second respondent while issuing the impugned clarification, dated 09.09.2004, was justified ....