TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1044
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.... had purchased materials such as thread, taps, foils and solutions, against Form XVII and used the same for the manufacture of shoes and dispatched them to other countries. Alleging violation of Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959, the assessing officer levied tax at 1%, on the turnover of Rs. 2,00,81,189/-, pertaining to the purchases of raw materials, against Form XVII, availing concessional rate of tax and used the same for manufacture of goods and exported the same. Aggrieved by the same, the assessee has filed an appeal, before the Appellate Assistant Commissioner (CT)-III, Chennai and the said appeal came to be dismissed on 22.03.2007. Against which, the assessee has preferred an appeal in T.A.No.188 of 2007, before the Tamil Nadu Sales Tax Appellate Tribunal (Main Branch) Chennai. Following the decision of this Court in Tube Investment of India Ltd., v. State of Tamil Nadu reported in [2010] 36 VST 67 (Mad.), the Appellate Tribunal, by its order, dated 30.11.2010, allowed the appeal. 4. Facts leading to Tax Case Revision No.43 of 2017, are that M/s.ITC Ltd., Chennai, respondent herein, dealers in Cigarettes and manufacturers of Printed Card Board Boxe....
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....he learned State Representative would rely upon the case law reported in (2004) 136 STC 215 in "ELGI Equipments v. Assistant Commissioner of Commercial Taxes" and (1997) 107 STC 571, in "State Karnataka v. B.M.Ashraf & Co.," 10. To repel this contention, the learned counsel for the appellant/assessee would submit that recently a Division Bench of the Honourable High Court of Madras, in a batch of Tax Case Revisions by a common order, dated 08.10.2010 has held that "export sale" is also a "sale"as contemplated in the first part of Section 3(4) of the Act and hence, not eligible to tax under Section 3(4) of the TNGST Act, 1959. 11. We are of the considered view that the case law relied upon by the learned State Representative, viz., (1997) 107 STC 571 arose out of the interpretation of Section 6 of Karnataka Sales Tax Act, 1957, in the matter of levy of purchase tax. But in our case, we are concerned about the tax liability under Section 3(4) of the TNGST Act, 1959, which has been specifically considered and answered by the Honourable High Court of Madras in the above stated case. In this case, the Honourable High Court of Madras has held that the ratio held in 107 STC 571 could ....
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.... the case of State of Karnataka vs. B.M. Ashraf & Co. reported in 107 STC 571 wherein it was held that a sale deemed to be in the course of export under Section 5(3) of the Central Sales Tax Act, 1956 cannot be regarded as an intrastate sale? (4) . Whether the Appellate Tribunal is correct in construing that the levy of tax attracted under Section 3(4) of the Act in the event of export sale of the manufactured goods as being a direct levy on the export sale itself and thus contravening Article 286 of the Constitution? (5) Whether the Appellate Tribunal is correct in placing a construction on the expression "in any other manner" occurring under sub Section (4) of Section 3 of the Tamil Nadu General Sales Tax Act, 1959 would not include export sale within its ambit? (6) Whether the Appellate Tribunal has failed to appreciate that sections 3(3) and 3(4) of the Tamil Nadu General Sales Tax Act, 1959 are not designed as charging provisions as evident from the non-obstante clause occurring at the beginning of Section 3(3) of the said Act? (7) Whether the Appellate Tribunal has totally failed to consider that Tamil Nadu General Sales Tax Act, 1959 was enacted to levy tax on sales....
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....i) Explanation 3(a) to Section 2(n) of the Tamil Nadu General Sales Tax Act, 1959, reads as follows: "Explanation (3)- (a) The sale or purchase of goods shall be deemed for the purposes of this Act, to have taken place in the State, wherever the contract of sale or purchase might have been made, if the goods are within the State-- (i) in the case of specific or ascertained goods, at the time the contract of sale or purchase is made; and (ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale or purchase by the seller or by the purchaser, whether the assent of the other party is prior or subsequent to such appropriation." (ii) Sub-Sections (3) and (4) of Section 3 of the said Act, read as follows: "Section 3(3): Notwithstanding anything contained in (sub-section (2), (2-A) or (2-C), but subject to the provisions 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, and assembling, packing or labelling in connection with such manufacture inside the ....
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.... such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." 12. In Tube Investment of India Ltd., v. State of Tamil Nadu, reported in [2010] 36 VST 67 (Mad.), after considering a catena of decisions, a Hon'ble Division Bench of this Court, held as follows: "24. Under Section 3(3), the sale of any goods including consumables, packing materials and labels and excluding certain specific goods sold to another dealer for use by such dealer for manufacturing any other goods inside the State of Tamil Nadu for sale of any goods other than certain exempted goods, such sale would attract levy of only 3% by way of sales tax to be collected by the seller. The levy is however subject to Section 3(1) wherein the turnover limit for levy of tax has been prescribed. The proviso to Section 3(3) however makes it clear that any dealer after purchasing the goods by using Form-XVII violates the conditions of such purchase as stipulated in Section 3(3) and the declaration contained in Form-XVII but dispose of such goods in any other manner should pay the difference of tax payable on the turnove....
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....striction would have been clearly set out in the Section itself as has been provided in Sections 3(3), 7(A)(b) and 9(b) of the Act. 29. At the very outset, it will be worthwhile to make a mention about the restrictions imposed on imposition of tax by the State on Export sales under Article 286(1)(a) & (b) of the Constitution. In fact there is a Constitutional embargo on the States to enact any law providing for levy of tax both on interstate sale or purchase as well as export sale that takes place to any territory outside the country. The apparent purpose is quite clear that in the case of interstate sale the same is covered by the provisions of the Central Sales Tax Act in which the respective States get a part of the tax collection. As far as the export sales are concerned, it is needless to state that in the national interest, when by virtue of such exports, considerable foreign exchange is earned, by way of incentives and to augment more of such exports, the levy of any tax on such export sale is prohibited. 30. In fact under Section 5(3) of the Central Sales Tax Act, the last sale or purchase of any goods preceding the sale or purchase occasioning the export is also to be ....
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....dia (ii) Statutory law (which may be either Parliamentary law or law made by the State legislature). (iii) Delegated Legislation (which may be in the form of rules made under the statute, regulations made under the statute, etc) (iv) Purely administrative or executive orders." Applying the said principles to the facts of this case, as in the hierarchy of law, the Constitution provision will supersede any conflicting statutory provision, we hold that the interpretation sought to be laid on behalf of the State, to hold that Section 3(4) will apply to the export sale of the assesses will run counter to the well laid legal principles referred to above and the same cannot be countenanced. 33. On these grounds itself, it can be held that there would be no scope for invoking Section 3(4) in regard to the export sales of the goods manufactured. 34. When we examine the other submissions of the learned counsel appearing for the petitioners that the export sale is fully covered by the definition of 'sale' under Section 2(n) read along with Explanation 3(a) and thereby that is also a sale within the State, on that ground as well, no liability by way of tax can be fastened ....
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....ds so purchased by availing the concessional rate of tax under Section 3(3) of the Act. 40. In view of our above conclusions, we have no hesitation to hold that such an export sale cannot be brought under the set of expressions "in any other manner" as used in Section 3(4) of the Act. 41. As rightly contended by the learned counsel for the petitioners, the said set of expressions having been used following the expression "for sale" and applying the maxim Ejusdem Generis, it can only mean and taken to the effect that any despatch to a place outside the State either by way of branch transfer or by transfer to an agent by whatever manner called, either for sale or for any other purpose, certainly it cannot be attributed to an export sale. It would be directly covered by the definition of 'sale' under Section 2(n) of the Act and thereby would not come within the exclusion of sale. We therefore need not have to even deal with the submission based on the comparison made by making a reference to Section 7(a), 7(b) and 9(b) of the Act. 42. On behalf of the State, heavy reliance was placed upon the decision of the Hon'ble Supreme Court reported in (1997) vol 107 STC 571 (....
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....on'ble Supreme Court in the first blush, it does appear that irrespective of the fact that the sale of fish oil by the assessee therein was a sequel to an export order thereby governed by Section 5(3) of the CST Act, but, yet the Supreme Court held that such a sale cannot be construed as a 'Sale' in the State and consequently it does not fall within the Set of expressions specifically stipulated in Section 6(i) of the Karnataka GST Act. 44. But at the very outset, it will have to be stated that the said decision can be considered in the event of a question arising relating to the exigibility of tax (purchase tax) under Section 7-A of the Act. Consequently, it is relevant to note that in Section 6(i) of the Karnataka Act, a specific expression ' by way of sale in the State' has been used and the decision of the Hon'ble Supreme Court was primarily while interpreting the said expression contained in Section 6(i) of the Karnataka Act. It is well laid down principle that a judgment cannot be an authority for a proposition which was not canvassed before it. In this context, it will be appropriate to refer to the decision of the Hon'ble Supreme Court reporte....
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.... case, it will have to be held that the said decision rendered in the context of the specific provisions contained in Section 6(i) of the Karnataka Act cannot be mutatis mutandis apply to the case on hand where Section 3(4) are worded differently. While in Section 3(4) the qualifying words are 'does not sell the goods so manufactured' and the expression by way of sale in the State as contained in Section 6(i) of the Karnataka Act is significantly absent in Section 3(4). Therefore, what are to be examined while applying Section 3(4) is as to whether the dealer after availing the concession rate of sale under Section 3(3) failed to effect a sale. It is unnecessary for that dealer to establish that such a sale was a 'sale either by way of intra state sale or export sale'. Keeping the above specific content of Section 3(4) in mind, when we examine, the definition of sale as contained in Section 2(n) read along with explanation 3(a) of the Act, the position becomes clear to the effect that by virtue of the fact that the manufactured goods of the assessee is available in the State and by virtue of compliance of explanation of 3(a) to Section 2(n), the transaction of the a....
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....in language so clear that no human being could entertain a doubt about it". We think that in a taxing statute like the present which is intended to tax the dealings of ordinary traders, if the intention of the legislature were that in order to qualify a sale of goods for deduction, "resale" of it must necessarily be inside Delhi, the legislature would have expressed itself clearly and not left its intention to be gathered by doubtful implication from other provisions of the Act. The absence of specific words limiting "resale" inside the territory of Delhi is not without significance and it cannot be made good by a process of judicial construction, for to do so would be to attribute to the legislature an intention which has chosen not to express and to usurp the legislative function. ...." 47. Applying the ratio laid down therein and having regard to the specific provision contained in explanation 3(a) to Section 2(n) wherein, it has been specifically provided that by virtue of the said explanation and the satisfaction of which would include the sale or purchase of goods as deemed sale or purchase for the purposes of this Act and in the event of satisfaction of the stipulations co....
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....39; as contemplated in the first part of Section 3(4) of the Act and consequently the exigibility to tax as provided under the said Section cannot be applied. 49. On behalf of the assesses, reliance was placed upon 2002 8 SCC 139 (CEMENTO CORPORATION LTD VS. COLLECTOR, CENTRAL EXCISE). In paragraph 17, the Hon'ble Supreme Court held as under:- ".....17. In our view, the Tribunal and the Collector have incorrectly interpreted the provisions of Tariff Item 23 of the First Schedule to the 1944 Act. The tariff heading of the entry is "Cement.". Therefore when TI 23(2) speaks of "all others" it means "all other kinds or varieties of cement". It is axiomatic that if the product is not cement but can be used for some purposes like cement, such product is not cement. The test as enunciated by the Tribunal for determination of the question of classification is no doubt how the product is known to the trade. The appellant has produced evidence to show that lympo had never been known or indeed advertised as "cement" whether of a superior or inferior quality, but was known as a cement substitute. The respondents have produced nothing to show to the contrary. A substitute necessarily i....
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.... It necessarily means that the selling dealer will collect (pass on) tax from the purchasing dealer only at the said concessional rate. The idea behind this provision is self-evident. It is to ensure that the price of the product manufactured by such purchasing dealers does not go up to the detriment of the consumers of those goods. The Parliament does not want to tax both the raw material and the finished goods at the full rate. Where the finished goods are meant for sale, the raw material utilised or consumed for the manufacture of said finished goods is taxed at the concessional rate, for the reason that the State derives revenue again by taxing the sale of the finished goods. However, it is not necessary that the finished goods are actually subjected to tax on their sale ' for they may be exempted either by the Act or by a notification issued thereunder. It is enough that the finished goods are meant for sale. Ordinarily, of course, their sale is taxed. ....." Therefore, when a constitution embargo is created on export sales, on that sole ground, the contention of the respondent will have to be rejected. 53. The reliance placed upon the Division bench decision of this....
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....ving regard to the peculiar facts involved in that case, the decision rendered therein cannot be applied to the facts of this case. 55. Similarly, the Division Bench decision reported in 45 STC 291 (PONNU SAW MILLS VS. THE STTE OF TAMIL NADU) cannot also be applied inasmuch as the said decision came to be rendered while applying Section 7-A of the Act. Inasmuch as the said section varies in very many degrees as compared to 3(3) and 3(4) of the Act, the same cannot be applied to the facts of this case. Similar is the decision reported in 87 STC 315 (STATE OF TAMIL NADU VS. A.S.RAJ & CO.,). Therefore, the same cannot be applied to the facts of this case. 56. Having regard to our above conclusions, we hold that Section 3(4) of the Act will have no application since situs of the export sales of the petitioners for the purpose of said Section was the State of Tamilnadu and by virtue of the said factual position, the applicability of Section 3(4) stands excluded for the exigibility of tax. The questions are accordingly answered in favour of the petitioners/assessee." 13. In State of Tamil Nadu v. Essar Inc., reported in [2015] 79 VST 588 (Mad.), while considering the very identica....
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....ust follow the decision of a coordinate bench and take the same view as has been taken earlier. The earlier decision of the coordinate bench is binding upon any latter coordinate bench deciding the same or similar issues. If the latter bench wants to take a different view than that taken by the earlier bench, the proper course for it is to refer the matter to a larger bench. (iii) In State of Punjab v. Devans Modern Breweries Ltd., reported in (2004) 11 SCC 26, the Hon'ble Supreme Court, at Paragraph 339, held as follows: "339. Judicial discipline envisages that a coordinate Bench follow the decision of an earlier coordinate Bench. If a coordinate Bench does not agree with the principles of law enunciated by another Bench, the matter may be referred only to a larger Bench. (See Pradip Chandra Parija v. Pramod Chandra Patnaik, reported in 2003 (7) SCC 01, SCC at paras 6 and 7; followed in Union of India v. Hansoli Devi, reported in 2002 (7) SCC 01, SCC at para 2.) But no decision can be arrived at contrary to or inconsistent with the law laid down by the coordinate Bench. Kalyani Stores, reported in AIR 1966 SC 1686 and K.K. Narula, reported in AIR 1967 SC 1368, both have b....
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....1989 Crl.L.J 2065, a Hon'ble Division Bench of Jammu and Kashmir High Court, faced with a similar situation, like in the present case, has observed and ordered, as hereunder: "8. It is not disputed before us that SLP against the Court direction has been filled before the Supreme Court. It is also not disputed that no stay has been obtained against the implementation of the order but all the same the Court direction has been kept in abeyance by the respondent simply under the pretext of pendency of appeal before the apex Court against the Court order. There is no doubt that appeal against a judgment from one forum to another forum may be available under the Statute, the question is : Whether this provision even if availed by a party without obtaining a stay from the appellate Court will ipso facto keep the implementation of the order in abeyance? ......Non-compliance of the order during the pendency of appeal without stay order appears to us an attempt by a party to support his intention of not complying the Court direction. The, initiation of contempt proceedings for non-compliance of an order, in our opinion, will forestall only after service of stay order on the party provi....