TaxTMI 
TaxTMI 
2026 (7) TMI 1121
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.....No.6 of 2015 2003-2004 2 24 of 2024 M.T.S.A.No.475 of 2018 (TNGST) A.P.No.1 of 2016 2005-2006 3 30 of 2024 M.T.S.A.No.360 of 2018 TNVAT Act 2006 A.P.No.94 of 2015 2012-2013 4 28 of 2024 M.T.S.A.No.362 of 2018 TNVAT Act 2006 A.P.No.91 of 2015 2009-2010 5 27 of 2024 M.T.S.A.No.358 of 2018 TNVAT Act A.P.No.90 of 2015 2008-2009 6 26 of 2024 M.T.S.A.No.359 of 2018 TNVAT Act A.P.No.93 of 2015 2011-2012 7 25 of 2024 M.T.S.A.No.361 of 2018 TNVAT Act A.P.No.92 of 2015 2012-2013 2. The respondent/assessee are civil contractors and registered dealers under the Tamil Nadu General Sales Tax Act, 1959 herein after called as "TNGST Act 1959"and Tamil Nadu Value Added Tax Act, 2006 hereinafter called as "TNVAT Act 2006". They purchased sand, gravel and jelly from unregistered dealers, and such goods were utilised in the execution of works contracts. Hence, the Department invoked "Section 7-A of the TNGST Act, 1959" and "Section 12 of the TNVAT Act 2006" for levy of purchase tax and penalty under Section 16(2)(b) of the TNGST Act, 1959 and Section 27(3)(c) of the TNVAT Act, 2006 and issued demand notice....
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....der the fact that the respondent had purchased the sand, gravel and jelly from an unregistered dealer and the goods did not suffer tax at the earlier stage and therefore, it will attract the purchase tax under Section Section 12 of the TNVAT Act 2006? b. Whether the Tribunal failed to take note of the judgment of this Court in Rajapalayam Cotton Pressing Factory vs. The State of Tamilnadu reported in 2000 118 STC 24 wherein this Court held that where the goods have been purchased from an unregistered dealer and did not suffer tax at the earlier stage, it will attract the purchase tax under Section 12 of the TNVAT Act 2006? 6.Submission on the side of the Revenue: 6.1. The learned Government Advocate appearing for the Revenue submitted that the issue is no longer res integra, in view of the Constitution Bench judgment of the Hon'ble Supreme Court, wherein it was held that a works contractor purchasing materials such as sand, bricks and granite from unregistered dealers for execution of works contracts then he is liable for purchase tax. It was further submitted that Section 6-A of the Andhra Pradesh General Sales Tax Act is pari materia with Section 7-A of the Tamil N....
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....g incorporation of Section 3-B under the Tamil Nadu General Sales Tax Act, the legal position stood materially altered. 7.5. The learned counsel would further submit that once the works contractor had discharged tax liability on the deemed sale turnover under Section 3-B, the Revenue cannot once again invoke Section 7-A under the guise of purchase tax in respect of the very same goods utilised in the execution of the works contract. According to him, such a levy would amount to double taxation, which is impermissible in law. 7.6. It is his further submission that once the goods had already suffered tax at the earliest point and the deemed sale value had also been subjected to tax under Section 3-B, there is no scope for imposing an additional levy under Section 7-A. Therefore, the learned counsel seeks interference with, and setting aside of, the concurrent orders passed by the authorities below, by accepting the legal contention founded upon the applicability of Section 3-B of the Act. 7.7. The learned counsel would further contend that both the Appellate Authority as well as the Tribunal confined their discussion only with reference to Section 7-A of the Act and failed t....
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....u v. M.K. Kandaswami categorically held that Section 7-A is an independent charging provision enacted to plug leakage and evasion of tax and that the said provision operates independently of the other charging provisions of the Act. 8.5. The learned State Counsel would further submit that the very object of Section 7-A is to prevent evasion and to ensure that goods do not escape the tax net merely because the transaction was effected through unregistered dealers. Reliance was also placed upon the judgment of the Honourable Supreme Court in Hotel Balaji v. State of Andhra Pradesh wherein the constitutional validity and the independent character of purchase tax provisions analogous to Section 7-A were upheld and the Honourable Supreme Court recognised the legislative competence to impose purchase tax where goods had escaped levy at the earlier point. 8.6. The learned State Counsel further relied upon the judgment of the Honourable Supreme Court in Assistant Commissioner v. Nandanam Construction Company and contended that the ratio laid down therein squarely applies to the facts of the present case. According to him, the provisions under Section 7-A(1)(a) of the Tamil Nadu Gener....
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....dealers in execution of works contracts would attract liability under Section 7-A, notwithstanding the levy under Section 3-B. 8.11. It is therefore contended that when the seller is a registered dealer and tax has already been collected at the seller's point, purchase tax under Section 7-A would not arise. However, where the purchases are effected from unregistered dealers and no tax has been paid at the seller's point, the liability to purchase tax automatically shifts upon the purchaser under Section 7-A. Since, in the present case, the purchases were admittedly made from unregistered dealers, the authorities below rightly imposed purchase tax under Section 7-A and correctly completed the assessment in accordance with law. 8.12. Insofar as the contention relating to deemed sale is concerned, Section 3-B would apply only when there is a taxable transaction involving transfer of property in goods. In the present case, the authorities have concurrently found that the purchases were made from unregistered dealers. Therefore, there is no question of application of Section 3-B, and the contention of the assessee's that there was no loss of revenue cannot be accepted. 9. This ....
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....e purchase tax on works contract". 11.6. The said Section 7-A is both charging as well as remedial provision, the very object of the provision is to plug the leakage of revenue and prevent the evasion of tax. 11.7. The constitutional validity of Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 was initially challenged before the Full Bench of this Court in the decision reported in 1971 (28 STC 227). The Full Bench accepted the contention of the assessee and declared the provision ultra vires on the ground that Section 7-A was controlled by Section 3 of the Act. The said Full Bench judgment was challenged before the Supreme Court of India. The Hon'ble Supreme Court in the case of the State of Tamil Nadu -vs- M.K.Kandaswami and Others reported in (1975) 4 SCC 745 overruled the judgment of the Full Bench and categorically held that Section 7-A is not subject to Section 3 of the Act. The Apex Court further held that Section 7-A itself is an independent charging provision, and therefore the authorities are empowered to levy purchase tax upon the assessee liable under the said provision and the relevant paragraph no.34 of the judgment reads as follows: "34. In our....
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....titution Bench of the Hon'ble Supreme Court in the case of Asstt. Commr. (Intelligence) v. Nandanam Construction Co. reported in (1999) 8 SCC 69 and the relevant paragraph is as follows: "11. We are concerned in this case only with subclause (a) of clause (ii) of Section 6-A, that is, either consumption of such goods in the manufacture of other goods for sale or otherwise. Clause (ii) of Section 6-A of the Act postulates levy of tax on purchase of goods from a person other than a registered dealer for consumption or disposal or despatch of goods outside the State. So the scheme of clause (ii) of Section 6-A of the Act is that when the goods cease to exist in the original form or cease to be available in the State for sale or purchase, the purchasing dealer of such goods is liable to tax if the seller is not or cannot be taxed. To our mind, it appears that the object of Section 6-A(ii)(a) of the Act is to levy purchase tax on goods consumed either for the purpose of manufacture of other goods for sale or consumed otherwise. If the view in Pio Food Packers [1980 Supp SCC 174 : 1980 SCC (Tax) 319 : (1980) 3 SCR 1271] is accepted the result would be that the expression "ot....
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....ods in the construction of buildings, which is an immovable property and can in no sense be called "other goods". In our view, clause (a) can be invoked only when the purchasing dealer consumes the goods purchased in the manufacture of other movable properties and not when the goods purchased are in the construction of buildings, which cannot be held to be a movable property." 11.13. This Court is unable to concur with the finding of the both appellate authority and the tribunal that the authority has no jurisdiction to impose the sales tax under Section 7-A of the TNGST Act and Section 12 of the TNVAT Act in view of the Constitution Bench judgment of the Hon'ble Supreme Court in the case of Asstt. Commr. (Intelligence) v. Nandanam Construction Co. reported in (1999) 8 SCC 69. Our view also is supported by the various Division Benchs of this Court in the cases of State of Tamil Nadu -vs- Pari Trading Co. reported in 2010 SCC OnLine Mad 6578, Ruchi Soya Industries Limited -vs- Commercial Tax Officer and Ors. reported in (2008) 12 VST 546 (Mad). 11.14. A similar case under the provision under TNVAT Act was elaborately dealt by the Hon'ble Judge of this Court in the case....
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.... to the provisions of sub-section (1) of section 3, every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods, the sale or purchase of which is liable to tax under this Act in circumstances in which no tax is payable under sections 3 or 4, as the case may be, not being a circumstance in which goods liable to tax under sub-section (2), (2A) or (2C) of section 3 or section 4, were purchased at a point other than the taxable point specified in the First, the Fifth, the Eleventh or the Second Schedule], respectively, and either,- 12. Levy of purchase tax.-(1) Subject to the provisions of subsection (1) of section 3, every dealer, who in the course of his business purchases from a registered dealer or from any other person, any goods (the sale or purchase of which is liable to tax under this Act), in circumstances in which no tax is payable by that registered dealer on the sale price of such goods under this Act, and either- (a) consumes or uses such goods in or for the manufacture of other goods for sale or otherwise ; or (a) consumes or uses such goods in or for the manufacture of other goods for sale or otherwise ; ....
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....within any of the manner or falls within the circumstances set out in clauses (a) to (d) to section 12 of the TNVAT Act, including goods so purchased being despatched to a place outside the State otherwise than by way of sale in the course of inter-State trade or commerce." 11.15.Both appellate authority and the tribunal failed to consider the above settled law. In view of the above law laid down by the Hon'ble Supreme Court that the assessee's engaged in work contract namely construction work for which they buy the material such as sand and bricks from the persons other than the registered dealers are liable to pay purchase tax under the relevant provisions of the sales tax, this Court finds perversity in the impugned orders of both appellate authority and tribunal. In the result, the impugned orders are liable to be set aside and we hold the order of assessment is in accordance with law and within jurisdiction. 11.16. To consider the further submission of the learned counsel appearing for the assessee relating to the deemed sale under Section 3-B of the TNGST Act, it is relevant to look into the provisions of Sections 3-B(1) and 3-B(2)(b) of TNGST Act: "Section....