This revision challenged the Tribunal's order on exemption for export packing materials and levy of Additional Sales Tax before the amendment threshold. The High Court found no error in the Tribunal's order and dismissed the revision.
The Tax Case Revision is dismissed; no costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 19.02.2018
CORAM:
THE HONOURABLE MR.JUSTICE S.MANIKUMAR AND
THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN
T.C.(R).No.23 of 2018 The Deputy Commissioner (CT), State of Tamil Nadu, Tirunelveli Division, Tirunelveli - 627002. .. Petitioner Vs. Tvl. R.P.Tikmany, No.38, Virudhunagar Road, Sivakasi. .. Respondent
Prayer: Tax Case Revision Petition filed under Section 38 of the Tamil Nadu General Sales Tax Act, 1959, to revise the order dated 30.12.2003, passed in M.T.S.A.No.176 of 2003, on the file of the Tamil Nadu Taxation Special Tribunal, Chennai.
For Petitioner : Mr.V.Haribabu Additional Govt. Pleader (Taxes)
ORDER
(Order of this Court was made by S.MANIKUMAR, J.)
Tax Case Revision is filed to revise the order of the Tamil Nadu http://www.judis.nic.in Taxation Special Tribunal, Chennai dated 30.12.2003, passed in M.T.S.A.No.176 of 2003.
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2. Short facts leading to the Tax Case Revision are that the
respondent, Thiru.R.K.Tikmany, Sivakasi, was finally assessed by the Deputy Commercial Tax Officer-IV, Sivakasi, in his original assessment by determining the total and taxable turnover of Rs.68,66,088/-, as against the reported total and taxable turnover of Rs.16,15,840/- for the year
1996-97, under TNGST Act, 1959.
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the respondent preferred an appeal in Appeal No.240/2000 before the Appellate Assistant Commissioner (CT) Virudhunagar, disputing the entire addition of a turnover of Rs.52,50,248/- and penalty amount of Rs.6,03,253/- under Section 12(3)(b) of the Act and Rs.110/- under Section 22(2) of the Act.
Commissioner, deleting the turnover of Rs.18,58,807/- assessed to tax for
two different periods and Additional Sales Tax of Rs.27,401/-, revenue has filed an appeal in M.T.S.A. No.176 of 2003.
that were used, as packing materials for the packing of goods, sale of
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which fall under Section 5(1) of the CST Act, 1956, alone are eligible for exemption, as per the Government Notification. Here the respondent has sold paper board and this paper board had been used for making paper cartons and they were used as packing materials. Hence, they stated that the order of the Appellate Assistant Commissioner in deleting the sales of packing materials effected to exporters, from assessment to tax liability,
is incorrect.
the Assessing Officer, including the penalty levied under Section 12(3)(b)
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of the Act.
decision reported in 99 STC 35 .
Assistant Commissioner, the respondent has submitted that the Appellate http://www.judis.nic.in Assistant Commissioner has correctly set aside the levy of Additional Sales
Tax, which has to be calculated at the end of the financial year and on
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calculation, if the taxable turnover does not exceed Rs.100/- crores, the
question of levy of Additional Sales Tax does not arise. The dealer further submitted that as their turnover did not reach 100 Crores of rupees, levy of Additional Sales Tax, deleted by the Appellate Assistant Commissioner is quite correct and in accordance with the provisions of the Act. Thus,
the dealer prayed to dismiss the appeal filed by the Revenue.
circumstances of the case and after considering the materials available on record, the Tribunal passed the following order:
"a) Now the point before us is whether the respondents
is eligible for sale of paper which has been used as packing materials by the exporter is liable for exemption under Section 5(1) of the CST Act, 1956? It is an admitted fact that sale of packing material to exporter is also exempted as per the Notification relied on by the learned Authorised Representatives, provided the seller had produced the certificate issued by the exporter to the effect that the packing materials had been used for packing the goods exported by him. In this case, the view of the appellants/revenue is that the exporter had not used the paper board as packing materials but used the paper board for conversion of packing cases. The learned Appellate Assistant Commissioner verified the fact and found that the respondents had produced the certificate issued by the exporters for having utilised the paper as packing material.
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In this case, there is no dispute that the paper has been used as packing material or used for conversion of packing cases. As per the decision relied only by the learned Additional State Representative which has been relied on by the Appellate Assistant Commissioner, the Honourable Higher Appellate Forum held that paper means writing paper, packing paper, drawing paper etc. In this case, one of the use of the paper is as packing material. It is also covered by the certificate issued by the respondents which is in accordance with Notification issued by the Government of Tamil Nadu. Even assuming that the buyer had converted the paper into cartons the purpose is for packing goods intended for export. In the above circumstances, we are of the view that the respondents are eligible for the claim in respect of the sale of paper to the exporter either for packing the goods or for converting it into packing case, because the buyer had utilised the paper for packing the goods intended for export. Therefore, we uphold the view of the learned Appellate Assistant Commissioner and the prayer of the appellants/revenue to restore the tax levied on the turnover of Rs.18,58,807/- is not sustainable.
b) Regarding the points mentioned by the Appellate Assistant Commissioner in his order that the respondents had purchased paper against Form XVII, there is no offence committed by the assessee/respondents. We have not gone into the fact, because this point had been disputed before us.
c) The next point prayed by the appellants/revenue is to restore the Additional Sales Tax deleted by the learned
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Appellate Assistant Commissioner. In this case, the total turnover of the assessee/respondents had not crossed 100 crores during the financial year. Therefore, he has ordered to delete the Additional Sales Tax levied by the Assessing Officer holding that the turnover for the year cannot be split during the relevant period up to 31.7.96 as the turnover for the year 1996-97 had not exceeded 100 crores. The prayer by the appellants/revenue is that the provision to levy Additional Sales Tax up to 31.7.96 was Rs.10 Lakhs and as the turnover had exceeded Rs.10 Lakhs, Additional Sales Tax is leviable for the turnover up to 31.7.96. They also relied on the decision of the Honourable Tamil Nadu Taxation Special Tribunal, Chennai in the case of Tvl.Sri Murugan Timber Traders, Tenkasi vs. C.T.O. Tenkasi in O.P. No.410/2001 dated 10.7.2001. In the above case, the Honourable Tamil Nadu Taxation Special Tribunal, Chennai, upheld the levy of Additional Sales Tax in respect of the turnover for the period from 01.04.1996 to 31.07.1996 it is exceed Rs.10 Lakhs. The learned Authorised Representative at the time of hearing as well as in his written argument had not raised any point against the prayer of the appellants/revenue. Accordingly, by following the decision of the Hon'ble Tamil Nadu Taxation Special Tribunal, Chennai, and we are of the view that the learned Appellate Assistant Comissioner is not correct in deleting the Additional Sales Tax levied on the disputed turnover. Accordingly, we restore the Additional Sales Tax of Rs.27,401/- which was deleted by the Appellate Assistant Commissioner.
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In the result, the State appeal stands modified."
Revision, on the following grounds:-
“(i) The Tribunal failed to note that the first appellate authority had erred in deleting the turnover, because it is not clear that the sale of packing materials effected by the dealer is an outright sale. The dealer in this case had sold the duplex board to Limtex India Ltd, who had converted the same into cartons and used it for their export purpose as packing material. Therefore, they are not eligible to claim exemption as per section 5(3) of the CST Act because the transaction took place outside the State of Tamil Nadu and that the goods exported are different commodities. Therefore, the assessment made in the instant case is quite reasonable and justified.
(ii) The Tribunal erred in observing that no additional sales tax is leviable if the turnover falls below 100 crores.
(iii) The finding of the Tribunal that the taxable turnover for the assessment year cannot be split for the purpose of additional sales tax is based on erroneous understanding of law.
(iv) The Tribunal has erroneously held that since the taxable turnover did not exceed Rs.100 crores, the levy of additional sales tax till 31.07.1996 is invalid.
(v) The decision of the Tribunal is contrary to the view passed by the Hon'ble Special Tribunal in O.P. No.739/99 dated 22.6.99 and in O.P. No.1601/99 dated 21.1.2000 (Geethanjali Case) wherein it is held that additional sale tax
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was adopted for the taxable turnover up to 31.7.96 i.e. from 1.4.96 to 31.7.96. The Government have also in their No.1591/D2/99-8 dated 25.5.2000 instructed to work out the levy of additional sales tax as per the amended provisions only from 1.8.96 and the earlier provisions for the period up to 31.7.96, the Commissioner of Commercial Taxes also had issued clarification in Ref. BD3/88803/96 dated 31.7.2000 in this regard. The Tribunal also has in its decision rendered in 661, 662, 645, 646 dated 6.11.2000 upheld the levy of AST for the period from 1.4.96 to 31.7.96."
Coimbatore has contended that the Appellate Tribunal failed to appreciate that the Additional Sales Tax is leviable for the period from 01.04.1996 to 31.07.1996, since the turnover exceeded ten lakhs. The Tribunal failed to consider that enhancement of exemption from 10 lakhs to 100 crores, was made only with effect from 01.08.1996, by Amendment Act 31 of 96, and the threshold limit was increased only with effect from 01.08.1996 and therefore, according to the petitioner, till 31.07.1996, the levy of Additional Sales Tax should be made, as per the existed section 2(1)(a) of the Tamil Nadu General Sales Tax Act, 1959.
Tvl.Geethanjali Mills v. Commercial Tax Officer, Sankarankoil http://www.judis.nic.in
[O.P.No.739 of 1999, dated 22.06.1999], the Special Tribunal held that
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there is liability to pay Additional Sales Tax upto 31.07.1996, if the
taxable turnover exceeds to Rs.10 lakhs. He further submitted that the
Tribunal erred in not considering the fact that the amendment of Section 2(1)(aa), in which, the upper limit of taxable turnover of Rs.100 crores,
came into force with effect from 01.08.1996 and that the dealer's turnover upto 31.07.1996, exceeded Rs.10 lakhs, which is liable for Additional Sales Tax, as decided by this Court in Tvl. National Time Co.
reported in 39 VST 247.
Heard Mr.V.Haribabu, learned Additional Government Pleader
(Taxes), and perused all the materials available on record.
provision dealing with levy of additional tax, in the case of certain
dealers, in Tamil Nadu Additional Sales Act, 1976.
by the Tamil Nadu Amendment Act 37 of 1999. Section 2(1)(aa) was
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inserted, reproducing the very language of Section 2(1)(a), with slight modification in the quantum of taxable turnover and the rate of tax. Section 2(1)(aa) of the said Amendment Act, is extracted hereunder:
"The tax payable under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) (hereinafter in this section referred to as the said Act),shall, in the case of a dealer including the principal selling or buying goods through agents whose taxable turnover for a year exceeds ten crores of rupees, be increased by an additional tax, calculated at the following rates, namely :-
Rate of tax
(i) Where the taxable turnover exceeds ten crores of rupees, but does not exceed twenty five crores of rupees :
1% of the taxable turnover
(i-a) Where the taxable turnover exceeds twenty five crores of rupees, but does 1.5 percent of the not exceed fifty crores of rupees : taxable turnover
(ii) Where the taxable turnover exceeds fifty crores of rupees, but does not 2 percent of the exceed one hundred crores of rupees : taxable turnover
(iii) Where the taxable turnover exceeds one hundred crores of rupees, but does 2.5 percent of the not exceed three hundred crores of rupees : taxable turnover
(iv) Where the taxable turnover exceeds 3 percent of the three hundred crores of rupees : taxable turnover
Explanation I : 'Taxable Turnover' for the purpose of this clause in respect of a principal selling or buying goods [...] through agents shall be the aggregate taxable turnover of all his agents relating to the sale or purchase of the goods
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of such principal within the State.
Explanation II : Notwithstanding anything contained in the said Act, for the purpose of this clause, 'turnover' in respect of sugarcane excluding sugarcane setts shall be arrived at by multiplying the total metric tonnes of sugarcane excluding sugarcane setts purchased during the year, by the minimum price fixed under Clause 3 and the additional price determined under Clause 5-A, of the Sugarcane (Control) Order, 1966 and such turnover shall be included in the total turnover of the dealer and the taxable turnover shall be arrived at accordingly for the purpose of this clause.
Explanation III : 'Taxable turnover' for the purpose of this clause in respect of a dealer liable to pay tax under Section 3-G of the said Act shall be the total turnover.
Explanation IV : 'Taxable turnover' for the purpose of this clause does not include the turnover of resale, taxable under Section 3-H of the said Act.
Explanation V : 'Taxable turnover' for the purpose of this clause in respect of a dealer liable to pay tax under Section 7-C of the said Act for the financial years commencing on the 1st day of April 1993, shall be the total value referred to in the said section."
the case of State of Tamil Nadu v. National Time Co. reported in [2011]
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39 VST 247 (Mad), wherein, it has been held that after taking the taxable
turnover for the entire year, the taxable turnover upto the date of amendment has to be assessed with reference to the relevant tax rate therein applicable to the period.
"The vital question required to be considered in this revision is, as to how to apply Section 2(1)(a) of the Tamil Nadu Additional Sales Tax Act, 1970, which existed prior to Act 31 of 1996, since by Act 31 of 1996, the previous section 2(1)(a) came to be amended and after the amendment, Section 2(1)(a) and 2(1)(aa) came to be introduced. Further, Act 31 of 1996 was the subject matter of challenge before the Tamil Nadu Taxation Special Tribunal, in which the Tribunal rendered a judgment in Siemens Limited v. State of Tamil Nadu reported in Vol. 110 (1998) S.T.C. 313. The Tribunal struck down the amended Section 2(1)(a) and also deleted certain words in the newly inserted Section 2(1)(a) of the Tamil Nadu Act 31 of 1996. In the light of the above preamended Section 2(1)(a) and the amended Section 2(1)(a) and 2(1)(aa) as well as striking down of the provisions to the extent referred to in the above judgment of the Special Tribunal, the question to be considered is as to in what manner the additional sales tax liability of the respondentassessee is to be determined."
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Both amended and unamended provision, extracted in the above reported
case, is extracted hereunder:
"3. In order to appreciate the contentions raised, it is better to note the un-amended provision as well as the amended provisions and the provision as it stands after the judgment of the Special Tribunal.
Rate of tax (i) Where the taxable turnover exceeds ten lakhs of rupees but does not exceed one crore of rupees.
Provided that no additional tax shall be payable under this item for the first ten lakhs of rupees of the taxable turnover - 1.5 per cent of the taxable turnover
(ii) Where the taxable turnover exceeds one crore of rupees but does not exceed five crores of rupees - 2 per cent of the taxable turnover
(iii) Where the taxable turnover exceeds five crores of rupees but does not exceed ten crores of rupees - 2.25 per cent of the taxable turnover
(iv) Where the taxable turnover exceeds ten crores of rupees but does not exceed three hundred crores of rupees - 2.5 per cent of the taxable turnover
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(v) Where the taxable turnover exceeds three hundred cores of rupees 3 per cent of the taxable turnover Provided that where in respect of declared goods as defined in clause (h) of Section 2 of the said Act, the tax payable by such dealer under the said Act, together with the additional tax payable under this sub-section, exceeds four per cent of the sale or purchase price thereof, the rate of additional tax in respect of such goods shall be reduced to such an extent that the tax and the additional tax together shall not exceed four per cent of the sale or purchase price of such goods."
Amendment of Section 2:- In section 2 of the Tamil Nadu Additional Sales Tax Act, 1970 (hereinafter referred to as the principal Act), in sub-section (1)--
(i) in clause (a), for the word "dealer" the words "casual trader or agent of a non-resident dealer or a local branch of a firm or company situate outside the State" shall be substituted;
(ii) after clause (a) and before the proviso thereto, the following shall be inserted, namely:-
"(aa) The tax payable under the said Act, shall in the case of a dealer including the principal selling or buying goods in this State though agents other than the casual trader or agent of a non-resident dealer or a local branch of a firm or company situated outside the State whose taxable turnover for a year exceeds one hundred crores of rupees, be increased by an additional tax calculated at the following rates, namely:-
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(i) Where the taxable turnover exceeds one hundred crores of rupees but does not exceed three hundred crores of rupees Rate of Tax - 2.5 percent of the taxable turnover;
(ii) Where the taxable turnover exceeds three hundred crores of rupees 3 per cent of the taxable turnover
Explanation:- 'Taxable turnover' for the purpose of this clause in respect of a principal selling or buying goods in this State through agents shall be the aggregate taxable turnover of all his agents relating to the sale or purchase of the goods of such principal within the State."
In the above reported case, the Hon'ble Division Bench considered the decision of the Special Tribunal in Siemens Limited v. State of Tamil Nadu reported in Vol. 110 (1998) S.T.C. 313, as follows:
"To give effect to the said intention we proceed to hold that clause (a) of sub-section (1) of Section 2 of the Principal Act, namely, Act 14 of 1970 is ultra vires and should stand deleted. We make it clear that we are striking down only clause (a) of Section 2(1). We also make it clear that under Section 2(2) and 2(3) the intention of the Legislature not to pass on the burden of additional sales tax to the consumers and the reference to prosecution, shall stand unaltered. So far as Section 2(1)(aa) as amended by Tamil Nadu Act 31 of 1996, the following words shall stand deleted, as obnoxious:
(1) The words "in this State" after the words, "Principal selling or buying goods" in Section 2(1)(aa) as well as in
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Explanation to Section 2(1)(aa).
(2) The words "other than a casual trader or agent of a non-resident dealer or a local branch of a firm or company situated outside the State" in Section 2(1)(aa)."
If the above directions are carried out, the exemption granted upto rupees one hundred crores will be equally applicable to all dealers. The O.Ps. are allowed and ordered in the above terms. There will be no order as to costs."
Considering the submissions and the facts and circumstances of the case, the Hon'ble Division Bench of this Court, in the above reported case, held as follows:
"8. With the statutory provisions prevailing as above during the assessment year 1996-97, the order of the Assessing Authority as well as that of the Appellate Tribunal has to be examined.
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the expression "year" in the Tamil Nadu General Sales Tax Act, though means the 'financial year', the same will not in any way affect the authority of the Assessing Officer to determine the tax liability as per the prevailing rate, which was applicable in that year up to 31.7.1996 and for the period subsequent to 1.8.1996.
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Section 2(1)(a) after its amendment has to be re-examined, we are of the view that such a question does not arise for consideration here, inasmuch as, we are concerned with the assessment year 1996-97 and with reference to the said assessment year, it was never in dispute that the amended Sections 2(1)(a) and 2(1)(aa) were effective from 1.8.1996. Therefore at the outset, we are not persuaded to consider the said submission of the learned counsel for the respondent.
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exercise to be carried out would be to ascertain the period for which the different rates of tax are to be worked out. In our considered view, such prescription of different rates in that financial year will not in any way affect the very basis of the liability created. Once we steer clear of the said position, we do not find hurdle at all in bifurcating the financial year in the case of any assessee, while applying the un-amended Section 2(1)(a) upto 31.7.1996 and the liability after its amendment on and after 1.8.1996, for the purpose of calculating the additional sales tax liability.
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additional sales tax would arise only if the taxable turnover for the whole of the financial year exceeded one hundred crores of rupees and even in such a situation, while for the period up to 31.7.1996, the liability will have to be worked out as per the provision which was prevailing upto that date namely, the unamended Section 2(1)(a) and that for the period subsequent to 1.8.1996 up to 31.3.1997 for the taxable turnover generated on and after 1.8.1996 alone, the applicable rate of tax will have to be calculated.
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the taxable turnover did not exceed one hundred crores, there would be no necessity to make any further calculation for the period beyond 31.7.1996. The Assessing Authority calculated the additional sales tax at the rate of 2% on the taxable turn over for the whole of the year.
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the sum of Rs.44,97,880/- (i.e.), after deducting the first ten lakhs as provided under the proviso to sub-clause (i) of Section 2(1)(a).
Tamil Nadu v. Kirthilal Kalidas & Co., reported in (2014) 70 VST 359, following the decision in State of Tamil Nadu v. National Time Co.
[2011] 39 VST 247 (Mad), and while setting aside the order of the Sales Tax Appellate Tribunal, remanded the matter back to the assessing
officer to work out the liability based on the decision of this court and thus, taking the taxable turnover for the entire year, the taxable turnover up to the period July 31, 1996, has to be worked out to attract the liability at the rates specified therein and beyond that, the liability of the
turnover has to be worked out based on the amended provision depending
on the taxable turnover crossing rupees 100 crores for the whole year.
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S.MANIKUMAR, J. AND V.BHAVANI SUBBAROYAN, J.
asr/skm
T.C.(R).No.23 of 2018
2 issues framed by the court
Whether the Tribunal correctly held that the petitioner was eligible for exemption on sales of packing materials used for export.
Whether Additional Sales Tax is leviable on turnover exceeding ten lakhs but not exceeding one hundred crores for the financial year 1996-97.
Colour shows how this judgement treated each authority
Sri Murugan Timber Traders vs. C.T.O. TenkasiDistinguished¶8
Sri Murugan Timber Traders, Tenkasi vs. C.T.O. Tenkasi [O.P.No.410/2001, dated 10.7.2001]
Tvl. Geethanjali Mills v. Commercial Tax OfficerDistinguished¶72
Tvl. Geethanjali Mills v. Commercial Tax Officer, Sankarankoil [O.P.No.739 of 1999, dated 22.06.1999]
National Time Co.Followed¶78
Tvl. National Time Co. 39 VST 247
State of Tamil Nadu v. National Time Co.Explained¶106
State of Tamil Nadu v. National Time Co. [2011] 39 VST 247 (Mad)
State of Tamil Nadu v. Kirthilal Kalidas & Co.Distinguished¶177
State of Tamil Nadu v. Kirthilal Kalidas & Co. (2014) 70 VST 359
99 STC 35Referred¶36
122 STC 100Referred¶8
6 provisions across 3 enactments
Tvl. R.P.Tikmany
Deputy Commissioner (CT), State of Tamil Nadu, Tirunelveli Division
S.Manikumar
V.Bhavani Subbarayan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
