1999 (3) TMI 603 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Constitutional validity of the words "within the State" in section 2(r) of the Tamil Nadu General Sales Tax Act, 1959.
2. Correctness of the assessment orders for the years 1983-84 to 1988-89.

Issue-wise Detailed Analysis:

1. Constitutional Validity of the Words "within the State" in Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959:

The petitioners challenged the validity of the words "within the State" in section 2(r) of the Tamil Nadu General Sales Tax Act, 1959, arguing that it discriminates against agricultural products grown outside Tamil Nadu. The petitioners contended that such discrimination violates Articles 301 and 304 of the Constitution, which ensure freedom of trade, commerce, and intercourse throughout India and prohibit discrimination against goods imported from other States.

The Tribunal examined Section 2(r) of the Act, which defines "turnover" and provides an exemption for agricultural or horticultural produce grown within the State. The petitioners argued that this provision unfairly discriminates against agricultural products from other States, such as cardamom grown in Kerala, which are subject to sales tax when sold in Tamil Nadu.

The Tribunal referred to various constitutional provisions and judicial precedents, including Articles 301 and 304, which prohibit discriminatory taxation against goods imported from other States. It was argued that the freedom of trade should not be impeded by regulations creating conditions for free movement of trade, and any restrictions must be reasonable and in the public interest.

The Tribunal also considered previous judgments, such as the Kerala High Court's decision in Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Sherneilly Rubber & Cardamom Estates Ltd., which held that taxing rubber produced outside the State while exempting locally produced rubber was discriminatory and void. The Supreme Court's decision in Shree Mahavir Oil Mills v. State of Jammu and Kashmir was also cited, where the Court held that exempting locally produced edible oil from sales tax while taxing imported edible oil was discriminatory and violated Article 304(a).

Based on these precedents, the Tribunal concluded that the words "within the State" in section 2(r) of the Act were discriminatory and violated Articles 301 and 304 of the Constitution. Therefore, the Tribunal struck down these words as ultra vires the Constitution.

2. Correctness of the Assessment Orders for the Years 1983-84 to 1988-89:

The Tribunal examined the assessment orders for the years 1983-84 to 1988-89, which levied sales tax on cardamom brought from Kerala and sold in Tamil Nadu. Given the conclusion that the words "within the State" in section 2(r) were unconstitutional, the Tribunal found that the levy of tax on cardamom was not sustainable.

The relief sought by the petitioners in various transferred petitions was granted as follows:

- In T.P. No. 690 of 1997, the petition was substantially allowed.
- In T.P. No. 894 of 1997, the order dated November 30, 1989, was quashed as the revision of assessment by the assessing officer was beyond his powers.
- In T.P. Nos. 725 and 726 of 1997, the assessees were allowed to move before the competent authority for rectification of the order within the prescribed time.
- The assessment orders in T.P. Nos. 727, 728, 729, and 785 of 1997 were set aside, and these petitions were allowed.

The Tribunal ordered that the judgment be observed and carried into execution by all concerned, and the petitions were allowed without costs.