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2016 (5) TMI 1037 - HC - VAT and Sales TaxLiability of purchase tax - Inter-state stock transfer made to their own branches located in other States effected from the warehouse located in the Special Economic Zone - Appellant contended that they have an exemption by virtue of Section 12(1)(a) of TNSEZ Act, 2005. Such exemption as every developer or entrepreneur is entitled to exemption from the levy of taxes both on the sale as well as the purchase of goods, if such goods are meant to carry on the authorized operations. Held that:- it is clear from the Letter of Approval that the appellant was obliged primarily to export the goods procured for trading and services. But, since the appellant was obliged to achieve positive net foreign exchange, only over a period of time, the Letter of Approval specifically permits the appellant to supply/sell goods or services in the DTA. Condition Nos.(i) and (v), if read harmoniously, would show that an export obligation is imposed upon the appellant, not with the idea of making the appellant a 100% export oriented unit. The appellant is entitled to apportion their exports and domestic sales in such a manner that they achieve a positive net foreign exchange within the stipulated period. Therefore, the inter state stock transfer made by the appellant to its own branches located outside the State, is very clearly authorised by Condition No.(v) of the Letter of Approval. Hence, the Department as well as the learned Judge were in error in thinking that an inter-state stock transfer would not come within the purview of the expression authorised operations. Whether the right conferred upon a developer or entrepreneur under Section 12(1) is circumscribed by the provisions of Section 15(a) of the TNSEZ Act, 2005 - removal of goods from the SEZ to the Domestic Tariff Area - Held that:- a direct export from a unit located in a SEZ to a foreign country cannot take place without the goods being removed from the SEZ to the Domestic Tariff Area, unless an airport or seaport is also located within the SEZ. Similarly, a direct sale to a local purchaser within the State cannot also take place without the goods being removed from the SEZ to the DTA. Likewise, an inter-state sales in terms of the Central Sales Tax Act cannot also take place without the goods being removed from the SEZ to the DTA of the State, within which, the SEZ is located. The expression "removed from a SEZ to a DTA" appearing in Section 15(a) has to be correlated to a taxable event. This is made clear by the rider contained in the last part of Section 15(a). This rider reads as "where applicable as leviable on such goods when imported". The fallacy in the interpretation given by the respondents to Section 15(a) could be understood very easily by looking at it from another angle. The respondents agree that if an export takes place from a unit located in SEZ to a foreign country, Section 15(a) does not get attracted even if the goods are removed from the SEZ to a DTA. The respondents also agree that even in cases where an inter-state sales takes place from a unit located in a SEZ, Section 15(a) does not have any application, despite the goods being removed from the SEZ to a DTA. Whenever a direct sale takes place from a unit located in SEZ to a local purchaser within the State, the chargeability of tax arises not because of the removal from SEZ to DTA, but because of the taxable event namely sale. Therefore, if the expression "removed" has to be understood in one particular manner in respect of three contingencies namely (i) export (ii) direct sales and (iii) inter-state sales, it cannot be understood differently in the context of inter-state stock transfer alone. Therefore, Section 15(a) does not actually circumscribe Section 12(1)(a) of the Act. We have already indicated four possible scenarios. At least in two out of those four scenarios, namely in the case of export and in the case of inter-state sales, the State, in which, SEZ is located is deprived of its revenue. - Decided in favour of appellant
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