TMI Blog2015 (2) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... ut tax credit or refund the sale should fall within one of the three categories mentioned above. Sub-Section (2) has to be read along with sub-section (1) of Section 18, and cannot be divested or segregated to be read only with clauses (i) & (iii) of sub-section 18(1), the statute does not made any such distinction between the transactions mentioned in clauses (i) (ii) & (iii) in Section 18(1) all being classified as a zero rated transactions. Therefore, to state that sub-section (2) of Section 18 will not apply to clause (ii) of Section 18(1) amounts to inserting a new provision to the statute when the statute does not contemplate of such situation/contingency. In terms of Rule 22 of the CSEZ Rules 2006, grant of exemption, drawbacks and concession to the entrepreneur or Developer shall be subject to conditions contained therein. Therefore, the scheme of the CSEZ Act, TNSEZ Act and the Rules make the position clear that benefit is intended to the SEZ unit for the authorised operations which essentially is the export activity for which approval has been granted. Hence, the contention raised by the petitioners is not tenable. Provisions of Section 21 of the Gujarat SEZ Act h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra vires to the provisions of the Tamil Nadu Value Added Tax Act and it is not violative of Article 14 of the Constitution of India or irrational. - The proposal to levy penalty in the impugned pre-revision notices are set aside. - Petition disposed of. - W.P. No.21453 of 2008, W.P.No.1304 of 2010, W.P.Nos.13187 to 13190 of 2011, W.P.Nos.18240 to 18242, 5187 to 5189, 1238 to 1241, 5471 & 5472 of 2012, W.P.Nos.35239 to 35243, 16938, 4677 & 4678, 22810 & 22811, 6630 & 6631 of 2013, W.P.Nos.4128 to 413 - - - Dated:- 9-1-2015 - Mr. T.S. SIVAGNANAM, JJ. For The Petitioners : Mr.N.Prasad, Mr.R.L.Ramani Senior counsel, Mr.V.Sundareswaran, Mr.D.Vijayakumar, M/s.R.Hemalatha, Mr.Mohammed Gahafoorur Rahman, M/s.Aparna Nandakumar, Mr.P.Rajkumar, Mr.Bharat Rai Chandhani, Mr.K.Vaitheeswaran, M/s.C.Rekha Kumar, Mr.C.Baktha Siromoni, Mr.R.Senniappan And Mr.Joseph Prabakar For The Respondents : Dr.Anita Sumanth Assisted by Mr.Manokaran Sundaram AGP, Mr.V.Haribabu And Mr.Cinbivishnu COMMON ORDER The issue involved in all these cases being identical, they were heard together and are disposed of by this common order. 2. The matter arises under the provisions of the Tamil Nadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractors who have entered into agreement with a company for construction of their unit in a SEZ. In W.P.No.11808 of 2014, the petitioner is engaged in the manufacture of construction machinery used for production of readymix concrete used for construction activities supplied to SEZ units. In W.P.Nos.23673 and 23674 of 2014, the petitioners are executing works contract for SEZ units and developers in the State. In W.P.No.16938 of 2013, the petitioner has effected sales to units located in SEZ. In W.P.Nos.14847 14848 of 2014, the petitioner is a manufacturer and trader of measuring machinery and effected sales to units situated in the SEZ. In W.P.Nos.6555 and 6556 of 2014, the petitioners are job work contractors who have done interior decoration work for units located in SEZ. The petitioners in W.P.Nos.4677 4678 of 2013 and W.P.Nos.16571 16572 and 15995 to 15997 of 2014, have executed works contract in interior decoration to SEZ and sold furniture to the SEZ or its Developer or Co-Developer. The petitioners in W.P.Nos.22810 22811 of 2013, have executed civil work for a developer of SEZ. The Petitioners in W.P.Nos.5187 to 5189 of 2012, have executed works contract for Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with exemptions, draw backs and concessions to every developer and entrepreneur. It is submitted that the Tamil Nadu Government enacted the Tamil Nadu Special Economic Zone (Special Provisions) Act, 2005, and in terms of Section 12(1)(a) of the State Act, every developer or entrepreneur shall be entitled to various exemptions and one such exemption is from levy of tax on the sale or purchase of goods under the TNGST Act, if the goods are meant to carry on the authorised operations by the developer or entrepreneur. Therefore, by virtue of both the Central Act and in particular the State Act exemption is granted on the sale or purchase of goods, if the goods are meant to carry on authorised operations. It is submitted that Section 18 of the TNVAT Act provides for zero rating consisting of two sub-sections; under Section 18(1) there are three sub-clauses and by virtue of sub-clause (ii) of Section 18(1) sale of goods to any registered dealer located in SEZ , if such registered dealer has been authorised to establish such unit by the authority specified by the Central Government in this behalf shall be entitled for input tax credit or refund of the amount of tax paid on the purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice to the contracts under Section 18(1)(ii) of TNVAT Act, they are independently governed by notification in G.O.Ms.No.193, dated 30.12.2006, issued under Section 17(1) of the erstwhile Tamil Nadu General Sales Tax Act, which continuous to have binding effect by virtue of Section 88(3)(i) of TNVAT Act. It is further submitted that the Commissioner while issuing circular has lost sight of Section 12(1) of the Tamil Nadu Special Economic Zones (Special Provision) Act 2005, (TNSEZ Act), which provides that subject to the provisions of the sub-section (2) of Section 12, every developer or entrepreneur shall be entitled for exemption from the levy of taxes on the sale or purchase of goods under the Tamil Nadu General Sales Tax Act, if such goods are meant to carry on the authorised operations by the developer or entrepreneur. It is submitted that TNSEZ Act is an act to make special provision in relation to SEZs in State of Tamil Nadu and for matters connected therewith and incidental thereto. In terms of Section 2(f), all other words and expression used and not defined in TNSEZ, but defined in the Central Act viz., the Special Economic Zones Act, 2005, (CSEZ Act) shall have the meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners are also an export transaction falling under Section 18(2) of the TNVAT Act and benefit of ITC cannot be denied. It is further submitted that in all cases apart from directing reversal of ITC, heavy penalty has been levied which is untenable and unwarranted. 6.3 It is further submitted that the nature of activity done by the petitioners have not been disputed by the department and the works contract performed by the petitioners are to be treated as zero rated. In W.P.Nos.6555 6556 of 2014, it is submitted that the input tax credit has only been shown in the books and no credit has been availed by the petitioner and hence, the question of reversal does not arise and no penalty can be levied. 6.4 Reliance was placed on the decision of the Division Bench of the High Court Chattisgarh in the case of Union of India, vs. Steel Authority of India, reported in 2013-297-E.L.T.,-166, wherein the scheme of the SEZ Act has been elaborately discussed and it is pointed out that the SEZ Act has overriding effect over any other law and in the case of conflict the SEZ Act is to prevail and that the SEZ is within the territorial limits of the country, the goods supplied to the uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 15 of the TNVAT Act or as specified in the IV Schedule and the transactions relatable to infrastructural support would fall only under Section 15 of the TNVAT Act in contra distinction to the transactions relating to goods that are to be exported as such or used or consumed in the manufacture for export which will attract Section 18 of the TNVAT Act. Further, it is submitted that Section 18(2) of the TNVAT Act has to be read along with Section 18(1)(ii) of the TNVAT Act, otherwise the inclusion of the words 'input tax credit' or 'refund' in Section 18(1) of the TNVAT Act looses significance. By referring Section 12(1)(a) of the TNSEZ Act, it is submitted that the authorised operation referred to therein are relatable to export activity as required under Section 18(2) of the TNVAT Act. Further, it is submitted that Rule 5(5) of the SEZ Rules 2006, states that before recommending any proposal for setting up of SEZ, the State Government shall endeavour that the requirements spelt out in clauses (a) to (h) are available in the State and undoubtedly, there is an endeavour and therefore, reliance on Rule 5(5) cannot in any manner advance the case of the petitioners. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in 13 VST 1. 9. By way of reply the learned Special Government Pleader submitted that the scheme under the TNVAT Act and TNSEZ Act are distinct and the petitioners cannot have the benefit of both the schemes. Further, the manner in which the petitioners have interpreted Section 18 of the TNVAT Act is not sustainable, since the Act has to be read as a whole and the legislature has intended Section 18 of the TNVAT Act to be a complete in all respects. In this regard, reliance was placed on the decision of the Hon'ble Supreme Court in Kerala State Co-operative Marketing Federation Ltd., vs., Commissioner of Income Tax reported in 231 ITR 814. Further, it is submitted that infrastructure is also necessary and that is why exemption is provided for under Section 15 of the TNVAT Act. It is further submitted that the refund which is provided for under Section 18(2) of the TNVAT Act is the input tax credit. Further, no clarification has been issued and those are in the nature of letters and the authorities cannot override the statutory provision. 10. Heard the learned counsels appearing on either side and perused the materials placed on record. 11. The petitioners have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed in clauses (i) to (iii) under Section 18(1) of the TNVAT Act subject to condition and restriction as may be prescribed. Zero rated sale as defined under Section 2(44) of the TNVAT Act means sale of any goods on which no tax is payable, but credit for the input tax related to that sale is admissible. Sub-section (2) of Section 18 deals with the entitlement of refund of input tax credit paid or payable by the dealer on purchase of those goods, which are exported as such or consumed or used in the manufacture of other goods that are exported as specified in sub-Section (1) of Section 18, subject to restrictions and conditions as may be prescribed. Sub-Section (3) of Section 18 deals with the period of limitation within which refund claim has to be made, failing which such credit shall lapse to Government. In the case of M/s.Interfit Techno Products Ltd vs. Principal Secretary in W.P.No. 13901 of 2008 etc batch this Court examined as to the nature of benefit accruing to a dealer under Section 18 of the TNVAT Act. In the said batch of cases, a contention was raised that Section 18 of the TNVAT Act is an island by itself not subject to the conditions prescribed under Section 19( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the TNVAT Act, they are (i) sale as specified under Section 5(1) or (3) of the Central Sales Tax Act, 1956; (ii) Sale of goods to any registered dealer located in Special Economic Zone in the State, if such registered dealer has been authorised to establish such units by the authority specified by the Central Government in this behalf; and (iii) Sale of goods to International organisation listed out in the fifth schedule. Therefore, to be considered as a zero rated sale and to be eligible for input tax credit or refund the sale should fall within one of the three categories mentioned above. Sub-Section (2) has to be read along with sub-section (1) of Section 18, and cannot be divested or segregated to be read only with clauses (i) (iii) of sub-section 18(1), the statute does not made any such distinction between the transactions mentioned in clauses (i) (ii) (iii) in Section 18(1) all being classified as a zero rated transactions. Therefore, to state that sub-section (2) of Section 18 will not apply to clause (ii) of Section 18(1) amounts to inserting a new provision to the statute when the statute does not contemplate of such situation/contingency. 14. In Maxwell' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur shall be entitled to the following exemptions, namely:- (a) exemption from the levy of taxes on the sale or purchase of goods under the Tamil Nadu General Sales Tax Act, 1959, if such goods are meant to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from the tax payable under the Tamil Nadu Additional Sales Tax Act, 1970; (c) exemption from the tax payable under the Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990; (d) exemption from the tax payable under the Tamil Nadu Tax on Entry of Goods into Local Areas Act, 2001; (e) exemption from the tax payable under the Tamil Nadu Tax on Luxuries Act, 1981; (f) exemption from the tax payable under the Tamil Nadu Entertainments Tax Act, 1939; (g) exemption from the tax payable under the Tamil Nadu Advertisement Tax Act, 1983; (h) exemption from the tax payable under the Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003 for electricity sold or consumed in a Special Economic Zone. (2) The Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions shall be granted to the Developer or entrepreneur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and TNSEZ Act is devoid of merits. This conclusion is further fortified if we examine Section 15 of the TNVAT Act. The said provisions deals with exempted sale and states that sale of goods specified in IV Schedule and the goods exempted by notification by the Government by any dealer shall exempt from tax. Further, the contention that exemption under TNSEZ Act has no relation to exemption under Section 15 of TNVAT Act does not merit acceptance in the light of the clear language of Section 12(2) of the TNSEZ Act. 19. As noticed above, Section 12(1)(a) of the TNSEZ Act speaks of an exemption. Though the SEZ Act provides for exemption in certain contingencies such exemption is available as the Government may prescribe and subject to terms and conditions in terms of sub-section (2) of Section 12 of the TNSEZ Act. 20. The concession granted under Section 18 of the TNVAT Act, is a special benefit given to exporters and such concession which is in the nature of input tax credit which may ripen into a refund claim, is subject to restriction and conditions contained under Section 19(9) of the TNVAT Act. If the sales effected by the petitioners to the SEZs are exempted from tax, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate fiscal statutes. The Revenue took a stand that Section 22 of the Gujarat SEZ Act gives overriding effect only to existing state laws and not to Section 5A and Section 9(5) of the Gujarat VAT Act, which was introduced subsequently that is w.e.f., 01.04.2008; non-obstante clause be given effect only to the extent the legislation intended. It is to be pointed out that it was not in dispute that the petitioners therein were not required to pay any taxes under Gujarat VAT Act [but for the newly introduced provisions, Section 5A and 9(5)]. Therefore, the question which was considered was whether immunity enjoyed was curtailed by subsequent law inserted w.e.f., 01.04.2008. Considering these facts the Court held that the provisions of Section 21 of the Gujarat SEZ Act had primacy and purchase tax cannot be demanded. At the outset, it has to be pointed out that Section 21 of Gujarat SEZ Act and Section 12 of TNSEZ Act are not pari materia and the Revenue herein does not admit the position that the petitioners herein are not liable to pay tax, but would seriously dispute the same. Further, the petitioners herein claim ITC on the sales effected to SEZ's or its developers. That apart, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the rules were enforced. The findings/observations made by the Hon'ble Court as regards the effect of the SEZ Act cannot be interpolated into the facts of the present case. Further, Section 2(m) of the CSEZ Act defining export cannot be read in isolation while claiming benefit of ITC under Section 18 of the TNVAT and essentially satisfy the conditions in clauses (i) to (iii) of Section 18(1) of TNVAT Act. 25. Similarly the decision of the High Court of Andhra Pradesh in the case of Parke-Davis Employees Union vs. A.P., Industries Infrastructure Corporation Ltd., reported in 2009 (2) ALT 290, also deals with the SEZ Act and does not pertain to any decision with regard to the VAT Act. 26. In the case of Emerald Stone Export vs. Assistant Commissioner reported in [2012] 52 VST 286 (Mad), the petitioner therein established that the sale to 100% EOU was in the course of export supported by documents such as bill of ladding export invoice etc., and therefore, this Court held that Section 18 of the TNVAT Act, would apply and the dealer was entitled to refund of the input tax. In the cases on hand no such attempt has been made by any of the petitioners to produce any such docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kasthuri Sons Ltd., reported in AIR 1999 SC 1275). 29. For the reasons assigned, it is held that impugned Circular No.9 of 2013, dated 24.07.2013, sets out the statutory provision and the benefit which accrues to the dealer under Section 18 of the Act and the circular is neither contrary nor ultra vires of the provisions of the TNVAT Act, not is it violative of Article 14 of the Constitution of India or irrational. 30. In the upshot, the prayer to quash the impugned circular is rejected and the Writ Petitions filed challenging the circular, are dismissed. 30.1 As noticed above, in several Writ Petitions in this batch of cases apart from challenging the impugned circular, the petitioners have challenged pre-revision notices and assessment orders, which are consequent to the impugned circular. In the pre-revision notices, there is a proposal to levy penalty. In the impugned assessment orders, the respective Assessing Officers have levied penalty. On a perusal of the impugned pre-assessment notices as well as the impugned assessment orders, it is seen that no specific reason has been assigned as to under what circumstances, penalty is leviable. In fact, mechanically there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the matter in accordance with the provisions of the TNVAT Act. In the Writ Petitions where pre-revision notices are impugned, the petitioners are directed to submit their objections to the respective Assessing Officers and on receipt of the same, the Assessing Officers shall afford an opportunity of personal hearing to the petitioners and pass a reasoned order on merits and in accordance with law. The objections shall be filed by the petitioners within a period of 30 days from the date of receipt of a copy of this order. In the result:- (i) The impugned circular No.9 of 2013, dated 24.07.2013, is held to be valid and not contrary or ultra vires to the provisions of the Tamil Nadu Value Added Tax Act and it is not violative of Article 14 of the Constitution of India or irrational. (ii) The proposal to levy penalty in the impugned pre-revision notices are set aside. (iii) The penalty levied in the impugned assessment orders are set aside. (iv) The petitioners who have challenged the pre-revision notices shall submit their objection in writing to the respective Assessing Officers, within a period of 30 days from the date of receipt of a copy of this order and on rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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