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HSI Automotives Ltd. Versus The State of Tamil Nadu, The Commercial Tax Officer

2015 (10) TMI 48 - MADRAS HIGH COURT

Determination of taxable turnover - inclusion of the exempted sales value - Held that:- Despite the fact that the 1970 Act underwent substantial amendments in 1976, 1980, 1999 and 2002, the Legislature did not introduce a section exclusively providing for definitions of words and expressions. It is true that the Tamil Nadu Additional Sales Tax Act, 1970 did not contain a provision that expressly stipulated that the words and expressions contained therein would have the same meaning as assigned t .....

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b) of the Tamil Nadu Additional Sales Tax Act, 1970, the provisions of the 1959 Act are made applicable to the additional sales tax payable under the 1970 Act and once it is seen that even for the purposes of assessment, levy of penalty, appeals and revisions, the assessees as well as the Department may have to take recourse only to the 1959 Act, it follows as a corollary that the Tamil Nadu Additional Sales Tax Act, 1970 does not have independent legs to stand on its own. - in the absence of a .....

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cation for exemption in respect of tax payable under the Tamil Nadu General Sales Tax Act, 1959 was issued in exercise of the powers conferred by Section 17(1) of the 1959 Act, the notification for exemption in respect of additional sales tax payable under the 1970 Act was also issued in exercise of the powers conferred by Section 17(1) of the 1959 Act read with Section 2(1)(b) of the 1970 Act. This is in view of the fact that the Tamil Nadu Additional Sales Tax Act, 1970 does not contain a sepa .....

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r for the purposes of Tamil Nadu Additional Sales Tax Act, 1970. Consequently, the levy of penalty was wrong and the second question has also to be answered in favour of the petitioner - Decided in favour of assessee. - Tax Case (Revision) No. 92 of 2014 - Dated:- 16-9-2015 - V. Ramasubramanian And T. Mathivanan, JJ. For the Appellant : Mr. K A Parthasarathi for Mr. N Inbarajan For the Respondent : Dr. Anita Sumanth, SGP (CT) assisted by Mr. S Manohar Sundaram, AGP (T) ORDER V. Ramasubramanian, .....

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s) for the respondent. 3. During the assessment year 2004-2005, the petitioner effected sales of rubber/PVC profiles, rubber hoses, etc., to two companies namely Hyundai Motors India Limited and Ford India (P) Limited. The sales to Hyundai Motors were exempted under G.O.Ms.No.16 dated 12.1.1998 and the sales to Ford India were exempted under G.O.Ms.No.381 dated 15.9.1997. 4. Though exemptions were allowed as claimed, the Assessing Officer added the sales turnover made to both these companies, to .....

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the Appellate Assistant Commissioner in A.P.No.144 of 2006. The First Appellate Authority held, by an order dated 20.11.2007, that for the purpose of computation of additional sales tax liability, the sales effected to Ford India cannot be included within the taxable turnover due to the specific exemption available under the Tamil Nadu Additional Sales Tax Act itself with respect to any sales made to Ford India. The Appellate Authority failed to take note of the availability of a similar exempt .....

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inst the said order that the petitioner has come up with the above revision petition on the following questions of law : "i. Whether the Hon'ble Tribunal has committed an error of law in treating the exempted sales effected by the petitioners to M/s.Hyundai Motors India Limited, as part of the 'taxable turnover' of the petitioner ? and ii. Whether the Hon'ble Tribunal has committed an error of law in confirming the levy of penalty under Section 12(3)(b) of the Tamil Nadu Gen .....

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s made to a certain buyer is exempt from the levy of both sales tax and additional sales tax, such sale may be included in the total turnover, but not in the taxable turnover, as otherwise, the purpose of exemption would be lost and (c) that the distinction sought to be made by the Tribunal as though Rule 6(b) permits deduction only for goods oriented exemption and not dealer oriented exemption, was uncalled for. 8. In support of his above contentions, the learned counsel for the petitioner reli .....

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etitioner is that there cannot be two different taxable turnovers, one for the purpose of the Tamil Nadu General Sales Tax Act, 1959 and another for the purpose of the Tamil Nadu Additional Sales Tax Act, 1970. According to the learned counsel for the petitioner, the Tamil Nadu Additional Sales Tax Act, 1970, though an independent statute, is part of the General Sales Tax Law of the State and that therefore, they have to be read together. In support of the above contention, the learned counsel f .....

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e Tamil Nadu Additional Sales Tax Act, 1970, to make the words and expressions contained therein, to have the same meaning as assigned to them in the Tamil Nadu General Sales Tax Act, 1959. Therefore, it is her contention that the expression 'taxable turnover' contained in the Tamil Nadu Additional Sales Tax Act need not have the same meaning as assigned to the expression 'taxable turnover' in the 1959 Act. 11. In support of her above contention, Dr.Anita Sumanth, learned Special .....

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s with a case where the assessee merely had the benefit of a reduction in the rate of tax or a concessional rate of tax and not an exemption relating to the sales of certain items to certain dealers. 13. We have carefully considered the rival contentions. 14. Dr.Anita Sumanth, learned Special Government Pleader is right in her submission that the decision of the Supreme Court in Ashok Service Centre arose out of the provisions of the Orissa Additional Sales Tax Act, 1975, which contained a speci .....

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njoy any exemption in relation to a sales turnover, but who merely enjoyed a reduction in the rate of duty. If what is granted under an exemption notification under Section 17 of the Tamil Nadu General Sales Tax Act, 1959 is only a reduction in the rate of tax payable on the sale of a particular material, the turnover does not get excluded from the total turnover or taxable turnover. Therefore, the observations contained in Sumangalam Steels to the effect that the 1970 Act is an independent piec .....

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The State of Tamil Nadu enacted the Tamil Nadu Additional Sales Tax Act, 1970, providing for the levy of an additional tax on the sale or purchase of goods. The scheme of Section 2 of the Act, as it stood at the time of enactment in 1970, was to levy an additional tax by the process of increasing the tax payable under the Tamil Nadu General Sales Tax Act, 1959, by 10%, the said increase representing the quantum of the additional tax. The validity of this 1970 Act was upheld by a Constitution Be .....

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aler whose total turnover for a year exceeded ten lakhs of rupees, liable to pay additional sales tax at the rate of 5% of the tax payable for that year. But, this liability could not be passed on by the dealer to the consumer. 19. By the new Section 2(1) inserted under the 1976 Amendment Act, only such a dealer, whose taxable turnover for a year exceeded three lakhs of rupees, was brought within the network of additional sales tax. The liability to pay additional sales tax was imposed under the .....

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g progressively in proportion to the taxable turnover. 21. The Constitutional validity of the Tamil Nadu Additional Sales Tax Amendment Act, 1976 was challenged in a batch of writ petitions filed under Article 32, mainly on the grounds inter alia that there was already a levy of sales tax as well as surcharge and that the prescription of different rates of additional sales tax for different dealers on the basis of their taxable turnovers, was a violation of Article 14. But, the Act was upheld by .....

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ct and (ii) the object of levy of additional tax. 23. The Tamil Nadu Additional Sales Tax Act, 1970, as it was originally enacted, contained only four provisions, from Sections 1 to 4. Section 1 gave the short title and commencement. Section 2, which was the charging section, imposed a levy of additional tax in the case of certain dealers, whose total turnover for a year exceeded a particular limit. Section 3 imposed the levy of additional tax upon an importer or whole sale dealer under the Tami .....

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the 1976 Amendment Act 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, whose total turnover for a year exceeds ten lakhs of rupees, be increased by an additional tax at the rate of five percent of the tax payable by that dealer for that year and the provisions of the said Act shall apply in relation to the said additional tax they apply in relation to the tax pay .....

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uch goods. 2(1)(a) 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, whose taxable turnover for a year exceeds three lakhs of rupees, be increased by an additional tax calculated at the following rates, namely:- Rate of tax (i) Where the taxable turnover exceeds three lakhs of rupees, but does not exceed five lakhs of rupees : 0.4 percent of the taxable turnover (i .....

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by such dealer under the said Act, together with the additional tax payable under this sub-section, exceeds four percent 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 percent of the sale or purchase price of such goods. (b) The provisions of the said Act shall apply in relation to the additional tax payable under Clause (a) as they apply in relation t .....

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ods through agents. 26. In other words, after the Amendment Act 37 of 1999, the scope of Section 2(1) was enlarged to include even a principal, selling or buying goods through agents, within the ambit of the charging section. At this juncture, two explanations namely Explanation I and Explanation II were also inserted under Section 2(1)(aa). Subsequently, three more explanations namely Explanations III, IV and V were inserted under Amendment Act 23 of 2002. 27. After the Amendment Acts 37 of 199 .....

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ed 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 not exceed fifty crores of rupees : 1.5 percent of the taxable turnover (ii) Where the taxable turnover exceeds fifty crores of rupees, but does not exceed one hundred crores of rupees : 2 percent of the taxable turnover (iii) Where .....

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oods 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 in .....

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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." 28. Despite the fact that the 1970 Act underwent substantial amendments in 1976, 1980, 1999 and 2002, the Legislature did not introduce a section exclusively providing for definitions of words and expressions. It is true that the Tamil Nadu Additional .....

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in the 1970 Act. 29. Until the amendment under Act 37 of 1999, the Tamil Nadu Additional Sales Tax Act, 1970 did not give a clue as to what would constitute a taxable turnover. By the Amendment Act 37 of 1999, Explanations I and II were inserted. By the Amendment Act 23 of 2002, three more Explanations were inserted. 30. The stipulations contained in these five explanations can be summarised as follows : (i) Explanation I dealt with the taxable turnover in respect of a principal selling or buyin .....

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he total turnover itself to be taken as the taxable turnover. Under Explanation IV, the turnover of resale taxable under Section 3-H was directed to be excluded from the taxable turnover. 31. But, the absence of a separate provision for definitions, was more than compensated in the form of Clause (b) of Sub-Section (1) of Section 2. We have already pointed out that Section 2 of the 1970 Act, as it was originally enacted in 1970, contained three sub-sections and a proviso under Sub-Section (1). B .....

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is what is referred to as 'the said Act', in the Tamil Nadu Additional Sales Tax Act, 1970. Therefore, the effect of Section 2(1)(b), which we have extracted above, is that the provisions of the Tamil Nadu General Sales Tax Act would apply in entirety, in relation to the additional sales tax payable under the 1970 Act, as they apply in relation to the tax payable under the 1959 Act. If they would apply in entirety, they would naturally apply along with that part of the 1959 Act, which c .....

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urse only to the 1959 Act, it follows as a corollary that the Tamil Nadu Additional Sales Tax Act, 1970 does not have independent legs to stand on its own. 34. Therefore, we are of the considered view that the Tamil Nadu Additional Sales Tax Act, 1970, is, in a way, a parasitical piece of legislation, that would have to depend upon the provisions of the Tamil Nadu General Sales Tax Act, 1959, (i) for the purposes of definitions of words and expressions (ii) for the purposes of assessment and lev .....

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o on fundamental principles of statutory interpretation. 36. The expression 'taxable turnover' is defined in Section 2(p) of the 1959 Act to mean the turnover on which a dealer shall be liable to pay tax as determined, after making such deductions from his total turnover and in such manner as may be prescribed. In this case, the total turnover of the petitioner was determined as ₹ 93,11,29,403/- and the taxable turnover was determined at ₹ 7,07,87,826/-, for the purposes of t .....

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India Limited. This exemption was subject to the condition that if Hyundai Motor India Limited failed to make use of the goods so purchased, for the purpose specified in the declaration, but disposed of the same in any other manner, they shall become liable to pay tax. By another notification issued in G.O.Ms.No.16 dated 12.1.1998, the sale of any goods to Hyundai, by any registered dealer, for use in the manufacture and in the assembling, packing or labelling in connection with the manufacture .....

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ion in respect of additional sales tax payable under the 1970 Act was also issued in exercise of the powers conferred by Section 17(1) of the 1959 Act read with Section 2(1)(b) of the 1970 Act. This is in view of the fact that the Tamil Nadu Additional Sales Tax Act, 1970 does not contain a separate provision for grant of exemption. Therefore, even the notification for exemption from payment of additional sales tax under the 1970 Act had to be issued only under Section 17(1) of the 1959 Act. The .....

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