TMI Blog2015 (11) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... to the export of the goods/services as well as clearances and supply of goods/services in the domestic tariff area. It is explicit that if any goods removed from a Special Economic Zone to the Domestic Tariff Area shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties. Further, it is also relevant to extract Section 15 of the TNSEZ Act, which deals with domestic clearances by Units - if the goods are removed from SEZ to the domestic tariff area, such transaction is liable to sales tax. The supply of goods by the dealer of Domestic tariff area to SEZ unit is treated as export of the dealer and import of the SEZ unit vice versa the sale of goods by SEZ unit to a dealer of Domestic tariff area will be import of the dealer and export of the SEZ unit. Thus all sales effected by SEZ unit to a dealer situated anywhere in India is export sales of SEZ unit because SEZ territory is deemed to be a foreign territory. The petitioner cleared the goods from SEZ unit to domestic tariff area and such removal of goods claimed as branch transfers under Section 6(A) of the CST Act, exempt from tax, however, such domestic tariff area clearances conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondents : Ms.Dr.Anitha Sumanth, assisted by Mr.Manoharan Sundaram, Mr.Kanmani Annamalai, Mr.V.Haribabu, Mr.Cibi Vishnu And Mr.ANR Jaya Pratap ORDER Being aggrieved over the orders, dated 25.6.2014 passed by the first respondent, in and by which, while revising the assessments for the years 2012-13 and 2013-14, levy of purchase tax on the Inter State stock transfer effected from warehouse located in SEZ under Section 12 of the Tamil Nadu Value Added Tax Act, 2006 (in short, TNVAT Act, 2006) has been imposed, the petitioner has filed the present writ petitions. The petitioner has also challenged the consequential notices of assessment and demand, dated 25.6.2014 issued by the first respondent. 2. It is pertinent to note that as against the above said orders, dated 25.6.2014, the petitioner has filed rectification petitions under Section 84 of the TNVAT Act, 2006 before the first respondent, which came to be rejected by orders, dated 30.07.2014, holding that the first respondent is not having jurisdiction to re-open the assessment under Section 84 and that the revised orders, dated 25.6.2014 hold good and the petitioner have to seek remedy by way of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been extended to the petitioner by the State and concessions by way of levies and duties as well as the benefits of deferment of taxation has been provided by the State to the petitioner company. The letter of approval dated 7.3.2011 issued by the Development Commissioner, MEPZ granted to the petitioner to carry on authorized operations subject to various terms and conditions both in regard to the export of the goods/services as well as clearances and supply of goods/services in the domestic tariff area. 6. It is further stated that by virtue of Section 12 of the Tamil Nadu Special Economic Zones Act, 2005 (in short, TNSEZ Act, 2005), goods sold/cleared by the SEZ unit of the petitioner are exempted from levy of purchase tax only in respect of exports and in respect of clearances from the SEZ unit to the domestic tariff area, are liable to purchase tax in terms of Section 15 of the TNSEZ Act. The intention behind the enactment of SEZ Act is to encourage manufacture and exports as well as increase the inflow of foreign exchange and therefore, exemption is provided from the levy of tax on transactions between units within SEZ as well as exported, however, turnover from local clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, the petitioner company is entitled to exemption from levy of purchase tax, in the following analysis, viz., 10. Section 12(1) of the TNSEZ Act refers to exemption from levy of taxes on the sale or purchase of goods under the Tamil Nadu General Sales Tax Act, 1959, which Act has been later repealed by the TNVAT Act, by virtue of said TNVAT Act, tax on sale and purchase of goods is being levied and collected. However, there is a saving clause provided in Section 87 of the TNVAT Act, which provides that reference to the Tamil Nadu General Sales Tax Act would be construed as a reference to the TNVAT Act and therefore, by virtue of Section 87 of the TNVAT Act, Section 12(1) of the TNSEZ Act has to be read as granting exemption from levy of tax on sale or purchase of goods under the TNVAT Act. Since the Section 12(1) grants exemption from the levy of taxes on the sale or purchase of goods to SEZ units if they were meant to carry on the authorized operations of the unit, it is to be noted that the terms entrepreneur and authorized operations are not defined in TNSEZ Act and Section 2(f) of the TNSEZ Act provides, All other words and expressions used and not defined in this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , since stock transfers to other branches of the same person do not satisfy the essential requirements of a sale, such transfers do not attract levy of VAT/CST. Hence, when sale itself was not involved in such transfer, purchase tax cannot be levied. 13. Therefore, based on the above analysis, the learned senior counsel would contend that the terms of Section 12(1) are clear and unambiguous and hence by virtue of Section 12 of the TNSEZ Act, the goods purchased by the warehouse of the petitioner company in the SEZ are exempted from levy of purchase tax. He would also contend that the Government of Tamil Nadu had announced its SEZ Policy, wherein, it has been expressly stated that the industrial units and other establishments within the SEZs would be exempted from all local taxes and levies, including sales tax, VAT and purchase tax or any other cess or levy of state government in respect of all transactions between the units/establishments within the SEZs and hence, there is no justification on the part of the first respondent in levying purchase tax on inter-state stock transfer effected from the warehouse located in the SEZ that too while dropping the proposal for levy of purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner are exempted from levy of purchase tax in regard to the turnover pertaining to exports alone, however, the petitioner had cleared the goods from SEZ unit to the domestic tariff area, which are liable to tax in terms of Section 15 of the TNSEZ Act. It is contended that the provision of Section 12(1) cannot be read or interpreted in isolation as it grants exemption from the levy of sales/purchase tax relating to authorized operations carried on by the developer/entrepreneur and in the present case, the authorized operations were clearly elaborated in terms of Letter of Approval dated 7.3.2011, wherein, Section 3(v) specified subjects clearances from SEZ to the domestic area to tax in terms of the provisions of the TN VAT Act. Therefore, according to the learned counsel, the first respondent levied purchase tax in respect of clearances effected by the petitioner to the domestic tariff area in terms of Section 12(1) read with Section 15 of the TNSEZ Act. 18. Heard the learned senior counsel appearing for the petitioners and the learned counsel appearing for the respondents and perused the entire materials available on record. 19. The Government of India had announced a Sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2005 and the rules and orders made thereunder for undertaking authorized operations, namely, trading and warehousing services for mobile phone handsets and mobile phone parts and accessories. Thus, the petitioner company became a part of larger scheme of operation by the NOKIA group in the State. The above said approval dated 7.3.2011 is subject to various terms and conditions both in regard to the export of the goods/services as well as clearances and supply of goods/services in the domestic tariff area. The relevant terms and conditions specified in the approval letter, dated 7.3.2011 are extracted hereunder: You (the petitioner) shall export the goods manufactured/goods imported/procured for trading and services, including items of trading, as per provisions of the Special Economic Zones Act, 2005 and Rules made thereunder for a period of five years from the date of commencement of production/service activities. For this purpose, you shall execute the Bond-cum Legal Undertaking as prescribed under the Special Economic Zone Rule, 2006. You (the petitioner) may supply/sell goods or services in the domestic tariff area in terms of the provisions of the Special Economic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Local Areas Act, 2001 where applicable, as leviable on such goods when imported; and b) The rate of sales tax, additional sales tax and entry tax, if any, applicable to goods removed from a Special Economic Zone shall be at the rate in force as on the date of such removal, and where such date is not ascertainable, on the date of payment of tax. 25. A perusal of the above provision, it is clear that if the goods are removed from SEZ to the domestic tariff area, such transaction is liable to sales tax. 26. In both the writ petitions, it is not in dispute that the petitioner company effected Inter State stock transfer from warehouse located in SEZ for ₹ 776,87,15,603/- and for ₹ 533,18,47,466/- respectively. The first respondent, by proceedings, dated 25.6.2014, purchase tax on the above said amounts at 14.5% has been confirmed by invoking Section 12 of the TNVAT Act, 2006. It is relevant to extract Section 12 of the TNVAT Act, 2006, which reads as under: 12. Levy of Purchase tax. (1) Subject to the provisions of sub-section (1) of section 3, every dealer, who in the course of his business purchases from a registered dealer or from any other perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (10) of section 3 and includes an Authority and a Co-Developer; 2(j) entrepreneur means a person who has been granted a letter of approval by the Development Commissioner under sub-section (9) of section 15; 2(i) Domestic Tariff Area means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones; 29. Section 2(f) of TNSEZ Act envisages that the expressions used and not defined in TNSEZ Act but defined in the Special Economic Zones Act, 2005 have the meanings respectively assigned to them in the said Act. Therefore, the expressions, developer, entrepreneur and domestic tariff area defined in the Special Economic Zones Act, 2005 would apply to TNSEZ Act. 30. As per Section 2(c), authorized operations means the operations which were authorized by the Development Commissioner by granting a letter of approval to the Developer to undertake in a special economic zone. In the present case, the petitioner was granted a Letter of Approval, dated 7.3.2011 by the MEPZ Special Economic Zone Authority for undertaking authorized operations, namely, trading and warehousing services for mobi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Z unit because SEZ territory is deemed to be a foreign territory. The petitioner cleared the goods from SEZ unit to domestic tariff area and such removal of goods claimed as branch transfers under Section 6(A) of the CST Act, exempt from tax, however, such domestic tariff area clearances consequently attract provisions of Section 15 of TNSEZ Act. Therefore, Section 2(1(b) of the TNVAT Act stands attracted justifying levy of purchase tax. In fact, the proposal for levy of purchase tax on the entire purchase effected from SEZ to SEZ, viz., Tvl.Nokia India Private Limited to the petitioner (Tvl.Nokia India Sales Private Limited) has been dropped, however, considering the fact that the petitioner effected stock transfer to other states having imported the goods from outside India to its warehouse located in SEZ area, which is nothing but domestic tariff area sales and such transaction is liable to sales tax, as if the goods are imported goods and in terms of Section 15 of the TNSEZ Act, the first respondent has confirmed the liability of purchase tax under Section 12 of the TNVAT Act at 14.5%. As already stated that Section 12 of TNSEZ Act provides exemption from the levy of taxes on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover of ₹ 4676.35 and 1635 crores (both writ petitions), the petitioner has exported goods/services of an amount of ₹ 1759.32 and 674.24 crores respectively and claimed exemption thereon; d) the petitioner has remitted tax of an amount of ₹ 159.49 and ₹ 45.96 crores only in respect of intra and inter-state sales and e) the petitioner claims exemption in relation to the bulk of its turnover, of amount of ₹ 776.87 crores and ₹ 533.18 crores relating to SEZ clearances to branches in other States, of course, sales of such goods are thereafter liable to tax in respective States. However, it is very deplorable to note that being a SEZ unit, having availed the hospitality and resources of the State of Tamil Nadu, the petitioner had diverted significant part of the turnover to other States by effecting interstate stock transfers which would not only defeat the very object of the SEZ Policy but also would have a considerable impact both on the revenue and economic growth of State of Tamil Nadu. In order to avoid these kind of repercussions, Section 15 has been brought into TNSEZ Act, which specifically insists that any goods removed from SEZ to domestic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 5Aand9(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, there is marked and material difference with regard to zero rated sale as per underSection 5Ain the Gujarat VAT Act with that of Section 18 of the TNVAT Act. The provisions are not pari materia. Furthermore, the factual background of the case was entirely different and therefore, the decision does not r ..... 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