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Tamilnadu Petroproducts Limited Versus The Assistant Commissioner (CT) , The Commissioner of Commercial Taxes

2016 (8) TMI 633 - MADRAS HIGH COURT

Claim of benefit of concessional rate of tax under Section 3(3) of the TNGST Act - inter-state sale or not - The LAB sold by the petitioner was used as a raw material in the manufacture of Acid Slurry and such manufacturing activity took place within the State of Tamil Nadu. What was stock transferred to Mangalore by HLL was not LAB, but a commercially different product namely, Acid Slurry. - Held that:- The Revenue does not dispute the fact that the delivery of LAB was effected within the S .....

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n the chain of manufacturing activities, it may be an intermediary product. The contention of the respondent that payment of tax by HLL at 1% under Section 3(4) of the TNGST Act is irrelevant cannot be countenanced. This is a very relevant factor, which goes to show that the HLL is a manufacturer. - To bring a transaction with the scope of Section 3 of the CST Act, essentially there should be sale of goods and transport of these goods from one state to another as a result of, or as an integr .....

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roval of the buyer and the material to be delivered to their job worker at Ranipet. Thus, the contract of sale was completed upon delivery of the goods at Ranipet within the state of Tamil Nadu. The seller namely, the petitioner had no contractual or other obligation to take the goods to another State nor there is any evidence produced by the Revenue in this regard. Thus, when the transaction done by the petitioner is factually not disputed and the transaction/sale concluded within the State at .....

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- Decided against the revenue. - W. P. No. 36152 of 2004 & WMP No. 4348 of 2004 - Dated:- 2-8-2016 - T. S. Sivagnanam, J. For the Petitioner : Mr. N. Prasad For the Respondent : Mr. Manokaran Sundaram AGP ORDER The petitioner is a company incorporated under the Companies Act, 1956, engaged in the manufacture of Linear Alkyi Benzene (LAB) in their factory at Manali, Chennai. In this Writ Petition, the petitioner challenges a clarification issued by the second respondent, the Commissioner of Comm .....

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ry of HLL at Ranipet. 2. The controversy which led to the petitioner seeking for the clarification arose under the following circumstances. HLL are engaged in the manufacture of detergents and they are registered dealers on the file of the Assistant Commissioner (CT), Fast Track Assessment Circle-II, Greams Road, Chennai under the provisions of the TNGST Act and the Central Sales Tax Act, 1956, (CST Act). HLL placed purchase order dated 15.06.2000, for sale of LAB and for delivery of the same at .....

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ation from the Commissioner under Section 28A of the TNGST Act, requesting to clarify as to whether the subject transaction is to be treated as a local sale or interstate sale. The Commissioner by clarification No.180/2000, dated 20.12.2000, informed the petitioner that they are not eligible to issue form-XVII declaration because the manufacture goods are not for sale by them in Tamil Nadu and LAB is taxable at 11% under residuary entry 69 in part B of the first schedule to the TNGST Act, as the .....

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, reiterated the earlier clarification, dated 20.12.2000, and rejected the request of the petitioner for reconsideration of the earlier clarification. It was stated therein that the job worker is not the purchaser of the goods and also not the owner of the manufacture goods and the goods are not intended for sale by them in the state, which is an essential condition for availing concessional rates provided under Section 3(3) of the TNGST Act. While so, the petitioner's Assessing Officer, fir .....

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-XVII declaration and extend the concessional rate of tax. Copy of the said communication was marked to the second respondent. The second respondent taking note of the said communication, dated 23.10.2003, once again reiterated the earlier stand and stated that concessional rate of tax cannot be extended to the petitioner and form-XVII, cannot be accepted. Once again, the petitioner submitted a representation on 18.02.2004, to the second respondent, in which, the nature of transaction done by th .....

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wherein among other things, HLL stated that their principal place of business was at Chennai during the assessment years 1999-2000 and 2000-2001. After all these representations, the second respondent by letter dated 09.09.2004, informed the petitioner that HLL, Mangalore, cannot make purchase of LAB against form-XVII declaration from the petitioner, though the job work was carried in Tamil Nadu by their job worker. It was further stated that as per the conditions stipulated in Section 3(3) of t .....

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r, submitted that the delivery of LAB was made by the petitioner within the State of Tamil Nadu to the job worker of HLL, in other words, the delivery was effected inside the State. The product which was moved by HLL from the factory of the job worker is Acid Slurry, which is commercially different from LAB. Thus, there is delivery and consumption of LAB within the State of Tamil Nadu and LAB did not move from one state to another either pursuant to a contract of sale or an incidence of a contra .....

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the TNGST Act, the seller is automatically entitled to the acceptance of form-XVII, declaration, where the buyer is the registered dealer and the declaration in form-XVII is issued under Section 3(3) of the TNGST Act read with Rule 22B of the Rules. When it is not in dispute that the buyer is a dealer within the State, the sale was effected for manufacture of goods within the state and as the goods fall under serial no.7(1) of part D of the first schedule of the TNGST Act, the concession under .....

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eement, it had to be supplied and delivered to their job worker at Ranipet and later after conversion of raw material as Acid Slurry, the same would be transported to HLL, Mangalore for further processing and manufacturing as detergents. Referring to the purchase order dated 15.06.2000, it is submitted that it clearly shows the dealer at Mangalore had placed the purchase order and in pursuance to the same, the petitioner had effected sale to the dealer at Mangalore and the transaction is clearly .....

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ection 3 of the TNGST Act, it is submitted that the provision clearly stipulates that there should be a manufacture inside the state for sale in order to avail concessional rate of tax at 3%. Inasmuch as the Acid Slurry converted by job worker at Ranipet, is stock transferred to Mangalore for further processing, the manufacturing of the final product was done out side the state, Section 3(3) of the TNGST Act, is not applicable to the transaction. Therefore, it is submitted that the manufacturing .....

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stain the impugned clarifications. 6. I have elaborately heard the learned counsels appearing for the parties and perused the materials placed on record. 7. Before considering as to whether the petitioner is entitled to the benefit of concessional rate of tax under Section 3(3) of the TNGST Act, it would be necessary to take note of the transaction, which was done by the petitioner. At this juncture, it is pertinent to point out that there is no dispute with regard to the nature of transaction d .....

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at Manali and assessee on the files of the first respondent. HLL, Mangalore placed a purchase order on the petitioner, dated 15.06.2000 for purchase of LAB. HLL is a registered dealer in the State of Tamil Nadu under the TNGST and CST Act on the file of the Assistant Commissioner, (CT), Fast Track Assessment Circle No.II. The instruction given to the petitioner in the purchase order was to deliver the product to a factory at Ranipet, who are job workers for HLL. 9. It is not in dispute that the .....

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[sub-section 2, 2-A, 2-C], but subject to the provision of sub-section (1), the tax payable by a dealer in respect of sale of any goods including consumables, packing material and labels, but excluding plant and machinery, to another dealer for use by the latter in the manufacture inside the State, for sale by him of any goods other than ethyl alcohol, absolute alcohol, etc., shall be at the rate of rate of only 3% on the turnover relating to such sale. Thus, for a dealer to be entitled to the .....

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stand taken by the HLL as well as the petitioner. In the absence of any dispute, it goes without saying that the sale was effected to HLL at their factory at Ranipet, since the factory at Ranipet was their job worker. If such is the undisputed factual position relating to the nature of transaction, all that is required to seen was whether there was manufacture inside the state for sale. 12. Undoubtedly, the products sold by the petitioner was not the product which was moved out of the Ranipet f .....

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t this juncture, we may see as to what is an interstate sale. The Hon'ble Supreme Court in the case of NTPC (Supra), pointed out that a sale in the course of interstate trade has three essential ingredients namely, there must be a contract of sale, incorporating a stipulation, express or implied, regarding inter-State movement of goods; that a movement of goods, which takes place independently of a contract of sale, would not fall within the meaning of interstate sale. Explaining the concept .....

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hand is tested on the anvil of the decision of the Hon'ble Supreme Court, it is not in dispute that the contract of sale with the petitioner stood completed within the State of Tamil Nadu upon delivery of the goods at Ranipet. The movement of the goods after undergoing a process of manufacture and after being converted into a commercially different product is an independent transaction and the transaction could not be treated as an interstate element. 15. The Revenue does not dispute the fa .....

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y is infact, a final product in such process though in the chain of manufacturing activities, it may be an intermediary product. The contention of the respondent that payment of tax by HLL at 1% under Section 3(4) of the TNGST Act is irrelevant cannot be countenanced. This is a very relevant factor, which goes to show that the HLL is a manufacturer. 16. Having come to such a conclusion, it has to be seen as to whether the second respondent while issuing the impugned clarification, dated 09.09.20 .....

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espondent states that for availing concessional rate of tax under Section 3(3) of the TNGST Act, the first pre-requisite is the purchaser should be a registered dealer in the State of Tamil Nadu. Secondly, the purchase of the goods should be for the purpose of manufacturing inside the State of Tamil Nadu. 17. It is not in dispute that HLL are registered dealer within the State of Tamil Nadu under the TNGST Act and the CST Act on the file of the Assistant Commissioner (CT), Fast Track Assessment .....

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purchase order placed from Mangalore with specific instruction to deliver at HLL's additional place of business at Ranipet and such delivery was effected by the petitioner at the Ranipet factory in trust for and on behalf of HLL and manufactures, the prescribed finished goods which was then stock transferred to the factory at Mangalore. Further the Revenue does not dispute the fact that during the Assessment Years 1999-2000 and 2000-2001, HLL's principal place of business was at Apex Pla .....

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