State Taxation Tribunal - Tamil Nadu
Rajapalayam Cotton Pressing Factory vs State Of Tamil Nadu on 2 August, 1999
Equivalent citations: [2000]118STC24(TRIBUNAL)
JUDGMENT P. Muthuswamy, Member (J)
1. This tax revision case is against the order of Tamil Nadu Taxation Appellate Tribunal (Additional Bench), Madurai, in M.T.A. No. 233 of 1985 dated July 17, 1986 by challenging the levy of tax of Rs. 21,368 at 4 per cent on a turnover of Rs. 5,34,185 under the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1981-82.
2. The revision-petitioner Tvl. Rajapalayam Cotton Pressing Factory, Rajapalayam, reported a total and taxable turnover nil before the Deputy Commercial Tax Officer-II, Rajapalayam. The assessing officer after checking of accounts and records found that the purchase of hoop iron or iron pattai from Tvl. Babu Traders, Madurai, for a sum of Rs. 5,34,196 and so also the purchase of hessian cloth from one Thiru S. Krishnan, Sivakasi, for a sum of Rs. 45,500 totalling at Rs. 5,79,696 leviable with purchase tax under 7-A(1)(b) of the TNGST Act on the ground that there was no such sales to the assessee as claimed. So the assessing authority determined the total and taxable turnover at Rs. 5,79,696 at 4 per cent.
3. Aggrieved by the said order, the assessee preferred first appeal before the Appellate Assistant Commissioner, Virudhunagar, wherein the levy of purchase tax on the purchase of hessian cloth on a turnover of Rs. 45,500 was deleted, but the levy of purchase tax under 7-A(1)(b) in respect of hoop iron on a turnover of Rs. 5,34,196 at 4 per cent was confirmed. So also additional sales tax was deleted. Aggrieved by the said order, the assessee preferred second appeal before the Appellate Tribunal wherein also the assessee failed to succeed. Against the said order the assessee preferred revision before the High Court of Judicature in T.C. No. 1340 of 1986 and the same has been transferred to this Special Tribunal Under Section 19 of Act No. 42 of 1992 and re-numbered as T.C. (R) No. 433 of 1997.
4. In the memo of grounds as well as during argument, it is the case of the revision-petitioner that Babu Traders, Madurai, are only genuine dealers and hence the purchases effected from them were genuine. It is also further contended even assuming that the sale in favour of the petitioner was not subjected to tax, the petitioner could not be burdened with the taxability to pay tax Under Section 7-A(1)(b) of the TNGST Act. It is also the specific case of the revision-petitioner that the iron hoops used for packing by the petitioner involved no transfer of property and hence there could not be any levy of purchase tax Under Section 7-A(1)(b) of the TNGST Act and further even as per case laws no purchase tax could be levied in respect of the hoops iron which is a declared goods consumed in the works contract.
5. Now, the point for consideration is, whether the order of the Appellate Tribunal is sustainable and correct in law.
6. It is no doubt that the petitioner's firm is carrying on the activity of pressing and packing. It is the specific case of the petitioner that for the purpose pressing and packing that is for job-work, the petitioner purchased hoop iron from one Thiru Babu Traders, Madurai, with Registration Certificate No. 410387 for a sum of Rs. 5,34,196 during the assessment year 1981-82. It is no doubt that the hoops or iron pattai is declared goods under entry 4(vi) of the Second Schedule for which the tax could be levied at 4 per cent at the point of first sale in the State. In such circumstances, firstly it is to be seen whether the hoops iron purchased from Tvl. Babu Traders suffered tax, secondly, it is also to be found out whether the hoops which were used as packing material during package and the same was severable one in the execution of works contract by the assessee and any tax could be levied at the point of first sales. It is the case of the assessee that the hoops said to have been purchased from Tvl. Babu Traders were consumed in the execution of works contract namely as packing material and the same was not severable while consuming in job-works or in works contract. So, the hoops said to be purchased from Tvl. Babu Traders was only accretion to the works contract. So, the hoops consumed in the works contract which is not severable would not attract tax at the point of first sale in the assessment year 1981-82 as the same is before the introduction of Section 3-B (June 26, 1986). So, it is obvious that neither Section 3 nor 4 of the TNGST Act would be attracted at the point of first sale effected by the assessee in respect of the hoops consumed in the works contract. Hence it is obvious that hoops being the declared goods, the sale of the said hoops at the point of first sale in the execution of the works contract would not attract tax either Under Section 3 or 4 of the TNGST Act at the relevant point of time.
7. In such circumstances, it is to be seen whether there was any sale or earlier sufferance of tax, if not whether any purchase tax Under Section 7-A(1)(b) of the TNGST Act could be levied in respect of the purchase said to have been effected by the assessee from one Tvl. Babu Traders. It is the definite and clear finding of the lower authorities that Tvl. Babu Traders who is said to have the Registration No. 410387 is not in existence and only bogus dealer and even the place of business is not within the jurisdiction of the concerned assessing authority. Only after due verification by the departmental officials it revealed that Tvl. Babu Traders was not in existence and the bills issued were bogus. Hence, there was no sufferance of tax or valid sale of hoops in the transaction of purchase said to have been effected from Tvl. Babu Traders by the assessee. So, further reasons stated above when there is no valid sale or sufferance of tax at the earliest point of time when the assessee purchased hoops it is obvious that purchase tax Under Section 7-A(1)(b) of the TNGST Act would be attracted. In this case, as already pointed out tax Under Section 7-A(1)(b) of the T.N.G.S.T. Act has to be levied due to the fact that no tax could be levied Under Section 4 of the TNGST Act at the point of first sale as the hoops purchased by the assessee was consumed in the works contract and sold by way of accretion to the works contract. Mr. R. Mahadevan, Government Advocate, contended that if at the point of purchase the goods did not suffer any tax because they were sold by an unregistered dealer, as here in this case, the hoops were purchased from the bogus dealer and the hoops were consumed in the execution of the works contract for which charges collected and hence no tax could be levied at the point of first sale, the levy of purchase tax Under Section 7-A(1)(b) of the TNGST Act is inevitable, and in support of his contention he cited decisions (1) in M.S. Viswanathan & Co. v. State of Tamil Nadu reported in [1990] 76 STC 221 (Mad.), and another decision (2) in Heat Transfer Development v. State of Tamil Nadu reported in [1995] 96 STC 60 (Mad.). In addition, the assessee being the purchaser of the hoops from an unregistered dealer (here bogus dealer) and used the same in the execution of the works contract and collected the value in the job-work done by it or in the works contract, thereby the transaction is liable for purchase tax Under Section 7-A(1)(b) of the TNGST Act as a dealer in view of the decision in the State of Tamil Nadu v. M.K. Kandaswami reported in [1975] 36 STC 191 (SC). In the cited decision of the Supreme Court, it has been clearly laid down that Section 7-A of the TNGST Act itself is charging section and it creates liability against a dealer on his purchase turnover of the goods if the subsequent sale or purchase had not suffered tax Under Section 3 or 4 of the TNGST Act, and the sale after the purchase in any of the modes Under Section 7-A of the TNGST Act, especially in view of the legal position (as laid down therein) that the main object of Section 7-A is to plug leakage and to prevent evasion of tax, and hence while interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from statute book should be eschewed. So, as already stated above, there was disposal of hoops in a manner other than by way of sale within the State by the assessee and thereby definitely it would attract purchase tax Under Section 7-A(1)(b) of the TNGST Act. So, the finding of the lower authorities that the turnover of Rs. 5,43,196 is exigible to purchase tax at 4 per cent Under Section 7-A(1)(b) of the TNGST Act is perfectly valid in law. So, we see no reason to interfere with the order of the Appellate Tribunal. Hence bearing all these aspects in mind the order of the Appellate Tribunal is confirmed.
In the result, the revision petition is dismissed.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 2nd day of August, 1999.