Case Note & Summary
The dispute arose from the levy of sales tax on the appellant, M/s. Technoglobe, for sales made to the Tamil Nadu Film Development Corporation during the assessment years 1994-95 and 1995-96. The Corporation was designated as the nodal agency for a film city project sanctioned by the State of Tamil Nadu in 1992. The appellant was awarded a contract to supply equipment for this project and received purchase orders stating that sales tax was exempted by the Tamil Nadu Government. However, the Commercial Tax Officer (CTO) later rejected the exemption claim for the assessment year 1995-96, leading to a significant tax demand and penalties. The appellant's subsequent legal notice to the respondents went unanswered, prompting them to approach the Tamil Nadu Taxation Special Tribunal, which also rejected their petition. The High Court upheld this decision, stating that no notification under Section 17 of the Tamil Nadu General Sales Tax Act had been issued, thus affirming the sales tax liability. The appellant contended that G.O.M. No. 169, issued by the Government of Tamil Nadu, exempted them from sales tax liability, arguing that the Corporation should be liable for the tax. The respondents countered that the G.O.M. was not issued by the relevant department and that the dealer is liable for sales tax regardless of any agreements with the purchaser. The Supreme Court found merit in the appellant's argument regarding the deferment of sales tax under G.O.M. No. 169 and remanded the case to the Tribunal for fresh consideration, emphasizing the need to examine the implications of the notification on the appellant's tax liability. The appeal was allowed, and the parties were directed to bear their respective costs.
Headnote
A) Taxation - Sales Tax Liability - Liability of Dealer - Tamil Nadu General Sales Tax Act, 1959, Section 3 - The court held that the liability to pay sales tax is cast on the dealer irrespective of whether the tax was collected from the consumer. The appellant's claim of exemption based on a certificate from the Corporation was not upheld due to the absence of a notification under Section 17 of the Act. (Paras 10-19). B) Taxation - Exemption Notification - Effect of G.O.M. No. 169 - Tamil Nadu General Sales Tax Act, 1959, Section 17-A - The court noted that the G.O.M. No. 169 provided for deferment of sales tax for five years for the Film City Project. The case was remanded to the Tribunal to examine the implications of this notification on the appellant's sales tax liability. (Paras 15-21).
Issue of Consideration
Whether the appellant is liable to pay sales tax on sales made to the Tamil Nadu Film Development Corporation for the assessment years 1994-95 and 1995-96.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment, and remanded the matter back to the Tribunal for fresh consideration regarding the sales tax liability in light of G.O.M. No. 169.
Law Points
- sales tax liability
- exemption claims
- public sector undertakings
- deferment of tax
- notification requirements
