Tax Exemption Cannot Be Claimed For Inter-State Purchases Without Segregating Local Purchases: Madras High Court
The Madras High Court has held that if the assessee has purchased goods both within the State and from other States, then to claim exemption for inter-State purchases, the purchases made within the State must be segregated from those made from others. Justices S.M. Subramaniam stated that when the facts are established in clear terms that the goods were found mingled during...
The Madras High Court has held that if the assessee has purchased goods both within the State and from other States, then to claim exemption for inter-State purchases, the purchases made within the State must be segregated from those made from others.
Justices S.M. Subramaniam stated that when the facts are established in clear terms that the goods were found mingled during the course of physical verification/inspection, the decision of the assessing Authority and the appellate Tribunal that the assessee is not entitled for exemption, is correct and in consonance with the provisions of the exemption Order.
The assessee/petitioner purchased gingelly seeds locally in the State of Tamil Nadu, and those gingelly seeds suffered tax at the point of first sale in the State of Tamil Nadu. Therefore, when the assessee effected an inter-State sale of such tax-suffering gingelly seeds, claimed exemption under G.O.No.3602, Revenue, dated 28.12.1963.
The assessee claimed exemption on the inter-State sale of such tax suffered gingelly seeds in line with the Government Order, and submitted purchase bills and stock book to prove the claim for exemption.
The assessment order passed by the Commercial Tax Officer shows that the assessee is not eligible to avail the benefit of exemption based on the inspection and physical verification.
The assessee preferred an appeal before the Appellate Assistant Commissioner, who, in turn, reversed the order passed by the assessing Authority. Thus, the State preferred an appeal before the Sales Tax Appellate Tribunal.
The Tribunal set aside the order of the Appellate Assistant Commissioner (Commercial Tax) by confirming the order of the assessing Authority.
The assessee submitted that the assessee purchased the gingelly seeds both within the State and from other States. As far as the gingelly seeds purchased within the State, the goods suffered tax, and therefore the assessee is entitled to avail an exemption in respect of the gingelly seeds purchased from other States.
The department submitted that the assessee admitted the fact that the goods were mingled and therefore it is impossible to segregate the gingelly seeds purchased from the State and inter-State. The Authorities during the inspection also found that the goods were mingled, which were not disputed by the assessee during the relevant point of time. That being so the assessee is not entitled for exemption.
The bench observed that the Appellate Assistant Commissioner had considered the stock books separately maintained by the assessee and not considered the inspection report of the assessing authority, as well as the fact that the goods were mingled during the course of inspection.
Once the assessee has disproved the mingling of stocks found during the course of inspection, the estimation of first sales accepted by the Appellate Assistant Commissioner (Commercial Tax) is found to be perverse. The Appellate Assistant Commissioner has not considered this aspect in his order, added the bench.
The bench noted that the assessing authority had conducted a physical verification of stock, which was found mingled and passed the assessment order.
In view of the above, the bench dismissed the petition.
Case Title: M/s.Sivakumar and Co., Perundurai Road, Erode v. The Tamil Nadu Sales Tax Appellate Tribunal
Citation: 2025 LiveLaw (Mad) 321
Case Number: W.P.No.33265 of 2007
Counsel for Petitioner/Assessee: Mr. C. Subramanian
Counsel for Respondent/Department: Mr. K.J. Chandran