U.S.R. Tyres and Tubes Pvt. Limited vs The Commercial Tax Officer

D. Hariparanthaman, J.—The Petitioner has filed the present Writ Petition seeking the relief of Writ of Certiorarified Mandamus, calling for

the records on the files of the Respondent herein in TNGST/3561941/2005-2006 dated 18.01.2008 and quashing the same and direct the

Respondent herein to consider the exemption granted in G.O. Ms. No. 526/CT & RE dated 21.11.1997.

The Petitioner is a company registered under Companies Act. The Petitioner is a registered dealer under the TNGST Act on the files of the

Respondent. The Petitioners have been recognised as 100% Export Oriented Unit for manufacture and export of rubberized wheel automobile

tubeless tyres etc., by the Government of India, Ministry of Commerce and Industry, Department of Commerce and approved by the office of the

Development Commissioner, MEPZ, Special Economic Zone and HEOUS in Tamil Nadu, Pondicherry, Andaman and Nicobar Islands, Chennai-

600 045. The Petitioners are manufacturing rubber compounded rings etc., and they are exporting the same. The main raw material for the

manufacture of the said rubber compounded ring wheels are rubber which is purchased from registered dealers in the State of Tamil Nadu from

and in and around Kanyakumari District. The Petitioners are exempted from payment of tax for such purchases in view of G.O. Ms. No. 528/CT

& RE dated 21.11.1997, issued u/s 17 of the Tamil Nadu General Sales Tax Act, 1959 r/w Section 4-E of the Act.

For the year 2005-2006, the Respondent issued the impugned proceedings dated 18.01.2008 and levied tax in respect of the purchase

turnover of rubber sheets from registered dealers within the State on the ground that the last purchase of the raw rubber of all varieties and grades

are liable to tax at the rate of 8% with effect from 27.03.2002 as per Item 33(ii) in Part C of the First Schedule to the Act.

The Petitioners have filed this present Writ Petition to quash the aforesaid order dated 18.01.2008. The Respondent filed counter affidavit

refuting the allegations. According to the Respondent, the Petitioners are bound to pay the tax at the point of last purchase of the raw materials

under entry 33(ii) Part C of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959.

Heard Mr. N. Inbarajan, learned Counsel appearing for the Petitioner and Mr. S.C. Herold Singh, learned Government Advocate, appearing

for the Respondent.

The Petitioners do not dispute that as per Section 3(2) of the Act, the Petitioners are liable to pay tax in the case of goods mentioned in the First

Schedule, at the rate and at the point specified therein on the turnover in each year relating to such goods. Part C of the First Schedule Item 33(ii)

deals with rate of Tax on the purchase of the raw rubbers of all varieties and grades and the same is at 8%. The Petitioners are also bound to pay

the aforesaid tax, if the Petitioners are not 100% Export Oriented Unit, as the Government issued G.O. Ms. No. 528, CT & RE Department,

dated 21.11.1997, exempting 100% Export Oriented Unit from the payment of tax on the purchase of raw materials. G.O. Ms. No. 528 CT &

RE is extracted herein:

NOTIFICATIONS

GOVERNMENT OF TAMIL NADU

ABSTRACT

Commercial Tax-Tamil Nadu General Sales Tax Act, 1959 -Exemption on the purchase of raw materials within the state by registered 100%

Export Oriented Units and units located in Chennai Export Processing Zone-Notification-Issued.

------------------------------------------------

COMMERCIAL TAXES AND RELIGIOUS ENDOWMENTS

(B2)

DEPARTMENT

G.O. Ms. No. 528

Dated 21.11.1997

READ:

From Development Commission, MEPZ, Chennai-45.

(D.O. No. 19/50/96/EOU-TN/2423, dated 17.10.98 and 18.02.97)

From SC&CCT, Chennai

(D.O. Lr. No. Q3/17816/97, dated 26.02.97....

Section 4(E) of the Tamil Nadu General Sales Tax Act, 1959 provides as below:

A registered 100% export oriented unit or unit located in the Madras Export processing Zone shall be entitled for refund of the whole of the tax

paid by it on the purchase of any goods, including consumables, packing materials and labels ,but excluding plant and machinery, which has been

used by such unit in the manufacture and assembling, packing of, labelling of goods manufactured within the State and sold by way by export of

such unit; provided that the unit shall satisfy such conditions and shall submit an application for refund in such manner and in such form as may be

prescribed.

In his letter first read above, the Development Commissioner, Madras Export Processing Zone has indicated that the Tamil Nadu Government

has been refunding sales tax paid paid by the units in Madras Export Processing Zone under the Tamil Nadu General Sales Tax Act and that the

refund has been made by SIPCOT and the amount involved by way of reimbursement has been of the order of Rs. 26 Lakhs only during 1996-

He has requested the Government that instead of the refund of tax, the 100% Export oriented units and the units located in Madras Export

Processing Zone (MEPZ) may be exempted from payment of sales tax.

Government examined the matter in consultation with the Special Commissioner and Commissioner of Commercial Taxes. With a view to

encourage the exports from Tamil Nadu they arrived at a decision that all raw materials purchased within the State by registered 100% Export

Oriented Units and units located in Chennai Export Processing Zone (CEPZ) will be fully exempted from payment of sales tax.

The appended notification will be published in the Tamil Nadu Government Gazette.

ANNEXURE NOTIFICATION

In exercise of the powers conferred by Sub-section (1) Section 17 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959),

the Governor of Tamil Nadu hereby makes an exemption in respect of the tax payable by any dealer on the sale of raw materials to the registered

100% Export Oriented units in this State and units located in the Chennai Export Processing Zone.

EXPLANATORY NOTE

(This does not form part of the notification but is intended to indicate its general purport).

Section 4E of the Tamil Nadu General Sales Tax Act, 1959 provides that a registered 100% export oriented unit or unit located in the Chennai

Export Processing Zone shall be entitled for refund of the whole of the tax paid by it on the purchase of any goods, including consumables, packing

materials, labels but excluding plant and machinery.

The Development Commissioner requested the Government that instead of refund of tax, the said units may be exempted from 8 payment of sales

tax. The amount involved by way of refund was Rs. 26.00Lakhs during 1996-97.

With a view to encourage the exports from Tamil Nadu, Government have decided that all raw materials purchased within the State by registered

100% Export Oriented units and units in Chennai Export Processing Zone (CEPZ) will be fully exempted from payment of sales tax. This

notification is intended to achieve the above object.

But the Respondent has proceeded that the Petitioners have not effected the sale of raw rubber to 100% Export Oriented Unit and hence the

exemption is not admissible. Holding so, the Respondent held that the Petitioners are liable to pay tax at the rate of 8% on the last purchase

turnover of raw rubber.

According to the Respondent, since the Petitioners do not effect the sale of raw rubber to 100% Export Oriented Unit, they are not entitled to

exemption under G.O. Ms. No. 528 CT & RE dated 21.11.1997. The purport of the Government Order is that the Petitioners being an 100%

Export Oriented Unit, they are entitled to exemption, if they purchase raw materials for manufacture.

It is not disputed even by the Respondent that the purchase was made for the manufacture. It is seen that the Petitioners involved in the purchase

of raw rubber for manufacturing activity. The Petitioners are entitled to exemption being an Export Oriented Unit. It is not necessary that the

Petitioners should involve in the sale of raw material to another Export Oriented Unit to claim the benefit of exemption. They are entitled to

exemption at the last purchase, being the manufacturer. Hence, the impugned order is liable to be quashed. Accordingly, the impugned order is

quashed.

In the result, this Writ Petition is allowed and the Respondent is directed to pass appropriate order relating to exemption under G.O. Ms. No.

528 CT & RE dated 21.11.1997. Consequently, the connected Miscellaneous Petition is closed. No costs.