Judgment:
1. The common prayer in all the original petitions is to quash the revised orders of assessment dated May 29, 2003 made for the years 1998-99, 1999-2000 and 2000-2001, wherein the first respondent has levied purchase tax under Section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 on the purchase turnover of vegetable oil purchased by the petitioner from the registered dealer.
2. The allegations of the petitioner are that during the course of his business, he purchased sunflower oil, soyabean oil and refined RBD palmolein oil from various registered dealers inside the State of Tamil Nadu and the same were stock transferred to his branches outside the State of Tamil Nadu. This was already noticed at the time of original assessment and final orders were made. Subsequently, the first respondent, noticing that the goods purchased from registered dealers had not suffered tax at their hands due to exemption granted by the Government under Section 17(1) of the Tamil Nadu General Sales Tax Act, 1959, in respect of sales tax payable on their sales turnover up to Rs. 300 crores, issued notices for revision of assessment for the said years, proposing to levy purchase tax under Section 7-A(1)(c) and penalty under Section 16(2) read with Section 12(3) of the Tamil Nadu General Sales Tax Act, 1959. The petitioner filed his objection on April 9, 2003. Without properly considering the objections, the first respondent has confirmed his proposal contained in the revision notices. The entire orders suffer from jurisdiction and from errors of law apparent on the face of the record. Though statute provides for appeal remedy, the filing of appeal would cause irreparable injury to the petitioner by way of payment of pre-condition deposit for entertainment of appeal and further payment for obtaining stay. As the matter involves question of law, the petitioner is approaching this Special Tribunal.
3. Mr. C. Natarajan, learned Senior Counsel appearing for the petitioner, argued that generally, vegetable oil is liable to tax under Section 3(2) of the Act read with entry 80, Part B of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (during the relevant period under entry 67, Part B of the First Schedule) only at the point of first sale within the State at four per cent. The petitioner purchased vegetable oil from registered dealers/first sellers within the State and despatched them to his branches outside the State. The first sellers were exempt under various Government Notifications and subsequently, the exemption limit was fixed at Rs. 300 crores effective from April 1, 1999 and no ceiling was fixed prior to that and there was full exemption on the first sales of vegetable oil from March 27, 1998. The books of accounts of the petitioner reflected the purchase transactions and on check of accounts, original assessments were already made treating the purchases by the petitioner as exempt. Now, the first respondent has imposed purchase tax under Section 7-A(1)(c) of the Act for the years 1998-99, 1999-2000 and 2000-2001 mechanically without looking into the fact that full exemption was allowed prior to April 1, 1999. On the ground that since tax was not paid at the first sale point by the seller, the purchaser has to pay purchase tax. The first respondent has also levied penalty under Section 16(2) of the Act. If the first sale is taxable and the first sale is exempted, there is no other point under the Act, on which tax has to be collected, even though Section 7-A may be a separate charging section. Inasmuch as the tax payable on the first sales has been exempt, it becomes non-taxable in nature. Even though vegetable oil is taxable under Section 3(2) of the Act, by virtue of exemption notification issued under the statute, Section 17(1) of the Act, the goods become non-taxable goods and therefore, the goods exempted under Section 17 cannot be brought to tax under Section 7-A. The petitioner's turnover is around Rs. 50 to Rs. 60 crores only. The Government exempts payment of tax up to Rs. 300 crores and the authority says that the intention was to exempt the seller and to recover it from the purchaser which is anomalous and the exemption does not pass on to the subsequent purchasers and the purpose of exemption gets defeated. The Act imposes a tax on a dealer and not on every sale. The authority has misread the provisions of Section 7-A(1) of the Act. The operative portion in Section 7-A(1) is "in circumstances in which no tax is payable under Section 3 or 4, as the case may be". The provision looks to circumstances operating under the Act, i.e., the circumstances in which tax is payable under the Act and the circumstances in which no tax is payable under the Act. The circumstances are that under Section 3(1), the sale is not liable, because the registered dealer has a turnover not exceeding rupees three lakhs. Under Section 3 read with Section 2(r) the agriculturists are not to be taxed as per the Scheme of the Act. The exemption under Section 17(1) was with regard to payability of the tax in respect of sale or purchase and therefore, the notification comes under Section 17(1)(iii) of the Act. The power to exempt is only to exempt the tax payable in respect of sale or purchase and the point of taxation under the Schedule to the Act cannot be shifted under the powers vested in the Government in Section 17. Therefore, when the first sale is exempt, the sale of vegetable oil by the first seller ceases to be taxable goods. The learned Senior Counsel relied on the decisions reported in [1989] 73 STC 175 (AP) [Vinod Solvent Extracts (P.) Ltd. v. State of Andhra Pradesh], [1975] 36 STC 191 (SC) (State of Tamil Nadu v. M.K. Kandaswami),(SC) (Hindustan Brown Boveri Ltd. v. State of Gujarat), [1995] 98 STC 125 (Mad.) [Sulochana Cotton Spinning Mills (P.) Ltd. v. State of Tamil Nadu] and contended that the judgments referred to by the authorities in the revised assessment orders are totally irrelevant to the circumstances prevailing in the present cases.
4. With respect to levy of penalty, all the facts and figures were before the authority at the time of original assessment and the assessments were also completed and tax dues were paid. The element of wilful non-disclosure is absent in these cases and therefore, the levy of penalty under Section 16(2) is illegal. In support of this contention, the learned Senior Counsel also relied on the decisions reported in [1970] 25 STC 211 (SC) (Hindustan Steel Ltd. v. State of Orissa) and [1997] 104 STC 61 (Mad.) (State of Tamil Nadu v. Sri Shanmughananda and Co.).
5. Mr. R. Muthukumarasamy, learned Additional Advocate-General assisted by Mr. M.C. Govindan, learned Senior Standing Counsel, appearing for the respondents, filed a common counter-affidavit and argued that the first respondent noticed that during the assessment years 1998-99, 1999-2000 and 2000-2001 the petitioner had purchased vegetable oil from the registered dealers, who were enjoying exemption from payment of tax on their first sales up to a total turnover of Rs. 300 crores. The so purchased vegetable oil were subsequently despatched/stock transferred by the petitioner to his branches in other States and not by way of direct inter-State trade or commerce. Inasmuch as those purchases were made in circumstances in which no tax was payable under Section 3 or 4 of the Act, even though the goods are taxable under entry 80, Part B of the First Schedule (entry 67 during relevant period) to the Tamil Nadu General Sales Tax Act, 1959 and subsequently, the goods were stock transferred to branches in other State not by way of direct inter State trade or commerce, Section 7A(1)(c) of the Act is attracted and the authority is perfectly right in levying purchase tax on the purchase transactions in question. The judgment of the Supreme Court reported in [1975] 36 STC 191 (State of Tamil Nadu v. U.K. Kandaswami) renders support for levying purchase tax. In the said judgment at P. 200, the Supreme Court approved the judgment of the High Court of Kerala reported in [1972] 30 STC 537 (Malabar Fruit Products Company v. Sales Tax Officer) explaining the scheme of the Section 5-A, which is identical to Section 7-A of the Tamil Nadu General Sales Tax Act, 1959, wherein one of the circumstances in which liability under Section 7-A is attracted has been stated as the circumstance wherein the seller is not liable to tax for the reason that his turnover is below the specified minimum. Similarly, in this case also, the seller is not liable because his total turnover did not exceed Rs. 300 crores, as notified by Government in G.O. Ms. No. 93 dated June 2, 2000 read with G.O. Ms. No. 105 dated June 22, 2000 effective from April 1, 1999. The petitioner has admittedly purchased the vegetable oil from the sellers, who had availed exemption and whose total turnover did not exceed Rs. 300 crores per year and despatched the same to his branches outside the State not as a direct result of sale or purchase in the course of inter-State trade or commerce. Further, the vegetable oil is not totally exempted by the Government and the exemption is only in respect of tax payable by dealers whose total turnover does not exceed Rs. 300 crores. Therefore, the exemption is only a conditional exemption and not total exemption. In such circumstances, the petitioner/purchaser of vegetable oil within the State is liable to purchase tax under Section 7-A(1)(c) of the Act. In the present case, all the ingredients contained in Section 7-A(1) and a further condition in clause (c) are satisfied and therefore, the levy is perfectly valid.
6. I heard the arguments of both the sides and perused the affidavits, common counter-affidavit and rejoinder and other connected records filed in these cases. It is an admitted fact that the petitioner A has purchased vegetable oil from the local registered sellers. Whose total turnover was below Rs. 300 crores per year and who were enjoying exemption under various Government Notifications and despatched the same to his branches outside the State not by way of direct result of sale or purchase in the course of inter-State trade or commerce.
7. From the typed-set of papers, 1 could find that the Government, by G.O. Ms. No. 109 dated April 7, 1998 granted exemption in respect of the tax playable under the Tamil Nadu General Sales Tax Act, 1959 on the sale of coconut oil, gingelly oil, groundnut oil, sunflower oil and all refined oils including refined palm oil, refined cotton seed oil and refined rice bran oil effective from March 27, 1998 and subsequently, cotton seed oil, rice bran oil were also extended to the benefit of exemption in G.O. Ms. No. 337 dated December 23, 1998. By G.O. Ms. No. 36 dated March 1, 1999 effective from March 1, 1999, the exemption in respect of tax payable was allowed to any dealer whose total turnover in a year does not exceed rupees one hundred crores.
Further, in supersession of the Government Order dated April 7, 1998, as subsequently varied, the Government issued a further Notification vide G.O. Ms. No. 93 dated June 2, 2000 effective from March 1, 1999, raising the exemption limit to rupees three hundred crores. This effective date of March 1, 1999, was further amended to take effect on and from April 1, 1999, by G.O. Ms. No. 105 dated June 22, 2000.
However, with effect from December 1, 2001, the Government Order in G.O. Ms. No. 93 dated June 2, 2000 fixing the exemption limit of Rs. 300 crores, was cancelled vide G.O. Ms. No. 110 dated November 30, 2001. A careful reading of the above notifications showed that there was full exemption in respect of the tax payable under the Tamil Nadu General Sales Tax Act, 1959 on the sale of coconut oil, gingelly oil, groundnut oil, sunflower oil, cotton seed oil, rice bran oil and all refined oils including refined palm oil, refined cotton seed oil and refined rice bran oil from March 27, 1998 to March 31, 1999 without any turnover limit and a ceiling was fixed at Rs. 300 crores for the enjoyment of exemption only from April 1, 1999 to November 30, 2001 and on and from December 1, 2001, exemption already issued was cancelled and there was no exemption and the said oils are quite taxable under Section 3(2) of the Act.
8. Both the counsels relied on the judgment of the Supreme Court reported in [1975] 36 STC 191 (SO (State of Tamil Nadu v. M.K.Kandaswami) to their favour in respect of taxability of the goods, especially, the following paragraph at page 197 which reads as under : "The focal point in the expression, 'goods, the sale or purchase of which is liable to tax under the Act', is the character and class of goods in relation to their exigibility. In a way, this expression contains a definition of 'taxable goods', that is, goods mentioned in the First Schedule of the Act, the sale or purchase of which is liable to tax at the rate and at the point specified in the Schedule. The words 'the sale or purchase of which is liable to tax under the Act' qualify the term 'goods' and exclude by necessary implication goods, the sale or purchase of which is totally exempted from tax at all points under Section 8 or Section 17(1) of the Act.
The goods so exempted-not being 'taxable goods'- cannot be brought to charge under Section 7-A.9. The main points to be considered in these cases are-(1) whether the goods purchased are "goods, the sale or purchase of which is liable to tax under this Act", i.e., taxable goods, and (2) whether the purchases were made "in circumstances in which no tax is payable under Section 3 or 4, as the case may be". With reference to the judgment reported in [1975] 36 STC 191 (SC) (State of Tamil Nadu v. M.K. Kandaswami), Mr. C.Natarajan, learned Senior Counsel for the petitioner, argued that the Government can exempt either at all points or at specified points under Section 17(1). The goods in question, i.e., vegetable oil is taxable at the point of first sale only and there is no scheme to tax at any other point. When the sale is exempt at sale point and that is the only point for levy, the vegetable oil cannot be taxable at all points and therefore, vegetable oil ceases to be a taxable goods. With regard to the ingredient that "in circumstances in which no tax is payable under Section 3 or 4" he argued that the first respondent has erred in applying the judgment in [1975] 36 STC 191 (SC) (State of Tamil Nadu v.M.K. Kandaswami) to the present circumstances of the case. In that case, the circumstances were that even though the goods are generally taxable goods, no tax was payable by the sellers, because they were agriculturists/ house-holders/unregistered dealers, who were not at all liable under the scheme of the Act. But, in the present case, the seller is the registered dealer and he is very much liable under the Act. When exemption was granted at the sale point which is the only taxable point, the Government was very well aware that it would be losing the revenue on the sale of exempted items from the dealers whose total turnover were below Rs. 300 crores and therefore, the circumstances dealt with in the judgment reported in [1975] 36 STC 191 (SC) (State of Tamil Nadu v. M.K. Kandaswami) cannot be simply followed in the present cases. On the other hand, the Learned Additional Advocate-General argued that as elaborately discussed by the Supreme Court, the words, "the sale or purchase of which is liable to tax under the Act" qualify the term "goods" and exclude by necessary implication goods, the sale or purchase of which is totally exempted from tax at all points under Section 8 or Section 17(1) of the Act and in the present case, the exemption is not a total exemption under Section 17(1) of the Act, but a conditional exemption in respect of tax payable by a dealer on his sale transaction, provided his total turnover does not exceed Rs. 300 crores per year and the goods in question are still taxable at the point of first sale under Section 3(2) of the Act beyond Rs. 300 crores, Therefore, the goods are still taxable goods. In respect of circumstance in which no tax is payable under Section 3 or 4, the seller was exempt up to a total turnover of Rs. 300 crores on his sale transaction of vegetable oil. A circumstance has been created that no tax is payable by the seller under Section 3 up to a total turnover of Rs. 300 crores. Since the sale transaction had not suffered tax at the point of first sale in the circumstance stated above, the purchase transaction is very much liable under Section 7-A(l)(c) in the present cases.(SC) (State of Tamil Nadu v. M.K. Kandaswami) and found that the Supreme Court has elaborately discussed the contents in Section 7-A(l) and held that Section 7-A(l) can be invoked only when all the ingredients therein are cumulatively satisfied. In that case, the goods in question were arecanuts, gingelly seeds, turmeric, grams, castor seeds and butter and the sale or purchase of which is generally taxable under the Act, i.e., taxable goods. The goods were not liable to tax at the hands of sellers, because the sellers were found to be agriculturists/house-holders/unregistered dealers, who are not liable to tax under the Act itself. The Supreme Court also observed that purchases have been made by the dealers of "goods, the sale or purchase of which is generally liable to tax under the Act", but because of the circumstances aforesaid, no tax was suffered in respect of the sale of these goods by the sellers. In such circumstances, the levy of purchase tax under Section 7-A was upheld. Finally, the Supreme Court held as follows : "In our opinion, the Kerala High Court has correctly construed Section 5-A of the Kerala Act which is in pari materia with the impugned Section 7-A of the Madras Act. 'Goods, the sale or purchase of which is liable to tax under this Act' in Section 7-A(l) means 'taxable goods', that is the kind of goods, the sale of which by a particular person or dealer may not be taxable in the hands of the seller but the purchase of the same by a dealer in the course of his business may subsequently become taxable. We have pointed out and it needs to be emphasised again that Section 7-A itself is a charging section. It creates a liability against a dealer on his purchase turnover with regard to goods, the sale or purchase of which though generally liable to tax under the Act have not, due to the circumstances of particular sales, suffered tax under Section 3, 4 or 5 and which after the purchase, have been dealt by him in any of the modes indicated in clauses (a), (b) and (c) of Section 7-A(l)." 11. On a careful reading of the provisions contained in Section 7-A(l) and the above judgment. I can very well say that though exemption was granted by the Government through various notifications on the sale of vegetable oils up to a turnover of Rs. 300 crores, still the goods retain the character of taxability beyond Rs. 300 crores and the goods are still taxable goods. There was no total exemption from tax under Section 17(1) at the sale point, even though the levy is only at single point of first sale within the State. The exemption is purported for a dealer whose total turnover is below Rs. 300 crores. Therefore, the goods in question cannot be said to be non-taxable goods and the goods purchased in this case by the petitioner are "goods, the sale or purchase of which is liable to tax under the Tamil Nadu General Sales Tax Act, 1959 or taxable goods". Hence, the contention that levy of purchase tax would amount to shifting of point of taxation from the scheduled sale point to purchase point, is not accepted. With respect to the other ingredient, "in circumstances in which no tax is payable under Section 3 or 4", I have to hold that the circumstance in which no tax was payable under Section 3 by the seller on his sales due to exemption notification in force, in the present cases, will attract levy under Section 7-A of the Act, following the judgment of the Supreme Court quoted in paragraph .10 above. The judgments relied on by the learned Senior Counsel in [1989] 73 STC 173 (AP) [Vinod Solvent Extracts (P.) Ltd. v. State of Andhra Pradesh], [1981] 47 STC 376 (SC) (Hindustan Brown Boveri Ltd. v. State of Gujarat), [1995] 98 STC 125 (Mad.) [Sulochana Cotton Spinning Mills (P.) Ltd. v. State of Tamil Nadu], etc., are not applicable to the circumstances prevailing in the present case. Thus, all the ingredients in Section 7-A(l)(c) are present in the cases in O.P. Nos. 693 and 694 of 2003, for which reason, the levy of purchase tax is to be upheld for the year 1999-2000 and 2000-2001 (O.P. No. 693 and 694 of 2003). However, in respect of the year 1998- 99 (O.P. No. 692 of 2003), as observed in paragraph 7 above, since there was a total exemption at the only taxable point/sale point without any limit to the turnover of the seller on his sales prior to April 1, 1999, under notification issued under Section 17(1) and also following the observation of the Supreme Court in [1975] 36 STC 191 at 197 (State of Tamil Nadu v. M.K. Kandaswami) that the words, "the sale or purchase of which is liable to tax under the Act" qualify the term "goods" and exclude by necessary implication goods, the sale or purchase of which is totally exempted from tax at all points under Section 8 or Section 17(1) of the Act, I hold that the goods (vegetable oil) so exempted does not satisfy the ingredient of taxable goods and therefore, the same cannot be brought to tax under Section 7-A(1)(c) of the Act.
12. With regard to penalty levied under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 in all the cases, the learned Additional Advocate-General fairly concedes that penalty under Section 16(2) won't be attracted. On considering the records, I could see that while the first respondent was revising the assessment by levying purchase tax in the impugned orders, he says that the dealer has wilfully not declared the turnover liable to tax under Section 7-A(l)(c) of the Act in the monthly returns and paid tax due thereon. Thus, for suppressing the relevant turnover, he has levied penalty under Section 16(2) read with Section 12(3) of the Act. The levy is not acceptable, since the facts and figures were already before the authorities even at the time of original assessment and the petitioner was allowed exemption on the sales turnover of edible oil for all the years. Only on noticing the exemption given to the seller and the provisions in Section 7-A, the first respondent has revised the assessments. Thus, there was no wilful suppression so as to warrant levy under Section 16(2) of the Act. For levying penalty under Section 16(2), the element of wilful non-disclosure is essential, which is absent in these cases. Therefore, in all the cases, the levy of penalty is deleted. 13. In the result, the order impugned in O.P. No. 692 of 2003 is set aside in full and the Original Petition in, O.P. No. 692 of 2003 (for the year 1998-99) is allowed. The orders impugned in O.P. Nos. 693 and 694 of 2003 relating to levy of penalty alone, are set aside and the Original Petitions in O.P. Nos. 693 and 694 of 2003 (for the years 1999-2000 and 2000-2001) are dismissed in respect of tax portion. Consequently, the miscellaneous petitions therein do not survive.
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 10th day of November, 2003.