While allowing a writ petition filed by the assessee, M/s.Zip Industries Ltd, the Madras High Court allowed Central sales Tax exemption on sale of zip fasteners to a readymade garment manufacturer who exported the readymade garments.
Assessee in the instant case engaged in the business activity of Zip fasteners. During the assessment year the assessee sold Zip fasteners to a readymade garment manufacturer who has exported the readymade garments outside the territory of India. Assessee has claimed exemption on this sale transaction.
The Commercial Tax Officer rejected the exemption claimed by the assessee by holding that the assessee was engaged in the business activity of Zip fasteners, and then there is no connection with the readymade garments and export. These are two different commodities, and accordingly the exemption cannot be granted to the assessee in this case.
After the rival submissions of both the parties the Justice T.S.Sivagnanam of Madras High Court held that the petitioner has sold zip fasteners to a manufacturer of readymade garments, who has fixed the zips in the garments and exported the garments outside the territory of India. Readymade garments business cannot be complete without the help of Zip fasteners, because both are complementary goods. Therefor the transaction between the petitioner and the exporter are inter-connected with the export of the goods outside India. The court also declared that, there for the petitioner is eligible for CST exemption.
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