TNVAT Exemptions Applicable to Interstate Transactions in Absence of CST Notifications u/s 8(5): Madras HC Grants Exemption to Interstate Sales of Gloriosa Superba [Read Order]

In a recent judgment, the Madras High Court ruled that exemptions under the Tamil Nadu Value Added Tax (TNVAT) Act apply to interstate transactions in the absence of specific notifications under Section 8(5) of the Central Sales Tax (CST) Act and granted relief to interstate sales of Gloriosa Superba.

The petitioner, Natesan, engaged in the interstate sale of Gloriosa Superba challenged a demand for Rs. 15,19,830 in tax for the financial year 2013-14. The tax authority had applied a 14.5% tax rate on interstate sales due to the absence of 'C' forms and rejected the petitioner’s claim of exemption under a TNVAT notification.

The petitioner argued that Gloriosa Superba was exempt from tax under Notification No.II(1)/CTR/30(a-2)/2007 of the TNVAT Act and cited a prior ruling in Appasamy Associates vs. Commissioner of Commercial Taxes (W.P.No.4355 of 2008 and batch, dated 15.07.2021) which recognized similar exemptions for interstate sales. In that case, the court held that specific notifications under the CST Act were not mandatory when general notifications under the state VAT Act provided clear exemptions.

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The respondent argued that CST-specific exemptions require a notification under Section 8(5) of the CST Act which was not issued in this case. The revenue explained the need for compliance with Section 8(4) of the CST Act requiring 'C' forms to claim concessional rates.

Justice C. Saravanan examined the provisions of the CST Act particularly Sections 8(2) and 8(5), and held that in the absence of a CST-specific notification, the general exemptions under the TNVAT Act applied to interstate transactions.

The court also referred to the Kerala High Court’s judgment in Collector of Central Excise vs. Polyset Corporation, which held that exemptions provided under one fiscal statute could guide similar exemptions under another provided the conditions were not contradictory.

The court observed that the notification under the TNVAT Act intended to exempt certain goods, including Gloriosa Superba from tax, and this intent should not be defeated by technicalities such as the absence of 'C' forms. It held that the demand raised by the tax authority lacked legal basis.

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The court quashed the impugned revision order dated 22.04.2022 and granted the petitioner the benefit of the TNVAT notification providing full exemption from tax on interstate sales of Gloriosa Superba. The writ petition was allowed with consequential relief granted to the petitioner.

To Read the full text of the Order CLICK HERE

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