EOU held 100% self explanatory term by HC.

Facts in Brief:

1. The petitioner who is the Registered Dealer on the files of the respondent under the Tamil Nadu Value Added Tax Act, 2006, and is engaged in the business of buying and selling granites.

2. The issue relating to refund of input tax credit in both the writ petitions are relatable to the period 2006-2007 and 2007-2008. During this period, the petitioner purchased raw granite from the Registered Dealers in the State of Tamil Nadu and the same was sold to the Exporter namely M/s.Tab India Granite (P) Ltd., Hosur, an 100% Export Oriented Unit who in turn exported the goods. These facts are not in dispute.

3. The petitioner made an application for refund of the input tax credit for the year 2006-2007 and 2007-2008 and the reason for seeking refund of tax paid on purchase of goods was that the goods were sold to 100% Export Oriented Unit in a sale in the course of export and therefore, the sale would fall under Section 5(3) of the Central Sales Tax Act, 1956 (hereinafter referred to as CST Act, 1956) and the petitioner is entitled to the benefit of input tax credit or refund on the amount of tax paid on the purchase of goods specified in the First Schedule including the capital goods under the category of zero rate sale as defined in Section 18 of the TNVAT Act, 2006.

Q. for Consideration:

4. The short question that arises for consideration in this case is as to whether the sales made to the 100% EOU will fall under the definition of Zero rated sales in terms of Section 18 of the TNVAT Act, 2006.

HC held as under,

5. In this case, the petitioner has sold the goods to Tab India Pvt. Ltd., a 100% EOU and the documents submitted by the petitioner to the competent Refund Authority clearly satisfied the requirements that the sale was for the purpose of export of goods outside the territory of India by the EOU and it is in the course of export. Section 18(1) of TNVAT Act, 2006 and Section 5(3) of CST Act, 1956, clearly apply to the facts of the petitioner's case. The sale in this case falls under Section 5(3) of CST Act, 1956, and then Section 18(1) of TNVAT Act, gets attracted.

6. In such view of the matter, by virtue of Section 18(i) of the TNVAT Act, 2006 the petitioner is entitled to Input Tax Credit or refund of tax if it is a sale specified under sub-section (1) and (3) of Section 5 of CST Act, 1956, by treating it as Zero rated sale. The petitioner will therefore be entitled to the refund in this case. The petitioner is justified in seeking refund of the tax treating the sale as Zero rated sale.

7. The impugned order accepts that the sale was effected to 100% EOU. No provision of law has been shown as to how the sale to 100% EOU cannot be termed as Zero rated sales. Since the petitioner has established that the sale was in the course of export supported by the Bill of Lading, Export Invoice, etc., (i.e) the documents in support of the export, the Department cannot contend that Section 18 of the TNVAT Act, 2006, will not apply.

8. The term 100% EOU is self-explanatory and it has not been properly appreciated by the authority. All that Section 18 of the TNVAT Act, 2006, provides for is that sale should be in the course of export. If the EOU has made the export and proof of export has already been brought on record, Section 18 of the TNVAT Act, 2006, has to automatically apply. The impugned order does not even state as to how a sale to an 100% EOU which is meant for export promotion, does not fall under Section 18(i) of TNVAT Act, 2006. This is a total misconception and misreading of the provisions of the Act.

9. In the result, the findings of the authority in the impugned orders are perverse and based on a misreading of the provisions of Section 18(i) of TNVAT Act,2006 and Section 5(3) of the CST Act, 1956. Accordingly, the impugned orders are set aside and the writ petitions are allowed as prayed for. Consequently, the connected Miscellaneous Petitions are closed. No costs. 

Case Reference - Emerald Stone Export vs The Assistant Commissioner (Ct).