2025-VIL-1117-MAD
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VAT High Court Cases

Tamil Nadu General Sales Tax Act, 1959 - Works contract, Inter-state transactions, Levy of penalty under Section 16(2) of the TNGST Act, 1959 - Petitioners, engaged in the execution of interior works, procured goods from both Tamil Nadu and outside the State for the purpose of executing works contracts. The authorities rejected the petitioners' claim that the goods procured from outside Tamil Nadu were inter-state transactions covered under Section 3-B(2)(a) of the Tamil Nadu General Sales Tax Act, 1959 and thus not liable to tax - Whether the transactions involving procurement of goods from outside Tamil Nadu for use in execution of works contracts within Tamil Nadu can be considered as inter-state transactions covered under Section 3-B(2)(a) of the TNGST Act, 1959 and thus not liable to tax - HELD – To constitute an inter-state transaction under Section 3-B(2)(a), the petitioners needed to demonstrate a conceivable, if not inextricable, link between the inter-state movement of goods and the deemed sale (works contract). However, the authorities found that there was no such link established by the petitioners, as the goods were standard goods that could be diverted. The subject transactions were not inter-state in character and thus ineligible for the deduction under Section 3-B(2)(a) – However, the Tribunal had levied the penalty under Section 16(2) of the TNGST Act, 1959 without any finding by the lower authorities that there was willful non-disclosure of the assessable turnover by the petitioners, which is a prerequisite for invoking the penalty under Section 16(2). In the absence of such a finding, the levy of penalty under Section 16(2) cannot be sustained - The writ petitions are partly allowed
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