2026-VIL-414-MAD
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VAT High Court Cases

Tamil Nadu General Sales Tax Act, 1959 - Transit Sales and High Sea Sales with Hire Purchase Transactions - The assessee claimed exemption under Section 6(2) of the Central Sales Tax Act, 1956 for transit sales and under Section 5(2) for high sea sales – Department’s case that the assessee had camouflaged inter-state sales as transit sales and high sea sales to claim exemption, when the transactions were actually local sales under hire purchase agreements – Whether the transactions were in the nature of hire purchase agreements and therefore taxable under the Tamil Nadu General Sales Tax Act – HELD - The assessee's documents showed that the transactions were not outright sales by transfer of documents of title, but were in the nature of hire purchase agreements where the goods remained the property of the seller. The assessee had raised two sale bills for the same transaction - one at the time of original sale under Section 6(2)(b) of the CST Act as a transit sale, and another at the termination of the hire purchase period as a local sale. This showed an attempt to camouflage the interstate sales as transit sales to claim exemption under Section 6(2) - Similarly, in the case of high seas sales, the Customs duty had been paid only on the import value and not on the high seas sale value, indicating that the high seas sale was a separate transaction from the import. The total amount financed by the assessee included the value of import, charges paid for clearance of the goods from customs, import duty paid and the assessee's profit margin. This showed that the import was a separate transaction and the hire purchase sale was a separate transaction - The movement of goods was not pursuant to any written contract, but the invoices to the customers were subsequent to the hire purchase agreement and included duty, interest and other charges. Therefore, the transactions were rightly held to be the first sale, taxable under the Tamil Nadu General Sales Tax Act. The penalty imposed for wilful suppression of facts is also upheld - The Tribunal's order disallowing the assessee's claims of transit sales and high sea sales exemptions, and imposing penalty for wilful suppression of facts, is upheld – The Tax Case (Revision) are dismissed
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