2026-VIL-704-MAD
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VAT High Court Cases

Tamil Nadu General Sales Tax Act, 1959 - Applicability of Section 7-A of Tamil Nadu General Sales Tax Act, 1959 and Section 12 of Tamil Nadu VAT Act, 2006 - Liability to pay purchase tax on goods purchased from unregistered dealers. Dept-Petitioner imposed purchase tax on Respondent civil contractors for purchase of sand, gravel and jelly from unregistered dealers utilised in execution of works contracts for assessment years 2003-2004 through 2012-2013, which was denied by Appellate Commissioner and confirmed by Appellate Tribunal on the ground that goods were used for construction of buildings and not for manufacture of other goods for sale - Whether purchase tax is attracted when goods purchased from unregistered dealers are consumed in construction of buildings - HELD - Section 7-A is both charging as well as remedial provision with main object to plug leakage and prevent evasion of tax. The Constitutional Bench judgment in Asstt. Commr. (Intelligence) v. Nandanam Construction Co. clearly established that once goods cease to exist or cease to be available in that form for sale or purchase so as to attract tax and correct meaning of the provision is that tax will be attracted when such goods are consumed in manufacture of other goods or are consumed otherwise. The expression otherwise will qualify both sale and manufacture not only sale. When goods are utilised in construction of buildings the goods cease to exist or cease to be available in that form for sale or purchase so as to attract the tax - The object of Section 7-A is to prevent evasion and ensure that goods do not escape tax net merely because transaction was effected through unregistered dealers - The Appellate Authority and Tribunal failed to consider the settled law laid down by Constitution Bench and various Division Benches of the Court consistently holding that utilisation of goods purchased from unregistered dealers in execution of works contracts would attract liability under Section 7-A notwithstanding levy under Section 3-B. The impugned orders containing finding that authority has no jurisdiction to impose sales tax under Section 7-A and Section 12 show perversity and aside - Purchase tax is attracted when goods purchased from unregistered dealers are utilised in construction of buildings. The appeal is allowed and impugned orders are quashed - Purchase Tax - Deemed Sale under Section 3-B - Relationship between Section 3-B (transfer of property in goods involved in works contract) and Section 7-A (purchase tax on goods from unregistered dealers) - Whether Section 3-B controls or excludes operation of Section 7-A when goods purchased from unregistered dealers are utilised in execution of works contracts. HELD - Section 3-B applies only when there is taxable transaction involving transfer of property in goods from registered dealer. On the other hand Section 7-A specifically deals with purchases effected from unregistered dealers who had not suffered tax. The two provisions operate in entirely different spheres and are independent provisions. Section 7-A relates to purchase tax whereas Section 3-B relates to transfer of property in goods involved in execution of works contracts, therefore nature, character and taxable event under both provisions are distinct and separate - The controversy in present case does not arise out of transfer of property by registered dealer but out of purchases effected from unregistered dealers for use in execution of works contracts, hence Section 7-A independently stands attracted and Section 3-B would not apply. In view of findings of authorities that purchases were made from unregistered dealers there is no question of application of Section 3-B. The contention that Section 3-B controls or excludes operation of Section 7-A is contrary to law laid down by Supreme Court in State of Tamil Nadu v. M.K. Kandaswami - Purchases made by works contractor from unregistered dealers are exigible to purchase tax under Section 7-A. The impugned orders are quashed and assessment orders of assessing authority are held in accordance with law and within jurisdiction.
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