REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL  APPEAL NO. 1809 OF 2003

M/S. TECHNOGLOBE — APPELLANT  

VERSUS

STATE OF TAMIL NADU & ORS. — RESPONDENTS

J U D G M E N T

D.K. JAIN, J.:

1. Challenge, in this civil appeal, is to the judgment and order dated 1st  

August 2000, delivered by the High Court of Judicature at Madras in  

W.P. No. 12798 of 2000, whereby the High Court has affirmed the  

levy  of  sales  tax  on  the  appellant  on sale  of  goods  made  by it  to  

respondent No.2 herein, in the assessment years 1994-95 and 1995-96.

2. Briefly stated, the facts necessary for the disposal of this appeal, are as  

follows :

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In  the  year  1992,  respondent  No.  1,  the  State  of  Tamil  Nadu  

sanctioned  a  “film city”  project,  for  which  respondent  No.  2  viz.  the  

Tamil  Nadu  Film  Development  Corporation,  (for  short  “the  

Corporation”) a public sector undertaking, was designated as the nodal  

agency, responsible for administering and implementing the said project.  

Pursuant thereto, a tender was floated by the Corporation for supply of  

various equipments for the said film city project. After a successful bid,  

the appellant was awarded the contract.  In furtherance thereof, on 28th  

June,  1994,  the  Corporation  issued  various  purchase  orders  to  the  

appellant, accompanied by Certificates of sale which, inter- alia, stated:  

“This  is  to  certify  that  the  Sales  Tax  for  the  equipments  purchased  for  the  Film  City  Project  at  Madras  has  been  exempted by the Tamil Nadu Government.”

3. Vide assessment  order  dated 31st January 1996, the Commercial  

Tax Officer (for short “CTO”) exempted the sales made by the appellant  

to the Corporation in the assessment year 1994-95 from the levy of sales  

tax.

4. However,  in relation to  the assessment  year  1995-96,  the CTO,  

vide  his  order  dated  26th June 1997,  rejected  the  appellant’s  claim of  

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exemption on similar sales made by them to the Corporation,  holding  

that:

“There is no exemption granted in the G.O. cited as stated by  the dealers for claiming exemption to the sales turnover made  to  the  Film  Development  Corporation.  Hence  the  objection- filed by the dealers are not accepted.”

5. Accordingly,  the CTO included the entire  sales turnover  made by  

the appellant to the Corporation in the taxable turnover  for the said year  

and subjected the same to sales tax under Tamil Nadu General Sales Tax  

Act,  1959  (for  short  “the  Act”),  thereby  creating  an  additional  tax  

demand  of `26,57,388/-.  In addition the CTO also imposed a penalty of  

`39,86,082/- under Section 12(5)(b)(v) of the Act.

6. Additionally, vide order dated 29th August 1997, the CTO revised  

the  assessment  under  the  Act  in  respect  of  the  year  1994-95,  thereby  

disallowing  the  exemption  on  the  goods  sold  by  the  appellant  to  the  

Corporation, which resulted in additional demand of tax of `29,75,983/-.  

A  penalty  of  `44,60,901/-  was  imposed  together  with  a  penalty  of  

`3,127/- under Section 12(3) read with Section 24(3) of the Act.  

7. Faced with the threat of recovery of the aforestated tax demands,  

the appellant issued a legal notice to the three respondents herein on 1st  

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February  1999,  requesting,  inter  alia,  the  Corporation to  furnish  the  

Government Order granting sales tax exemption, as mentioned in their  

purchase orders and, in the alternative to pay the sales tax, penalty and  

surcharge levied on the appellant by the CTO. However, there was no  

response to the said notice from any of the respondents.  

8. On  1st December  1999,  the  CTO  served  a  legal  notice  on  the  

appellant, stating that since the arrears of sales tax had not been paid, the  

house  property  of  the  proprietress  was  being  attached,  and  would  be  

brought to public auction.  

9. The  appellant,  thereafter,  approached  the  Tamil  Nadu  Taxation  

Special Tribunal (for short “the Tribunal”) praying that the Corporation  

be directed to pay the arrears of sales tax, surcharge and penalty levied on  

them.  The  Tribunal,  vide  its  order  dated  6th July  2000,  rejected  the  

petition of the appellant, observing that:

“As the petitioner themselves are not able to mention that there  is  any  Government  order  available  granting  exemption  it  appears  that  there  is  no  such  exemption  granted  by  the  Government. Under those circumstances there is no question of  exemption.”

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10. Being aggrieved by the said order, the appellant preferred a writ  

petition before the High Court. As afore-mentioned, the High Court has  

rejected the writ petition of the appellant, inter alia, holding that:

“On  consideration,  we  find  that  admittedly,  no  notification  under Section 17 of the Tamil Nadu General Sales Tax Act has  been issued. Therefore, in the absence of any such notification  issued, the petitioner-firm being an assessee is liable to pay the  sales tax and it cannot take advantage of the alleged certificate  issued by the 2nd respondent.”

11. Hence the present appeal.

12. Mr.  Rajiv  Mehta,  learned  counsel  appearing  on  behalf  of  the  

appellant, while assailing the impugned judgment, strenuously contended  

that  in  view of  G.O.M.  No.  169 dated  27th June  1994,  issued  by the  

Government  of  Tamil  Nadu,  the  appellant  cannot  be  made  liable  for  

payment  of  Tax under  the  Act in respect  of  sales to the Corporation.  

Learned counsel contended that if at all sales tax is leviable under the  

Act,  it  is  the  Corporation  which  is  liable  to  pay  the  same  as  in  the  

purchase order issued by them to the appellant it was clearly stated that  

“Film City project has been exempted from the payment of Sales Tax by  

issuing a separate G.O. (copy will be sent separately). The particulars to  

that  effect  is  enclosed  with  this  purchase  order.”  Relying  on the  said  

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representation which had been made by a public sector undertaking of the  

State  Government,  the  supplies  were  made  by  the  appellant  without  

charging any sales tax.  It was also urged that in light of Section 26(1) of  

the  Act,  the  CTO  was  competent  to  recover  sales  tax  from  the  

Corporation,  notwithstanding  the  fact  that  it  is  a  public  sector  

undertaking.

13. Per contra, Mr. TLV Iyer, learned senior counsel appearing for the  

respondents  contended that  G.O.M. No. 169 Information and Tourism  

Department,  dated 27th June, 1994 was not  issued by the Commercial  

Taxes  Department,  and  therefore,  the  dealer-appellant  cannot  claim  

exemption on the basis of the said G.O.M.  Learned counsel contended  

that under the Act, it is the dealer who is liable to pay the sales tax, and  

if  there  is  any  contract  or  understanding  between  the  dealer  and  the  

purchaser  regarding  payment  of  tax  dues,  the  Commercial  Taxes  

Department is not bound by it.  If the appellant, so desires, it may recover  

the amount so paid by them from the Corporation. Commending us to the  

decision  of  this  Court  in  American  Remedies  Pvt.  Ltd.  &  Anr.  Vs.   

Government of Andhra Pradesh & Anr.1, learned counsel contended that  

it is a settled proposition of law that the dealer is liable to pay sales tax,  

1 [1999] 113 STC 400 (SC))

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and it is immaterial whether or not, he has collected the same from the  

consumer.  Learned  counsel,  however,  submitted  that  the  Commercial  

Taxes Department will have no objection if this Court, in exercise of its  

jurisdiction under Article 142 of the Constitution, is inclined to pass an  

order, directing the Corporation to discharge the sales tax liability under  

the  Act  on  the  purchases  made  from  the  appellant  during  the  years  

1994-95 and 1995-96.

14. Before we advert to the rival submissions, it would be expedient to  

extract  relevant  portions of G.O.M. No. 169 Information and Tourism  

Department dated 27th June 1994,  filed  before us by learned Counsel for  

the Corporation.  The G.O.M. issued under the order of the Governor of  

Tamil Nadu, declares the “Film City Project” as a Tourism project and  

grants  certain  “incentives,  concessions  and  subsidies  for  Tourism  

promotion projects and activities.” It reads:   

“3.  The  Government  after  careful  consideration  of  the  proposal  submitted  by  Special  Officer,  Film City,  declare  the ‘Film City Project’ as ‘tourism project’ for purpose of  extending various concessions, incentives and subsidies as  applicable to other industries.  The Government also direct  that  the  following  concessions,  incentives  and  subsidies  shall be made available to Film City Project :- ………………………………………………………………

iii)  Deferral of sales Tax for a period of 5 years wherever  Sales Tax levy is applicable.

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..……………………………………………………………

6.  This  order  issues  with  the  concurrence  of  Industries  Commerical Taxes and Religious Endowments, Energy and  Finance  Departments  vide  their  U.O.  Nos.  12959A/MIG2/94-1  dt.2.5.94,  26/Secy/Per/94-1  dt.3.5.94,  4554/A2/94-1 dt.9.5.94 and 2677/FS/P/94 dt. 2.6.94.”                                                    (Emphasis supplied by us)

15. It is manifest that the said G.O.M. defers payment of sales tax by  

the proposed “Film City Project” for a period of five years. It is also plain  

that the Government of Tamil Nadu had acceded to the request of the  

“Film City” for granting it various concessions, incentives etc. with the  

concurrence of different departments, which included the Department of  

Commercial Taxes as well.   

16. At this juncture itself, it will be useful to refer to Section 17-A of  

the  Act,  which  empowers  the  State  Government  to  notify  deferred  

payment of tax for new industries etc.  The Section reads as under:

“17-A.  Power  of  Government  to  notify  deferred  payment  of  tax  for  new  industries,  etc:  (1)  The  Government may, in such circumstances and subject to  such  conditions  as  may  be  prescribed,  by  notification  issued whether prospectively or retrospectively, defer the  payment by any new industrial unit or sick unit or sick  textile mill of the whole or any part of the tax payable in  respect of any period:

Provided that such retrospective effect shall not be  earlier than the 9th May, 1988.

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(1-A) The Government may, by general or special  order,  authorize  the Territorial  Assistant  Commissioner  to exercise such of their powers specified in sub-section  (1).

(2)  Notwithstanding   anything  contained  in  this  Act, the deferred payment of tax under sub-section (1) or  sub-section  (1-A)  shall  not  attract  interest  under  sub- section  (3)  of  section  24  provided  the  conditions  laid  down for payment of the tax deferred are satisfied.”

Thus,  it  is  clear  that  under  certain  circumstances  the  State  

Government   has  the  power  to  issue  notification  for  deferment  of  

payment of the whole or any part of the tax payable in respect of any  

period.  It bears repetition that the State Government in exercise of its  

jurisdiction  under  Section  17-A  of  the  Act  was  competent  to  issue  

G.O.M.  No.169  dated  27th June,  1994.    It  is  also  evident  from the  

notification  that  it  was  issued  with  the  “concurrence”  of  Commercial  

Taxes and Finance Departments, besides others.

17. Section 3 of the Act provides for the levy of sales tax on sales or  

purchase of goods by a dealer.  The relevant part thereof reads as under:

“3. Levy of taxes on sales or purchases of goods.-

(1)(a)(i) Every dealer, other than the dealer, casual trader  or agent of a non-resident dealer referred to in clause (ii),  whose  total  turnover  for  a  year  exceeds  three  lakhs  of  rupees ; and

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(ii)  every  dealer  in  bullion,  gold,  silver  and  platinum  jewellery including articles thereof and worn-out or beaten  jewellery and precious stones and every casual trader or  agent of a non-resident dealer, whatever be his turnover for  the year, shall pay tax for each year in accordance with the  provisions of this Act ;

(1)(b)  Notwithstanding  anything  contained in  clause  (a),  every dealer  (other  than a dealer  in bullion,  gold,  silver,  platinum jewellery including articles thereof and worn-out  or beaten jewellery and precious stones and a casual trader  or agent of a non-resident dealer) whose total turnover for  a year exceeds three lakhs of rupees but does not exceed  ten lakhs of rupees shall not be liable to pay tax on the first  three lakhs of rupees of his total turnover, provided that no  amount by way of tax or purporting to be by way of tax  has been collected by him under this Act in respect of that  first three lakhs of rupees.”

18. It is abundantly clear that under Section 3 of the Act, the liability  

to pay sales tax in accordance with the provisions of the Act is cast on the  

dealer,  irrespective   of  the  fact  whether  he  has  collected  it  from the  

consumer or not.  Therefore, the plea of the appellant that they had not  

charged  and  collected  any  sales  tax  from  the  Corporation  is  of  no  

consequence.  However, the issue for consideration in the present case  

relates to the effect of the deferral scheme envisaged in G.O.M. No. 169  

on the liability of the appellant to pay sales tax on the sales made by them  

to the Corporation for the assessment years 1994-95 and 1995-96.   

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19. It is evident from the afore-extracted orders that all the authorities  

below, particularly the Tribunal, have proceeded on the premise that no  

notification  under  Section  17  of  the  Act,  which  clothes  the  State  

Government with the power to notify exemptions and reductions of tax in  

respect of any tax payable under the Act, had been issued.  Therefore,  

according  to  the  Tribunal,  in  the  absence  of  such  a  notification,  the  

appellant could not take advantage of the Certificate allegedly issued by  

the Corporation, certifying that sales tax on the equipment purchased for  

the film city project had been exempted by the Tamil Nadu Government  

and avoid payment of sales tax on the sales made to them in the years  

1994 and 1995.  It is quite intriguing as to why, in response to the legal  

notice issued by the appellant to the three respondents, the Corporation,  

in particular, did not furnish a copy of the said notification to them or  

produce it before the Tribunal where it was represented by a Government  

pleader.  At the same time, it is equally surprising as to why the appellant  

did not make any effort to produce a copy of the notification, a public  

document when they were visited with huge sales tax demands and were  

threatened with auction of their immovable property.  Be that as it may,  

we are of the opinion that notification dated 27th June, 1994, placed on  

record by the respondents  has a significant  bearing on the aforestated  

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issue  before  us.   As  noticed  above,  the  notification  contemplates  

deferment of sales tax for a period of 5 years wherever sales tax levy is  

applicable on the purchases for the film city project.  Prima facie, there is  

some force in the stand of the appellant that the notification would cover  

the  sales  made by them to  the  Corporation  in  the  years  1994-95  and  

1995-96  which  fall  in  the  stipulated  period  of  five  years.   We  are  

conscious  that  ordinarily  this  Court  would  be  loathe  to  examine  

contentions of facts based on evidence, advanced for the first time before  

this Court without there being any adjudication by the High Court on the  

same.   (See:  Sardar  Govindrao  Mahadik  & Anr.  Vs.  Devi  Sahai  &  

Ors.2).  However, in the present case, the said notification being a public  

document, produced by one of the contesting respondents, it  would be  

travesty of justice if the said document is not taken into consideration for  

determining  the  issue,  which  admittedly  surrounded  the  same  

notification.

20. In light of the aforestated factual scenario, we are of the opinion  

that  since  none  of  the  authorities  below had examined the  scope and  

implication of  the said notification,  it  would be expedient  and just  to  

remand the case back to the Tribunal, to examine all the aspects of levy  

2 (1982) 1 SCC 237

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of sales tax on the subject sales, in the said two years, keeping in view  

the scope and ambit of the said notification as also the fact that the period  

for which the  payment of sales tax was deferred has also expired.  

21. For  the  foregoing reasons,  the  appeal  is  allowed;  the  impugned  

judgment is set aside and the matter is remitted back to the Tribunal for  

fresh  consideration,  particularly  in  light  of  the  notification  dated  27th  

June, 1994.  The parties are left to bear their respective costs.   

      ..……………………………..…..…….        (D.K. JAIN, J.)  

       .…………….…………………..…..….        (DR. MUKUNDAKAM SHARMA, J.)

        ….……………………………..…..….         (R.M. LODHA, J.)

NEW DELHI; NOVEMBER 16,   2010.  

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