NLC wins case over sales tax on briquetting plant

Tag: Briquetting Presses

Chennai, May 1 The Neyveli Lignite Corporation in Tamil Nadu has won a case in the Madras High Court by which it would pay a nominal 4 per cent sales tax under the TNGST Act, 1959 instead of 12 per cent demanded by the TN Commercial Tax Officer.

In a recent order, the Court held that the fact that it was described as “briquetting and carbonisation plant” would in no way make it either as a plant in running condition or it should be shifted to any other place for use.

The intention of the parties (NLC and the bidder, Chitrahar Traders of Tirupur) was to sell it only as a scrap, and even in the gate pass, it was described only as scrap.
Contrary to dictum

The Court also said that the authorities themselves had initially directed that it was taxable at 4 per cent and the parties had also paid that amount.

Therefore, without there being any real basis to describe it as first sale and to refuse to accept it as scrap by the order dated April 16, 2007 of the Commissioner of Commercial Taxes, Chennai, was “clearly impermissible and contrary to the dictum of this Court”, Mr Justice K. Chandru, who heard the writ petitions of NLC and the firm, ruled.

In April 2001, NLC had said that the B&C plant had become useless to any activity, and hence it was decided to dispose it as scrap.

An accord was reached between Metals & Scrap Trading Corporation, selling agent of NLC, and Chitrahar Traders to sell the plant, and it was dismantled and removed outside NLC.

The Commercial Tax Officer, Cuddalore, informed NLC that the plant was sold as scrap and hence, the sale was taxable at 4 per cent.
NLC petition

On July 4, 2005, the Commissioner of Commercial Taxes, Chennai, informed NLC that since the sale of B&C plant was on ‘as is where is’ basis, and ‘no complaint basis’, it was taxable at 12 per cent under Entry 20 Part D of the 1st Schedule to the TNGST Act. Against the said order, NLC filed a writ petition.

The Court held that ultimately, goods being what they were, labelling it one way or the other, could not help either side.

The plant had become unusable and had been closed, and its licence had been surrendered. It had been sold only with the condition that the purchaser would dismantle and sell it.

In these circumstances, the writ petition would stand allowed, and the respondent was directed to restore tax at 4 per cent, and refund the balance to appropriate parties.