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2021 Supreme(Mad) 1899
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S.M. Subramaniam, J.
M/s. Star Audio, Represented by B. Poonam Chand, Partner, Chennai & Others – Petitioners
Versus
Commercial Tax Officer, T.Nagar (East), Assessment Circle, Chennai & Others – Respondents
W.P. Nos. 33462 of 2005, 13514 & 13515 of 2006 & W.P.M.P. Nos. 15101 & 15102 of 2006 & 36378 of 2005 & W.V.M.P. No. 59 of 2010
Decided On : 06-09-2021
For the Petitioner:V.S. Manoj, K. Vaitheeswaran, Advocates.
For the Respondent:V. Veluchamy, Government Advocate.
Headnote:
Constitution of India,1950 - Articles 14, 19 (1) (g), 226 and 265 - Central Sales Act, 1956 - TNGST Act, 1959 - Tamil Nadu General Sales Tax Act, 1959 - Section 3(1) and 16 - Petitioner entrusts master copy received from producers to cassette manufactures and supply pre-recorded cassettes - Cassette manufactures purchase blank cassettes from registered dealers within State after payment of Sale tax and record devotional songs/film songs etc on blank cassettes and sell pre-recorded cassettes to petitioner charging total value of pre-recorded cassettes and Sales tax - Accordingly, impugned Circular passed by respondents in Circular is confirmed and writ petition in W.P. stands dismissed No costs. Consequently, connected miscellaneous petitions are closed - Whether such transaction amounts to sale or “works contract” or otherwise – Held, Court has no hesitation in forming an opinion that first sale as claimed by petitioner cannot be considered as a first sale but to be construed as “works contract” and sale by petitioner in open market is to be taken as first sale for purpose of levy of tax under provisions of TNGST Act - Present case, there was a “works contract” between petitioner and cassette manufacturers to use master copy for purpose of recording blank cassettes in large scale - Secondly there is an execution of works contract and such execution is done on certain terms and conditions of agreement - Goods were transferred to petitioner, who has supplied master copy and not sold in open market admittedly - It would have been supplied in sale form or in any other form - Court present case, it was supplied in other form by recording blank cassettes by utilizing master copy and therefore all three conditions stipulated by Hon'ble Supreme Court of India in above case has been complied with in respect of facts and circumstances of present case - Judgment of Court of India in case of Toubro Limited would be aptly applicable with reference to nature of transactions occurred in case of petitioner - Contrarily activities involved in manufacture of pre-recorded audio cassettes with reference to Gramophone case may not have application as issue raised before Hon'ble Supreme Court are not connected with sale or “works contract” and levy of tax under provisions of TNGST Act as in Present case - Writ Petitions dismissed
ORDER :
(Prayer: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Declaration, to declare the impugned Circular No. Acts Cell-I/76234/2002 dated 16.05.2003 as ultravires the provisions of Section 3(1) and other relevant sections of the Tamil Nadu General Sales Tax Act, 1959 and as being ultravires Articles 14, 19(1)(g) and 265 of the Constitution of India in so far as the petitioner is concerned.
Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorari, to call for the records of the First Respondent in pursuant to the revised assessment order TNGST/0482113/2002-2003 dated 28.02.2006 and quash the same.
Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorari, to call for the records of the First Respondent in pursuant to the revised assessment order TNGST/0482113/2003-2004 dated 28.02.2006 and quash the same.)
W.P.No.33462 of 2005
1. The writ on hand is filed, to quash the Circular dated 16.05.2003 as ultravires to the provisions of Section 3(1) and other relevant Sections of the Tamil Nadu General Sales Tax Act, 1959 [hereinafter referred to as 'TNGST Act'] and as being ultravires to Articles 14, 19 (1) (g) and 265 of the Constitution of India.
2. The petitioner is engaged in the business of selling/marketing of pre-recorded audio cassettes and is registered under the provisions of the TNGST Act, 1959 and Central Sales Act, 1956.
3. The petitioner purchases pre-recorded audio cassettes from suppliers in Tamil Nadu, who are also duly registered under the TNGST Act and the said suppliers charge Sales Tax under TNGST Act in respect of the sales of pre-recorded audio cassettes.
4. The petitioner acquires audio rights from the artists themselves or from the film producers in Tamil Nadu to publish, manufacture, sell, distribute and broadcast the devotional songs and songs of cine films. The petitioner entrusts the master copy received from the producers to the cassette manufactures and supply pre-recorded cassettes. The cassette manufactures purchase blank cassettes from registered dealers within the State after payment of Sale tax and record the devotional songs/film songs etc., on the blank cassettes and sell the pre-recorded cassettes to the petitioner, charging the total value of the pre-recorded cassettes and the Sales tax.
5. The petitioner states that the sales, which are made by the petitioner, are therefore second sales of pre-recorded audio cassettes, which are exempt from payment of tax as pre-recorded audio cassettes are only subject to tax at the point of first sale.
6. The first respondent after duly verifying first sale invoices in respect of pre-recorded audio cassettes, has allowed the second sale exemption in respect of earlier assessment years.
7. Under these circumstances, the exemption granted in respect of the earlier assessment years under Section 16 of the TNGST Act has been withdrawn.
8. The contention of the respondents are that the transaction between the petitioner company and the cassette manufacturers are “works contract” and cannot be construed as first sale. In the regard, the impugned Circular has been issued. Thus, the petitioner is constrained to move the present writ petition.
9. The learned counsel for the petitioner mainly contended that the nature of manufacturing and selling the recorded cassettes to the petitioner would reveal that the same amounts to first sale and not “works contract”. Admittedly, the petitioner purchased the copyright from the Film Producers, Music Directors etc., and allowing the cassette manufactures to purchase the blank cassettes and record the songs and thereafter, sell the same to the petitioner and such sale would become a first sale, wherein tax has been paid. Therefore, the selling of the recorded cassettes by the petitioner to the end users cannot be construed as a first sale and it must be treated as second sale for all purposes, whic
