TMI Blog2011 (6) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... goods is complete, in that event, the question of deterioration of quality of goods can hardly arise Regarding interest u/s 27(1) of the DST Act read with section 21(3) - It is not as if any and every return filed by an assessee/dealer would result in obviating the liability to pay interest as imposed under section 27(1) read with section 21(3) of the DST Act - The necessary consequences of this will be that even though the liability towards interest is ascertained when tax is assessed, it will run from the date on which such correct and complete return ought to have been filed - Decided against the assessee - S.T. REF. NO. 2 OF 2002 - - - Dated:- 3-6-2011 - SANJAY KISHAN KAUL AND RAJIV SHAKDHER, JJ. M.S. Syali, Rahul Sateeja and D.V. Kapoor for the Petitioner. H.C. Bhatia for the Respondent. JUDGMENT Rajiv Shakdher, J. - This is a reference made on behalf of the assessee. The captioned reference pertains to the assessment years 1984-85 to 1989-90. The Appellate Tribunal, Sales Tax, Delhi (hereinafter, referred to as the Tribunal) has referred to this court, for adjudication, the following questions of law : (i) Whether on the facts and under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t consignor supply unit at the Airside Tarmac across Air Customs Pool Indira Gandhi International Airport the consignee is liable to take delivery of the goods with utmost despatch and the consignors shall not be liable for any deterioration in the quality of the goods due to delay on consignee's part in taking delivery of the goods. 5. Notwithstanding the goods referred to herein being damaged and or destroyed the consignee shall be liable to make payment for the same to the consignor and shall be entitled to receive any insurance claim receivable for such goods. 2.2 Based on the above, the assessee/dealer contended that the goods in issue were exempt from local Sales Tax being sales in the course of export'. 3. An argument was raised that the assessee's/dealer's sale came within the ambit and scope of the second limb of section 5(1) of the Central Sales Tax Act, 1956 (hereinafter referred to as CST Act') which reads as follows :- A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's contention that its case fell within the scope and ambit of the second limb of section 5(1) of the CST Act : 8. Sh. Kapoor argues that the delivery order is a document of title to goods and since the sale is effected by its transfer after the goods have crossed the customs frontier of India, it squarely falls within the second limb of section 5(1), however, we will venture to examine whether the present delivery order can be said to be a document of title to goods'. This expression has been defined under the Sale of Goods Act, 1930. Section 2(4) of this Act reads as under : Document of title of goods includes a bill of lading, dock warrant, warehouse-keeper's certificate, wharfinger's certificate, railway receipt, warranty order for the delivery of goods and any other document used in the ordinary course of business as proof to the possession or control of goods, or purporting to authorize, either by endorsement or by delivery the possessor of the document to transfer or receive goods thereby represented. 9. Document of title to goods has an inclusive definition but in two parts. The first part names certain documents which in their own right have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be evident from submissions noted in paragraph 19 of the impugned judgment, that the assessee/dealer's stand was that the interest was not leviable since the issue of imposition of local tax on sales of goods in issue to the airlines was a debatable issue. 19. The next question is interest. Sh. Kapoor submitted that since the matter is debatable interest should not be leviable in the light of the Supreme Court in J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 followed in Frick India Ltd. v. State of Haryana [1994] 95 STC 188. It is argued that so long as the dealer pays the tax which according to him is due on the basis of the information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation. The law does not envisage the dealer to predict the final assessment when he files the return and expect him to pay the tax on that basis to avoid the liability to pay interest. [Emphasis supplied) 5.1 The Tribunal, however, relying upon its own judgment in the case of Phillips India Convest Ltd. 35 DSTCJ 24, which was evidently approved by this court (the details of which neither the assessee/dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto a civil appeal bearing No. 1944/2004. The said civil appeal was dismissed as withdrawn vide order dated 3-11-2004. The assessee/dealer evidently chose to withdraw the civil appeal on the ground that it was desirous of availing benefit of an amnesty scheme introduced by the State of Maharashtra. We have not been told as to whether or not the assessee/dealer obtained any benefit under the Amnesty Scheme. 8. In view of the aforesaid circumstances, the arguments before us were advanced by both parties only with respect to question No. (iii). We are thus called upon to examine the scope and ambit of section 27(1) of the DST Act. On behalf of the assessee, arguments were put forth by Mr. Syali, senior advocate assisted by Mr. Rahul Sateeja and Mr. D.V. Kapoor, advocates, while on behalf of the revenue, submissions were made by Mr. H.C. Bhatia. 8.1 It was submitted by Mr. Syali that no interest could be levied in the circumstances obtaining in the present case as interest was leviable under section 27(1) only if tax due' under section 21(3) of DST Act was not paid. According to Mr. Syali, section 21(3) mandates payment of tax according to such return' filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was contended that the facts obtaining in the present case were squarely covered by the judgment of the Supreme Court in the case of J.K. Synthetics Ltd. (supra) which dealt with pari materia provisions contained in section 11(b) of the Rajasthan Sales Tax Act. The learned counsel laid stress on the observations made by the court at page 438 which read as follows: it is difficult on the plain language of the section to hold that the law envisages the assessee to predict the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible. 8.6 In other words, it was contended that interest could not be imposed on the difference obtaining between the assessed and the returned turnover and that too from the date of filing of the return. Interest, if any, could be charged 30 days from the date of assessment/demand. Taking cue from the observations made by the Supreme Court in J.K. Synthetics Ltd.'s case (supra), reliance was also placed by learned counsel on the judgment delivered by Justice Bhagwati (as he then was) in the case of Associated Cement Co. Ltd. v. CTO [1981] 48 STC 466 (SC). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uire that every return filed should be in the prescribed form being: Form ST-11. The said form of the return requires the assessee to set out, amongst others, the particulars of its turnover, mandating verification by the assessee, on solemn affirmation that the particulars contained therein are true and correct to his best knowledge and belief. Therefore, a conjoint reading of sections 27(1), 21(1) and 21(5) of the DST Act along with Rule 21(1) and Form ST-11 make it abundantly clear, according to the learned counsel, that the tax due required to be deposited by the assessee/dealer in consonance with the return filed, must be that tax, which is calculated and deposited, on the basis of a return, which is, true and correct. The learned counsel submitted that if the information submitted in the return was not true and correct, a dealer under the Act cannot be said, to have deposited, the full amount of tax due resulting in the dealer becoming liable for interest. In this regard, the learned counsel drew our attention to the following observations made by the Supreme Court in the case of J.K. Synthetics Ltd. (supra) : Therefore, on a conjoint reading of section 7(1), (2) and (2A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to us for adjudication. 10.1 Sub-section (1) of section 3 of the DST Act inter alia provides that every dealer who at the commencement of the Act, is registered or is liable to pay tax under the CST Act, shall be liable to pay tax under the DST Act on all sales effected by him on or after such commencement. Section 3 is the charging section which determines the incidence of the tax. Therefore, ordinarily after the commencement of the DST Act tax is payable on all sales. 10.2 The provisions with regard to filing of returns, assessment, recovery and refund of tax are contained in section 21. 10.3 Sub-section (1) of section 21 provides that tax payable under the DST Act shall be paid in the manner hereinafter provided, at such intervals, as may be prescribed. Sub-section (2) requires every registered dealer and every other dealer who may be so required by the Commissioner by notice served on him to do so furnish such returns of turnover by such dates and to the authority as prescribed. Sub-section (3) and the relevant portion of sub-section (5) of section 21 of the DST Act being crucial to the controversy at hand, we propose to extract the same verbatim to the extent re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at which it is assessable or any deduction has been wrongly made therefrom, he is empowered to serve a notice and proceed to determine the amount of tax due' from the dealer according to his best judgment under section 24 of the DST Act, bearing in mind the time frame provided in clauses (a) and (b) of sub-section (1) of the said section. 10.8 The payment and recovery of taxes is provided in section 25. 10.9 Section 27 of the DST Act which provides for levy of interest in certain situations, is extracted hereinafter, to the extent necessary, for the sake of convenience, being directly in issue : If any dealer fails to pay the tax due as required by sub-section (3) of section 21, he shall, in addition to the tax (including any penalty) due, be liable to pay simple interest on the amount so due at one per cent per month from the date immediately following the last date for the submission of the return under sub-section (2) of the said section for a period of one month, and at one and a half per cent per month thereafter for so long as he continues to make default in such payment or till the date of completion of assessment under section 23, whichever is earlier. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the Supreme Court in the case of J.K Synthetics Ltd. (supra) which was followed in Frick India Ltd.'s case (supra) and EID Parry (India) Ltd.'s case (supra). 12. In our view, the contention of the learned counsel, in the facts and circumstances arising in this case, is misconceived. The reason being that the judgment of the Supreme Court in J.K. Synthetics Ltd.'s case (supra) dealt with a situation where the court was called upon to consider as to whether interest could be levied on the failure of the assessee to pay tax on freight which, pursuant to the decision rendered by that Court in an earlier round had been declared as forming part of the price of the goods in issue (i.e., cement) and hence, amenable to sales tax. The Supreme Court in the said case has decidedly observed that the dealer is obliged to file a full and complete return. In this regard the assessee/ dealer is required to make an honest effort to file a correct and complete return. Therefore, the issue at hand is not whether interest can be levied on the difference between assessed and returned turnover but whether the turnover disclosed in the facts and circumstances of a case is complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lines under terms and conditions of the contract between the parties (which are not on record) appears to have taken insurance holding themselves as title holders of the goods so as to entitle them to receive an insurance claim for such a goods in the event of loss or damages to the goods. In other words, the foreign airlines/consignee has also paid premium for policy of insurance. Thus the consignee has treated the goods as its own property so that in the event of loss in transit they can validly set up their claim with the insurance company to get themselves compensated. In the circumstances, it is clear that the title in goods passes in favour of the foreign airlines in the State of Maharashtra. 112. Turning to the other aspect of the matter, relying on the submission of Mr. Sibal that the delivery order is a document of title, let us examine one more factor leading to time fact vis-a-vis operation of the condition Nos. 4 and 5 extracted hereinabove. These terms and conditions are to be found in the delivery order. The delivery order is to be handed over to the consignee with the delivery of goods. Once the goods are delivered with delivery order, then sale of goods with deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale being at tarmac before the goods having crossed the customs frontiers of India, the sale in question would be a local sale. [Emphasis supplied] 13.2 Thus the Bombay High Court in the assessee's/dealer's own case recorded findings that the delivery order was tailor made to dress-up the transaction as a section 5(1) (i.e., of the CST Act) transaction under the latter part of the said section, only to avoid production of a written contract possibly executed with the airlines. 13.3 It is important to note that the assessee had the benefit of the judgment of the Supreme Court in the case of Burmah Shell Oil Storage Distributing Co. of India Ltd. (supra). The principle of law with regard to sale in the course of export had been fully articulated in the said judgment. As found by the Tribunal, it was only to get over the judgment of the Supreme Court in the case of Burmah Shell Oil Storage Distributing Co. of India Ltd. (supra) that the delivery order was generated as between the parties. The argument was novel in the sense that having known that flight kitchen sales would not be construed as sales which occasioned an export, it was sought to be argued that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court was called upon to consider reads as follows : Section 10A - Interest payable by dealer - (1) where a registered or certified dealer furnishes a return referred to in section 10 in respect of any period by the prescribed date or thereafter, but fails to make full payment of tax payable in respect of such period by such prescribed date, he shall pay a simple interest at the rate of two per centum [Emphasis supplied] 14.4 Pending adjudication in the writ petition the Calcutta High Court granted an injunction in favour of the assessee/dealer, whereby the Government of West Bengal was restrained from collecting tax recoverable on insertion of section 6B in the Bengal Act. The writ petition, however, finally came to be dismissed. 14.5 The question which arose for consideration was whether the assessee/dealer had furnished a full and accurate return as the tax paid obviously did not take into account the impact of the provisions of section 6B of the Bengal Act. 14.6 It was argued on behalf of the assessee/dealer that they had furnished complete and accurate returns and paid full tax as per such returns and hence, were not liable to pay interest under section 10A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the very same judgment that the Supreme Court in addition also considered the argument of the assessee/dealer that they could not be mulcted with the liability to pay interest on the tax amount, since they had raised a bona fide dispute with regard to the validity of the provisions of section 6B of the Bengal Act; an argument which is similar to the one raised in the instant case. The court after considering the ratio of the judgment of the Supreme Court in J.K. Synthetics Ltd.'s case (supra), in paragraph 14 of its judgment, repelled this contention. The observations made by the court, in that regard, are contained in paragraph 15 of the judgment. These being apposite are extracted hereinbelow : 15. But the position here is explicitly distinguishable from the factual situation in M/s. JK Synthetics Ltd. Here, nobody had doubt that if section 6B of the Act was valid the tax was payable on the turnover. It was the constitutional validity of section 6B which was challenged by the appellants in the earlier writ petitions before the Calcutta High Court and which finally ended up in upholding of its validity. Hence, there was no question of the assessee waiting for the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er would have to be ascertained in the facts and circumstances of each case. It is not as if any and every return filed by an assessee/dealer would result in obviating the liability to pay interest as imposed under section 27(1) read with section 21(3) of the DST Act. If it is found, in the facts and in the circumstances of a case that the return filed is not complete and correct, the liability to pay interest on the full amount of tax due will run from the date on which such a return ought to have been filed. The necessary consequences of this will be that even though the liability towards interest is ascertained when tax is assessed, it will run from the date on which such correct and complete return ought to have been filed. In that sense, Mr. Syali's argument that interest cannot be imposed on the difference between assessed and the returned turnover, is in our opinion, misconceived. 17. The argument of Mr. Syali that since an interim order operated the assessee/dealer could not be said to have filed an incomplete or incorrect return is misconceived. The court's final judgment delivered on 9-10-2003 declared the true effect of the document, i.e., the delivery order w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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