TMI Blog2000 (6) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. T.C.R. No. 1997 of 1997 C.T.A. 206 of 1990 dated 25-6-1990 S.T.A.T. (AB), Coimbatore Anamallais Engineering 1988-89 79,79,925 at 15 per cent, 33,33,498 at 8 per cent and 25,57,501 [section 12(5)(iii)] penalty. T.C.A. No. 1841 of 1997 N2/22665 of 1991 dated 28-5-1991 JC (SMR), Chennai L.G. Balakrishnan Brothers 1983-84 4,06,870 at 15 per cent. 2.. The brief facts in respect of the main dispute relating to disallowance of exemption claimed under section 5(3) of the Central Act, are as follows: T.C. (R) No. 2169 of 1997: In this case, the assessing authority stated that Tvl. Ashok Leyland Ltd., Madras, had entered into contract with the foreign buyer for export of passenger buses, but Tvl. Sundaram Industries, Ltd., sold only bus bodies mounted on the chassis supplied by the exporter. The sale of bus body by Tvl. Sundaram Industries, Madurai, was not the goods which was exported by Tvl. Ashok Leyland Ltd., the exporter. Thus, the exported goods was different from the supply of bus body by the assessee. Entry 3 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Local Act") has classified chassis and bus body as different commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso revealed that the buses exported consisted of the chassis manufactured by Tvl. Ashok Leyland Ltd., and the body constructed by Tvl. Sundaram Industries Ltd. Thus, the body constructed on the chassis was taken as such and exported as a bus, without making any change in the bus, after taking delivery. The description in the shipping document reads as follows: "Ashok Leyland ALPSV 2/2-L-210 W.B. Passenger chassis complete with 61+1 seater bus body in 3 X 2 layout and as per invoice No. PS/Veh/31-87 dated May 14, 1987. Chassis manufactured by Ashok Leyland Limited, Hosur. Bus body manufactured and mounted by Sundaram Industries, Bus Body Model No. SI-148." The bill of lading also described the goods exported as passenger buses consisting of chassis manufactured by Tvl. Ashok Leyland Ltd. and body constructed by Tvl. Sundaram Industries Ltd. Therefore, when bus body as indicated by the foreign buyer, was manufactured and supplied, then naturally, the claim of exemption under section 5(3) of the Central Act has to be allowed, by treating the sale of bus body as penultimate sale prior to an export, as contemplated under section 5(3) of the Central Act. Referring to the alternati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assess the turnover in respect of 51 bus bodies under the Central Act on the ground that the goods were exported from Bombay Port was also disallowed on the ground that bus bodies were found built at Pollachi and invoices raised therein and in the absence of any recorded evidence to support the claim, there is no case to allow the portion of the turnover as assessable under the Central Act. Penalty under section 12(5)(iii) of the local Act was also levied to the extent of Rs. 25,57,501. In the first appeal, the Appellate Assistant Commissioner referred to entry 3 of the First Schedule to the local Act in the following terms: "Motor vehicles including motor cars, motor taxi-cabs, motorcycles and cycle combinations, cycles (including bicycles, tri-cycles, cycle-rickshaws, tandem cycles, cycle combinations and perambulators) fitted with motor engines, motor scooters, motorettes, motor omni buses, motor vans and motor lorries, chassis of motor vehicles, bodies built on chassis of motor vehicles belonging to others........................" On that basis, the Appellate Assistant Commissioner observed that bus, chassis of motor vehicles and bodies built on chassis of motor vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced by the foreign buyer with the actual exporters, namely, Tvl. Ashok Leyland Ltd. This turnover of Rs. 34,735 was assessed at 15 per cent. 3.. In the first appeal before the Deputy Commissioner of Commercial Taxes, Coimbatore division, it was observed that there was no evidence to show that the foreign buyer placed orders for extra fittings and further, the order produced is dated August 5, 1983 when the export itself took place on June 9, 1983 and therefore, the disallowance of exemption to the tune of Rs. 34,870 was in order. However, as the sale took place in Tamil Nadu itself, the assessment made under the Central Act, is not in order. On that ground, the assessment was set aside with direction to assess the turnover under the local Act. 4.. Thereafter, the Joint Commissioner of Commercial Taxes in suo motu revision, reviewed the orders passed under the local Act and the Central Act by the assessing authority for the assessment year 1983-84 and also the appeal order of the Deputy Commissioner in respect of the CST assessment for the year 1983-84 and resorted to assess the turnover relating to bus bodies and the extra fittings supplied under the local Act for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Central Act should be available to the referred goods. 6.. The commercial documents like export order, export invoice, the shipping bill submitted as part of an application for export, bill of lading, certificate of export, excise documents including export applications and in-bond clearance documents indicate and maintain the commercial identity of the chassis and the export of the body. They are consistent with the commercial practice of negotiating for an export involving chassis with body of definite specification, though compendiously called bus. 7.. In this case, the export order was as much an order for the export of a bus body of a definite specification and feature, which has been found actually exported. "Serial No. 6 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, specifies: ......................bodies built on chassis of motor vehicles belonging to others (on the turnover relating to bodies), ....................." Which is in conformity with the body being identified, whether before or after being built on a chassis. This is again consistent with the commercial practice of dealing with chassis and body, and negotiating for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of second sale exemption. In that case, the auto-rickshaw had suffered tax and the body was fitted by the assessee/manufacturer. That was a case of two invoices being raised by the assessees, which were discredited. The question there, was whether there was sale of finished vehicle or two independent goods. In [1995] 98 STC 330 (Bom) (Tata Engineering and Locomotive Company Ltd. v. State of Maharashtra), the question considered was the resale of goods and form 14 with obligation to resell. In Azad Coach Builders Pvt. Limited v. State of Karnataka (S.T.R.P. Nos. 4 of 1997 and 5 of 1998 dated 8-2-2000) reported in [2001] 123 STC 473, the Karnataka High Court, in an identical case, has clearly held that the contract with the foreign buyer was for the export of bus having the chassis and body of definite specification and therefore, the body built on chassis is eligible for exemption under section 5(3) of the Central Act, inasmuch as all the conditions contemplated under section 5(3) of the Central Act have been fulfilled. The Karnataka High Court categorically held that both chassis and body constituted a single item called bus and therefore, the bus bodies supplied to the exporter wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods delivered under sale by the assessees and the goods exported by the exporters, the claim has to be allowed under section 5(3) of the Central Act. Absolutely, there is no case to levy any penalty and the Appellate Tribunal was right in setting aside the penalty levied under section 12(5)(iii) of the local Act. 11.. Mr. K. Soundararajan, learned Government Advocate, contended that the foreign buyers' contract was for buses and the assessees supplied only bus body, which is commercially a different commodity and therefore, the Appellate Tribunal was not right in allowing the claim under section 5(3) of the Central Act. The decision of the Madras High Court in South India Automotive Corporation Private Ltd. v. State of Tamil Nadu [1990] 76 STC 115 is relevant in this case, inasmuch as the auto-rickshaw and body built on chassis were held to be different goods. Once it is admitted that body built by the assessee and the bus exported are different goods, then naturally, no claim is admissible under section 5(3) of the Central Act. The Government order in G.O. Ms. No. 115, Revenue dated January 17, 1972 was held inapplicable to allow exemption, on the ground that section 5(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods exported out of the territory of India. In this connection, the following observations of the Supreme Court in the case of Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer reported in [1996] 100 STC 571 are relevant: "In order to fulfil an export obligation, if an exporter purchases goods and as a result of some processing, the identity and character of the goods change, then it will not be a case of export of the same goods. There is no dispute that every change does not bring into existence new goods nor can it be said that however small the change may be due to the processing, the identity of the goods will be completely lost. It is a question of fact and degree." 14.. Referring to the decision in the case of Sterling Foods v. State of Karnataka reported in [1986] 63 STC 239 (SC), it was observed that the processing of shrimps of prawns and lobsters did not change the identity of the goods and commercially also, they were regarded as the original goods. Therefore, the exported goods were held to be "those goods" purchased and on that account, the claim of exemption under section 5(3) of the Central Act was allowed. In the context of the observation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Packaging Industries v. State of Tamil Nadu), the polythene bags used for packing barium sulphate were held to be in pursuance of contract, which contemplated packing and therefore, exemption was to be allowed under section 5(3) of the Central Act. First of all, when the export order specifies the nature of packing and when the goods exported does not loose its character because of the packing, it was held that the claim of exemption under section 5(3) of the Central Act could be extended in respect of packing material also, on the ground that it was for the purpose of complying with the agreement or order for or in relation to such export. But, in the cases before us, the buses, the subject-matter of export contract, came into existence as a new commercial commodity only after bodies were built on the chassis. As a result of body built, the character of the commodity itself changed as discussed supra. Therefore, the line of decisions pertaining to packing materials, are not relevant to the present cases. 16.. As regards rubber bladder, in Commissioner, Sales Tax v. Girdhari Lal Football Maker [1987] 65 STC 287 (All.) the finding of the Appellate Tribunal was that the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export." 17.. Thus, section 5(3) was introduced in the Central Act with a view to encourage those who produce export commodities and effect export sales through export houses, who secure foreign contracts. Section 5(3) of the Central Act was not intended to exempt all components which go into manufacture of a new commercial commodity, which was exported in pursuance of the foreign export order. The decision of the Allahabad High Court reported as Munjal Rubber Industries v. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for resale, fitting bus body and supplying complete bus. It was held that it was not a case of resale of bus bodies and therefore, there was violation of declaration and in such circumstances, purchase tax was leviable on purchase turnover of bus bodies. In that case, it was held that the assessee did not sell bus bodies, which it had purchased free of tax by furnishing declarations, but what was sold as bus is a different commodity altogether and therefore, the levy of purchase tax on bus bodies for violation of the conditions specified in form 14 was justified. In that case also, a foreign order was received from a buyer in Egypt for supply of eight "Mercedes Benz diesel complete buses". The description of the goods to be supplied, as set out in the letter of the customer dated November 23, 1968, which is as follows: "Quantity Description 8 (eight) Mercedez Benz-110 BHP left-hand drive, diesel engined complete bus type LP 1210/52 wheel-base 5195 mm. with aluminium superstructure and all steel body with 54 passenger seats 3 X 2 to the drawing No. 200/412 complete with 7 wheels size 7 X 20 and 7 tyres size 9 x 20 12 ply. The bus will have two doors besides a driver's do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... travention of the condition of declaration in form 14 and hence the assessee was liable to pay purchase tax under section 14 of the Act." 21.. Thus, in the present case also, though specifications have been made regarding the nature of chassis, bus body, superstructure, etc., the foreign order really contemplated only sale and supply of buses and it was one indivisible contract for sale and supply of complete buses. Just because specifications have been given regarding chassis and bus body including the source of supply, it cannot be construed that the foreign order contemplated two constituents, namely, chassis and body. It is also relevant to note that form 14 of the Bombay Sales Tax Rules, 1959 contemplates free of tax in respect of goods purchased for resale in the course of inter-State trade or commerce or in the course of export out of the territory of India. Under the Central Act, for claim of exemption under section 5(3), form H contemplates purchase of goods for the purpose of complying with the agreement or order of the foreign buyer or in relation to such export. Thus, the purchase contemplated in form H is also similar to the resale considered in form 14 of the Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign countries. The Government have decided to grant exemption by way of refund of tax. They direct that the tax paid under the Tamil Nadu General Sales Tax Act, 1959 on bus bodies built and supplied to chassis manufacturers in India for onward export to foreign countries be refunded subject to production of proof of export. The proof of export may be furnished before or at the time of final check of the accounts of the assessees for the year concerned. Any one of the following documents will be treated as proof of export: (i) Certificate of exports out of India duly attested by the Customs Department as prescribed in public Notice No. 122/62 dated 15-9-1962 the Customs Department, as may be amended from time to time. (ii) The shipping bill duly attested by the Customs by way of proof that bus bodies have been exported. (iii) Invoices attested by the Customs mentioning G.R. 1. number of Reserve Bank of India. (By Order of the Governor) B. Vijayaraghavan, Additional Secretary to Government. To The Board of Revenue (CT), Madras-5. M/s. Sundaram Industries Pvt. Ltd., 37, Mount Road, Madras-6. Copy to Industries Department. Copy to Revenue CT III Department." 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance to exemption granted in specific cases, in terms of the powers vested under the Sales Tax Act. 27.. Similarly, in [1998] 110 STC 313 (TNTST) (Siemens Ltd. v. State of Tamil Nadu), certain offending words in the additional sales tax provisions were held ultra vires. Only in that context, it was held that the benefits enjoyed by persons who received favourable treatment, should be extended to aggrieved persons also. 28.. Therefore, we hold that Tvl. Sundaram Industries Ltd. in T.C. (R) No. 2169 of 1997 are eligible to get exemption by way of refund of tax, as contemplated in G.O. Ms. No. 115, Revenue, dated January 17, 1972, in respect of the disputed turnover, though such exemption cannot be granted under section 5(3) of the Central Act. Though the exemption contemplated in G.O. Ms. No. 115, dated January 17, 1972 direct that the tax paid under the local Act on the bodies built and supplied to manufacturers in India for onward export to foreign countries, has to be refunded, subject to production of proof of export, thereby, stipulating condition for payment of tax and thereafter claim refund, having regard to the fact that the Appellate Tribunal has taken note of this fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight in holding that the entire transactions should be assessed to tax under the local Act. Therefore, the claim allowed by the Appellate Tribunal is not in order and in so far as tax on bus bodies' turnover is concerned, the order of the Appellate Tribunal, which is erroneous in law, is set aside, thereby, restoring the order of the Appellate Assistant Commissioner levying tax on a turnover of Rs. 79,79,925 at 15 per cent and Rs. 33,33,498 at 8 per cent. 31.. As regards penalty, we find that the assessee reported a total and taxable turnover of Rs. 21,27,657.40 and Rs. 20,35,970.11 respectively. The total and taxable turnover was determined as Rs. 1,35,82,080 and Rs. 1,34,90,392 respectively. Further, a part of the claim of inter-State sales, was also disallowed. In short, the assessment made was a best judgment assessment falling under section 12(2) of the local Act and in such circumstances, the levy of penalty under section 12(5)(iii) of the local Act is not warranted. In view of the reasoning given by us, we uphold the deletion of section 12(5)(iii) penalty by the Appellate Tribunal. 32.. As regards T.C. (A) No. 1841 of 1997 the Joint Commissioner of Commercial Taxes (SMR) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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