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TMI ID= 234751
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2013 (6) TMI 576 - ALLAHABAD HIGH COURT

M/s. Sejwar Traders Versus Commissioner of Commercial Tax, UP., Lucknow.

Form H - sale in the course of Export - Exemption on the purchases of raw hides from unregistered dealer - held that:- the test to be applied is, whether there is an inseverable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under section 5 (3) for exemption from State sales tax is justified, in which case, the same goods theory has no application.

The applicant purchased raw goat skins from unregistered dealer and sold to the exporter. The authorities below have recorded the finding that the goods mentioned in the invoices, by which the goods have been sold, are different to the goods mentioned in the bill of ladding and Form 'H'. It means that the goods, which had been exported, were different to the goods sold by the applicant. In Form 'H' the foreign buyer's order number and date are not mentioned.

Therefore, Form 'H' filed was incomplete and inadmissible for the transaction in dispute. The copy of the order of the foreign buyer has not been produced before any of the authorities to show that the purchases by the exporter from the applicant was inextricably connected with the export and there existed a bond between the contract of sale and the actual export. Such link is missing in the present case.

Therefore, in view of the law laid down by the apex Court, in the case of State of Karnataka v. Azad Coach Builders Pvt. Ltd. And another [2010 (9) TMI 879 - SUPREME COURT OF INDIA], the sale by the applicant to the exporter cannot be said to be in the course of export under Section 5(3) of the Central Sales Tax Act. The Tribunal has rightly held so. - Decided against the assessee.

No.- Commercial Tax Revision No. 943 of 2010

Dated.- January 24, 2011

Citations:

  1. State of Karnataka Versus Azad Coach Builders Pvt. Ltd. and another - 2010 (9) TMI 879 - SUPREME COURT OF INDIA

Rajes Kumar,JJ.

ORDER

This revision is under Section 11 of the U.P. Trade Tax Act (called the 'Act' for short) against the order of the Tribunal dated 19.8.2010 for the assessment year 2004-05.

During the year under consideration the applicant has purchased goat raw hide and skins from the unregistered dealer and, after getting it tanned on job work basis, sold the same to M/s. Shalimar Trading Company, Chennai, claimed to be exporter. In respect of the aforesaid sale three Form 'H' have been submitted. Copies of the bill of ladding have also been furnished. The applicant claimed exemption on the purchases of raw hides from unregistered dealer and also on the sales to the alleged exporter on the ground that such purchases preceded to the export sale and it was in the course of export.

The assessing authority rejected the claim of exemption on the ground that in Form "H" the order number and date of the foreign buyer was not mentioned. The goods, which was mentioned in Form 'H' and the bill of ladding were different to the goods purchased and claimed to have been exported. No details relating to the payment for the job work has been furnished. The assessing authority levied the tax on the purchases of goat raw skins under Section 3-AAAA in the assessment under the Act and also treated the sales to the exporter as an inter-State sales and levied the tax under the Central Sales Tax Act (called the 'Central Act' for brevity).

Being aggrieved by the two assessment orders the applicant filed appeals before the Additional Commissioner Grade II (Appeals), Commercial Tax, Etawah. The appellate authority has allowed both the appeals and set aside the levy of tax.

Being aggrieved by the order of the first appellate authority, the Commissioner of Trade Tax filed two appeals before the Tribunal. The Tribunal, by the impugned order, allowed Appeal No. 228 of 2008 under the Central Act and dismissed the appeal under the Act.

Being aggrieved by the order of the Tribunal, the applicant filed the present revision.

Heard Sri S.D. Singh, learned counsel for the applicant, and Sri B.K. Pandey, learned Standing Counsel.

Learned counsel for the applicant submitted that the applicant has sold raw goat skins after tanning to the exporter. The bill of ladding establishes that the goods have been exported and, therefore, the movement of goods from the destination of the applicant to the destination of the exporter was in the course of export and was deemed export under Section 5(3) of the Central Act and, therefore, it is not liable to tax.

Learned Standing Counsel submitted that the applicant has purchased raw goat skins. No detail of expenses relating to the job work has been produced to establish that the tanning has been carried on, on job work basis. In the bill of ladding and Form 'H' different goods are mentioned than the goods sold by the applicant. In Form 'H' the details of the order and date of foreign buyer are not mentioned and, therefore, the applicant failed to establish that the movement of goods was in the course of export. Such sale cannot be treated as deemed export. He submitted that Section 5(3) of the Central Act has been interpreted by the Constitution Bench of the apex Court in the case of State of Karnataka v. Azad Coach Builders Pvt. Ltd. And another reported in (2010) 36 VST 1 wherein it has been held that the sales and purchases between the parties should be inextricably linked with the export of the goods for the claim of exemption under Section 5(3) of the Central Act. He submitted that even the Tribunal has wrongly dismissed the appeal of the Commissioner of Trade Tax under the Act and upheld the deletion of tax under Section 3AAA of the Act because the sale by the present applicant to the exporter is not the export sale and, therefore, the proviso to Section 3AAA of the Act does not apply.

Having heard learned counsel for the parties, I have perused the impugned order of the Tribunal and the authorities below. Section 5 of the Central Act reads as follows :

5. When is a sale or purchase of goods said to take place in the course of import or export.- (1) 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 transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.

(2) A sale of purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.

(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the 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."

Section 5(3) of the Central Act came up for consideration before the Constitution Bench of the apex Court in the case of State of Karnataka v. Azad Coach Builders Pvt. Ltd. And another (supra). In this case the apex Court has held as follows :

23. When we analyse all those decisions in the light of the Statement of Objects and Reasons of the Amending Act 103 of 1976 and on the interpretation placed on section 5 (3) of the CST Act, the following principles emerge:

To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export;

There must be obligation to export, and there must be an actual export.

The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export.

To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it, without which a transaction sale cannot be called a sale in the course of export of goods out of the territory of India.

24. The phrase "sale in the course of export" comprises in itself three essentials : (i) that there must be a sale; (ii) that goods must actually be exported; (iii) that the sale must be a part and parcel of the export. The word "occasion" is used as a verb and means "to cause" or "to be the immediate cause of". Therefore, the words "occasioning the export" mean the factors, which were immediate cause of export. The words "to comply with the agreement or order" mean all transactions which are inextricably linked with the agreement or order occasioning that export. The expression "in relation to" is words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed.

25. Therefore, the test to be applied is, whether there is an inseverable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under section 5 (3) for exemption from State sales tax is justified, in which case, the same goods theory has no application.

28. Mr. T.S. Narasimha, learned counsel appearing for respondent no. 2 contended that any penultimate sale made in furtherance of export, irrespective of the nature of the goods, would also be covered, is too tall a proposition to be accepted. It all depends on the question as to whether the sale or purchase is inextricably connected with the export of goods and not a remote connection as tried to be projected by the counsel. The connection between the penultimate sale and the export of goods should not be casual, accidental or fortuitous, but real, intimate and inter-linked, which depends upon the nature of the agreement the exporter has with the foreign buyer and the local manufacturer, the integrated nature of the transactions and the nexus between the penultimate sale and the export sale.

Therefore, the question for consideration is whether there is an inseverable link between the local sale or purchase on export and such sale or purchase between the parties is inextricably linked with the export of the goods in the present case. The applicant purchased raw goat skins from unregistered dealer and sold to the exporter. The authorities below have recorded the finding that the goods mentioned in the invoices, by which the goods have been sold, are different to the goods mentioned in the bill of ladding and Form 'H'. It means that the goods, which had been exported, were different to the goods sold by the applicant. In Form 'H' the foreign buyer's order number and date are not mentioned. Therefore, Form 'H' filed was incomplete and inadmissible for the transaction in dispute. The copy of the order of the foreign buyer has not been produced before any of the authorities to show that the purchases by the exporter from the applicant was inextricably connected with the export and there existed a bond between the contract of sale and the actual export. Such link is missing in the present case.

Therefore, in view of the law laid down by the apex Court, in the case referred herein above, the sale by the applicant to the exporter cannot be said to be in the course of export under Section 5(3) of the Central Sales Tax Act. The Tribunal has rightly held so.

In the result, the revision fails and is dismissed.

 
 
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