9911796707
TMI Blog2015 (7) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty under Section u/s 9(2) of the Central Sales Tax Act, 1956 ('CST Act') read with Sections 32 and 33 of the Delhi Value Added Tax Act, 2004 ('DVAT Act') read with Section 86 (10) of the DVAT Act for the years 2006-07 and 2007-08 respectively. Background facts 2. The Appellant is a registered dealer engaged in the business of manufacturing and trading of Reverse Osmosis ('RO') water purifying systems, water treatment plants, their parts and accessories etc. 3. The Audit Officers of the Trade and Tax Department conducted a DVAT audit in the premises of the Appellant on 22nd August 2008. According to the Appellant, it provided the explanations, clarifications and documents sought by the Audit Officers regarding the transactions under Section 5 (2) of the CST Act (sale or purchase of goods in the course of import of the goods) and Section 6(2) of the CST Act (liability to tax on inter-State sales). According to the Department, however, the Audit team noted discrepancies in the books of accounts and returns filed by the Appellant. Default Assessment Orders 4. Accordingly, the Value Added Tax Officer (VATO) issued on 4th and 11th January 2009 default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods and had also got them cleared from the customs. Accordingly, tax @4% was levied on all the aforesaid transactions and penalty for tax deficiency was also imposed under Section 9(2) of the CST Act read with Section 33 of the DVAT Act, 2004. Orders of the OHA 6. The Appellants objections to the above orders of default assessment were rejected by the OHA by two separate but identical orders dated 31st July 2009 confirming the demand of tax, penalty and interest for the aforementioned periods. In the said orders, the OHA noted that there were broadly two issues that arose for consideration: "1.Validity/ admissibility of exemptions in respect of sales claimed to be high sea sales/sales in course of import, and 2. Admissibility of exemptions in respect of sales against E-1/C forms." 7. As regard the sales for which exemption was claimed under Section 5 (2) of the CST Act, the OHA noted that in the returns filed the Appellant had claimed these to be high seas sales but in the objections filed before the OHA it had changed its stand and claimed them to be sales in the course of imports. The OHA noted that the Appellant had claimed that the sales ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/C Form sales, it appeared that "there was no break in the movement of the goods and the invoice and other documents raised by the first supplier clearly shows that that goods had directly moved to the ultimate customer." The Appellant was, inter alia, asked to deposit 10% of the tax as pre-deposit in each appeal. 12. By the common impugned final order dated the 21st August 2014, the AT dismissed the appeals. The AT concurred with the findings of the VATO and the OHA that the sales under the E-1/C Forms as well as the sales claimed to be in the course of import did not qualify for exemption under Sections 6 (2) and 5 (2) of the CST Act respectively. The questions of law 13. At the time of admission of the present appeals, this Court by order dated 9th January 2015 framed the following questions of law: (i) Did the AT fall into error in holding that the transactions which were the subject matter of appeal before it were not in the course of inter-State sale under Section 6 (2) of the CST Act in the circumstances of the case for AY 2007-08; and (ii) Did the AT fall into error in holding that the transactions which were the subject matter of appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (iii) None of the transactions in respect of which exemption was claimed, whether under Section 5 (2) or 6 (2) of the CST Act, satisfied the test of there having to be an unbroken integral link between the transaction in the course of inter-state sale or sale in the course of import and the transaction of sale with the ultimate purchaser. At best, they were back to back independent contracts of sale which did not qualify for exemption. Reliance was placed on the decisions in Mohd. Serajuddin v. The State of Orissa (1975) 2 SCC 47, State of Karnataka v. Azad Coach Builders Pvt. Ltd. JT 2006 (2) SC 599, A&G Projects and Technologies Limited v. State of Karnataka (2009) 2 SCC 326 and Giesccke & Debrient I.P. Ltd. v. Commissioner of Sales Tax, Delhi [2012] 47 VST 343 (Del). (iv) The two important tests were whether for the breach of the contract, action could be taken against the ultimate purchaser or the consignor (which in this case was the Appellant) and whether there was privity of contract between the ultimate purchaser and the supplier of the goods. (v) The fact that these were back to back contracts meant that the purchase order placed on the Appellant did not by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince there was no privity of contract between the DGSD and the foreign manufacturer. Secondly, the latter had consigned the goods directly to the assessee by ship under bills of lading. Thereafter they were cleared by the assessee and despatched for delivery to the buyers. Thirdly, the sale was completed only when the goods were delivered and could not be said to be occasioning the import.‟ The Constitution Bench of the Supreme Court held to the contrary and observed that the import was in pursuance of the contract between the assessee and the consignee and that there was no possibility of the goods being diverted for any other purpose. It held: "It seems to us that it is quite clear from the contract that it was incidental to the contract that the axle-box bodies would be manufactured in Belgium, inspected there and imported into India for the consignee. Movement of goods from Belgium to India was in pursuance of the conditions of the contract between the assessee and the Director-General of Supplies. There was no possibility of these goods being diverted by the assessee for any other purpose. Consequently we hold that the sales took place in the course of import of goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import arising from statute, contract or mutual understanding or nature of the transaction which links the sale to import which cannot, without committing a breach of statute or contract or mutual understanding, be snapped." 21. At this stage it must be noticed that the reliance by Mr. Ghose on the decision in Mohd. Serajuddin v. The State of Orissa (supra) is misplaced. That was a case concerning a sale in the course of export. In the circumstances of that case, it was held that a back-to-back contract did not satisfy the legal requirement to qualify for exemption. However, thereafter with effect from 1st April 1976, sub-section (3) was inserted in Section 5 of the CST Act to recognise even a penultimate sale i.e the last sale preceding the sale occasioning the export of goods, as "deemed to be in the course of such export." 22. In Indure Ltd. v. Commercial Tax Officer [2010] 34 VST 509 (SC) the Court applied the test in K.G. Khosla and concluded that the import in that case had been occasioned only on account of an agreement between the parties and that the imported pipes in that case "were used exclusively for erection and commencing of the plant." Additionally, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoice should be in the name of the Appellant and that bill of lading (B/L) should state that the goods were consigned to NCS Sugars Ltd. Andhra Pradesh (India). Copies of the invoice prepared by Grundfos and the B/L show that the consignee named therein is NCS Sugars Ltd. 25. The Court finds that there is no discussion in either the order of the VATO or of the OHA or the AT of the documents with reference to the transactions of sale in the course of import. The only reference made is to the agreement with MUL. The mere fact that the agreement executed by the Appellant with the dealer did not contain a clause requiring goods to be imported or that the Appellant had itself got the goods released from the Customs authorities would not by itself be factors determinative of the issue whether it was a sale in the course of import. It would have to be examined whether there was an inextricable link between the said import and the subsequent sale and whether the imported goods could have been diverted to some other buyer or destination. In the sample document concerning the PO placed on the Appellant by NCS Sugars Ltd., the mention of the name of NCS Sugars Ltd. as the consignee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale or not, it is essential to see whether there was movement of the goods from one State to another as a result of prior contract of sale or purchase." 29. The case of the Appellant is that it received orders from buyers outside Delhi for providing RO water treatment systems or parts for manufacturing RO water purification systems. The Appellant purchased some of the components from various suppliers situated outside Delhi against Form-C and directed the supplier to despatch the goods to the place/address of the ultimate buyers. The goods were sent by the supplier outside Delhi to the ultimate buyers outside Delhi. The supplier only sent the invoice and the GR/RR to the Appellant at Delhi. The Appellant made payment and issued C-Forms against the said purchases and, in turn, requested and obtained E-1 Form from the supplier. The Appellant then sent its invoices along with the GR/RR to the ultimate buyers who in turn would get the goods retired/released from the transporters at his end and would issue form C to the Appellant. It is claimed that since this was a sale transaction effected by the Appellant while the goods were in movement therefore, the Appellant is entitled to exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the VATO. 32. As already observed, the default assessment orders of the VATO give no indication of any detailed examination of the documents. It is not clear which document the VATO is referring to when he concludes that the description of the commodity is different or when he concludes that there is "diversion of movement of goods from original destination to some other/different destination." Even the OHA and the AT make no reference to any particular transaction or document pertaining to inter-state sales and have simply repeated the reasoning of the VATO. At least the documents produced for the sample transaction concerning the PO placed on the Appellant by Ramgarh Chini Mills do not show that there is any diversion of the goods to some other destination. Also, if indeed it is correct that 'Duolite' is the brand name for 'Cation' or 'Anion' resin, then the exemption cannot be denied on the ground of the description of the commodity not matching that mentioned in the PO. In any case, as explained in State of Karnataka v. Azad Coach Builders Pvt. Ltd. (2010) 9 SCC 524, where it is able to be shown that the local sale or purchase between the parties is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
