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TMI Blog2015 (11) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... wood purchased by her at the auction, since the goods so purchased are taken by her directly to the unit in the Madras Export Processing Zone, it is the case of the respondents that the transaction of sale would attract tax under the KVAT Act since the sale was concluded in the State of Kerala. 2. The brief facts that are necessary for a disposal of this case may now be noticed; The petitioner, who is a registered dealer under the Tamil Nadu Value Added Tax Act as well as the Central Sales Tax Act (hereinafter referred to as the 'CST Act'), is an exporter of articles like pre Indian Sandalwood chips and chips powder. These items are procured from the Domestic Tariff Area (hereinafter referred to as the 'DTA') and then exported to various countries against export orders placed by foreign buyers. Against Exts.P2 to P4 purchase orders obtained by the petitioner, she wanted to purchase sandalwood from the respondents and she, accordingly, participated in the e-auction held by the respondents pursuant to Ext.P5 auction notice. The State Government through Ext.P6 Government Order dated 18.03.2014 notified the terms of the e-auction of sandalwood at Marayoor. At the auct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods from Kerala to the unit of the petitioner in the Madras Export Processing Zone, pursuant to the sale effected by the respondents, could be considered an "export" of the goods outside the territory of India? (ii) If so, whether the sale effected by the respondents occasioned the export for the purposes of Section 5(1) of the CST Act? Issue No.1: It is the specific contention of the learned Senior Counsel for the petitioner that, as per the scheme and specific provisions of the Special Economic Zones Act, 2005 (hereinafter referred to as the 'SEZ Act'), Special Economic Zones (SEZ) created under the said Act are seen as foreign countries for the purposes of trade and hence, when the goods sold to the petitioner were transported from the DTA to the unit of the petitioner in the SEZ, there was an export of the goods for the purposes of Article 286 of the Constitution of India read with Section 5(1) of the CST Act. It is contended that the Special Economic Zones Act, 2005 should also be seen as a law enacted by the Parliament pursuant to Article 286(2) of the Constitution and hence the definition of the word "export" under the said Act would also be relevant in deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Sales Tax Act, 1956. Section 5 of the CST Act, which is relevant for the purposes of the instant case, 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 or 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 comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs as in the Customs Act, 1962 (52 of 1962)]. 9. The above definition also indicates that the meaning to be attributed to the word "export", as also the phrase "crossing the customs frontiers of India", under the CST Act is the same as attributable to the word/phrase under the Customs Act, 1962. A sale effected to a unit in an SEZ cannot, therefore, on a plain reading of the CST Act, be deemed to be an export for the purposes of the said Act. 10. I must, however, advert to the provisions of the SEZ Act, 2005 for it is the contention of the learned Senior Counsel for the petitioner that the SEZ Act is also a law enacted by Parliament, and the said Act also provides a definition for the term "export", which can be taken into consideration when examining the issue of whether or not a sale occasioned an export of the goods out of the territory of India. 11. The SEZ Act was enacted with the object of providing an internationally competitive environment for exports by making available goods and services free of taxes and duties, supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Act or any rules or regulations made thereunder or any notification or order issued or direction given or scheme made thereunder so far as such modification, rule, regulation, notification, order or direction or scheme relates to the matters relating to trade unions, industrial and labour disputes, welfare of labour including conditions of work, provided funds, employers' liability, workmen's compensation, invalidity and old age pensions and maternity benefits applicable in any Special Economic Zones. (2) A copy of every notification proposed to be issued under sub-section (1) shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses. 50. Power of St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised operations. (2) A Special Economic Zone shall, with effect from such date as the Central Government may notify, be deemed to be a port, airport, inland container depot, land station and land customs stations, as the case may be under section 7 of the Customs Act, 1962 (52 of 1962): Provided that for the purposes of this section, the Central Government may notify different dates for different Special Economic Zones. 14. It will be seen from a reading of Section 53 of the SEZ Act that an SEZ is deemed to be a territory outside the customs territory of India only for the purposes of undertaking authorised operations. The term "authorised operations" is defined in Section 2(c) of the Act as meaning operations which may be authorised under Section 4(2) and Section 15(9) of the Act. Section 4(2) and Section 15(9) speak of such operations, which are authorised by the Central Government, and in respect of which the Developer of a unit has the authorisation of the Board of Approval. Further, an overview of the provisions of the SEZ Act indicates that it is a special law enacted with the specific object of providing an internationally competitive environment for export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of inter state trade or commerce:- [(1) ................. (2) ................. (3) ................. (4) ................. (5) ................. (6) Notwithstanding anything contained in this Section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in a unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic Zone, if such registered dealer has been authorised to establish such unit or to develop, operate and maintain such special economic Zone by the authority specified by the Central Government in this behalf.] 15. Similarly, under the KVAT Act, there is a provision that grants exemption in respect of sale of goods to units in a SEZ, under certain circumstances. Section 6(7)(b) of the KVAT Act reads as follows: 6. Levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the petitioner's unit in the Madras SEZ as a direct consequence of, or incidental to, the sale transaction between them, I am of the view that I need not deliberate upon this issue since I have already found that a movement of the goods from Kerala to the unit of the petitioner in the SEZ would not qualify as an export for the purposes of Section 5(1) of the CST Act or for the purposes of Article 286 of the Constitution. It is also relevant to note that the express terms of Ext.P6 - "Special Terms and Conditions of the e-auction of sandalwood at Marayoor Sandal Depot of Kerala Forest department", and in particular clauses 11 and 14(v) thereof, clearly contemplated that prevalent rates of KVAT would be applicable to all successful bidders irrespective of destination of transportation of materials and purpose. 17. Learned Senior Counsel for the petitioner would contend that, even if the sale to the petitioner does not qualify as an export sale for the purposes of Section 5(1) of the CST Act, the sale could be viewed as a penultimate sale prior to export for the purposes of Section 5(3) of the CST Act or even qualify for an exemption in terms of Section 8(6) of the CST Act. I f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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