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M/s. A.B. Mauri India Pvt. Ltd, Hyderabad Versus The Deputy Commercial Tax Officer, Ranigunz Circle, Hyderabad & Anr.

2016 (1) TMI 998 - ANDHRA PRADESH HIGH COURT

Levy of purchase tax under Section 4(4)(iii) of the A.P. VAT Act on goods sold in the course of export out of the territory of India. - The petitioner claims that, since purchase of chillies by the Secunderabad branch constitutes purchase in the course of export out of the territory of India, the States of Andhra Pradesh and Telangana lack jurisdiction to levy purchase tax in view of the constitutional prohibition in Article 286(1)(b) of the Constitution of India, and Section 5(b) of the A.P. VA .....

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h a bond, between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. - It is wholly unnecessary for us to examine whether the chillies purchased by the Secunderabad branch of the petitioner, and then transferred to its Cochin branch in the State of Kerala, were exported to foreign buyers; and whether such exports satisfy the requirements of Section 5(1) of the CST Act; as these are all matters to be examined by the .....

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ent orders, passed for different assessment periods in respect of the very same assessee, levying purchase tax under Section 4(4)(iii) of the A.P. VAT Act on goods sold in the course of export out of the territory of India. Counsel on either side are in agreement that the facts in W.P. No.26129 of 2012 can be taken as illustrative of the facts in this batch of Writ Petitions. The petitioner, a company registered under the Companies Act, has branches in different parts of the country including on .....

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he course of inter-State trade and commerce; their branch at Cochin, on receipt of orders from intending buyers in foreign countries, intimates the Secunderabad branch to purchase chillies of the required specifications; the Secunderabad branch purchases chillies, strictly in accordance with the requirements of the Cochin branch, in the market yards at Guntur both from cultivators, who are not registered under the AP VAT Act, and also from registered VAT dealers; the chillies, so purchased, are .....

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to foreign buyers, constitute purchases in the course of export. For the assessment year 2009-2010, the petitioner claimed to have purchased chillies worth ₹ 6,56,02,241/- from unregistered dealers, and for ₹ 3,04,77,218/- from registered dealers. The entire stock of chillies, worth ₹ 9,58,40,649/-, were transferred to the Cochin branch in the State of Kerala for export to foreign countries. The petitioner claims that, since purchase of chillies by the Secunderabad branch const .....

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ies purchased from unregistered dealers i.e., for ₹ 6,41,62,345/-. The petitioner was also asked to show cause why penalty, and interest at 1%, should not be imposed on them. In reply thereto the petitioner, vide letter dated 19.03.2012, submitted that, since chillies purchased from unregistered dealers were exported out of the country, Section 4(4) of the A.P. VAT Act was not attracted. The petitioner claims to have produced all the records, at the time of personal hearing, to show that t .....

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the bill of lading, and the consideration for exports received by way of foreign remittances to the petitioner s bank accounts, show that the petitioner is the direct exporter; the Fforms prove inter-branch transfers and the subsequent export by the petitioner; and the purchases made, within the State of Telangana and Andhra Pradesh, constitutes purchase in the course of export immune from State taxation. The 1st respondent rejected the contentions, put forth by the petitioner in reply the show .....

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nation of the record revealed that the petitioner had not paid tax on the purchase of chillies, and did not claim input-tax credit in accordance with the provisions of the Act; a show cause notice was issued on 28.02.2012, calling upon them to file their objections; the petitioner filed its objections on 19.03.2012; and, thereafter, the assessment order was passed on 03.07.2012. According to the first respondent, the petitioner had purchased chillies from unregistered dealers, and had transferre .....

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of the territory of India; as the goods were transferred, otherwise than by way of consumption or by way of sale, the petitioner was liable to pay tax on the chillies purchased from unregistered dealers; if the goods were, indeed, exported the petitioner ought to have filed Form-H ; in the present case the petitioner has merely filed Form-F which shows that the goods were transferred to its branches otherwise than by way of sale; and, under the circumstances, the respondent had levied tax, on pu .....

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anch to their Cochin branch, and were exported therefrom to foreign buyers; since the petitioner is itself the direct exporter, Form H, as required under Section 5(3) and (4) of the CST Act read with Rule 12(10) of the CST (R&T) Rules, need not be submitted; the chillies purchased by the petitioner at Guntur were stock transferred to its branch in the SEZ at Cochin, and was exported from there to other countries; Form F , in terms of Section 6-A, was submitted as proof of the fact that the g .....

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has issued Form H declarations, to all registered VAT dealers from whom chillies were purchased, to enable them to claim exemption from tax; and the subject transactions constitute purchases in the course of export. Dr. S.R.R. Viswanath, Learned Counsel for the petitioner, would submit that the impugned assessment order is without jurisdiction and in violation of Articles 286(1) (b) of the Constitution read with Sections 4(4)(iii) and 5 of the A.P. VAT Act; purchases in the course of export enj .....

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les Tax Act, 1956 formulating principles to determine when a sale or purchase takes place in the course of export out of the territory of India; purchases made by the petitioner s branch at Secunderabad to comply with export obligations, and export of the very same goods by the petitioners branch in Cochin, makes the purchases, by the petitioner s branch at Secunderabad, purchases in the course of export; the branches at Secunderabad and Cochin are not independent legal entities, but form part o .....

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e to be set aside; the judgment of the Supreme Court in East India Tobacco Company v. State of Andhra Pradesh related to a dispute which arose before the CST Act was enacted by Parliament in the year 1956; Section 5(b) of the CST Act, and its explanation, exclude levy of VAT on export sales; the assessing authority erred in reducing the input tax credit, on other commodities, treating purchases, in the course of export, as stock transfers, and in applying Rule 20(8)(d) of the A.P. VAT Rules; and .....

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reme Court in East India Tobacco Co. AIR 1962 SC 1733, and the judgment of Allahabad High Court in Commissioner of Trade Tax v. Rajesh Spices Company, to submit that, as the goods purchased by the Secunderabad branch which is a dealer under the AP VAT Act were transferred outside the State, the ingredients of Section 4(4) are attracted; as the State Legislature has jurisdiction to levy tax, the petitioner cannot avoid liability to pay tax claiming exemption under the Central Sales Tax Act; and, .....

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column 13; as the petitioner had themselves claimed exemption as stock transfer, the assessing authority was justified in levying tax under Section 4(4)(iii) of the A.P. VAT Act; and, even otherwise, since the assessing authority had rejected the petitioner s contention on this short ground, he should be permitted to examine the records, and determine whether or not the goods purchased from unregistered dealers within the State were, in fact, exported to foreign buyers. Before examining the riv .....

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ding the statutory appellate remedy, it is within the discretion of the High Court to grant relief under Article 226, more so when the assessing authority has not drawn any factual adverse inference after examining various documents, and the evidence to the transaction; there are no disputed questions of fact; the jurisdictional error, committed by the respondent authorities, is on account of misappreciation of the law and the statutory provisions; the levy is without jurisdiction, without autho .....

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Income Tax Investigation Commission AIR 1954 SC 207; Sangram Singh v. Election Tribunal AIR 1955 SC 425; Union of India v. T.R. Varma AIR 1957 SC 882; K.S. Venkataraman and Co. (P) Ltd. v. State of Madras AIR 1966 SC 1089; N.T. Veluswami Thevar v. G. [Image not available] Raja Nainar AIR 1959 SC 422; Municipal Council, Khurai v. Kamal Kumar AIR 1965 SC 1321; Siliguri Municipality v. Amalendu Das (1984) 2 SCC 436; S.T. Muthusami v. K. Natarajan (1988)n 1 SCC 572; Rajasthan SRTC v. Krishna Kant (1 .....

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tive remedy, is not a rule of compulsion. (Harbans Lal Sahnia10; Gujarat Ambuja Cement11). When, on undisputed facts, the taxing authorities are shown to have assumed jurisdiction which they do not possess, a writ petition can be entertained. (Gujarat Ambuja Cement11). Some exceptions to the rule of alternative remedy have been recognized i.e. where the statutory authority has not acted in accordance with the provisions of the enactment or in defiance of the fundamental principles of judicial pr .....

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, not be justified in dismissing the Writ Petition on the ground of non-exhaustion of the statutory remedies unless it finds that factual disputes are involved, and it would not be desirable to deal with them in a writ petition. (L. Hirday Narain v. Income Tax Officer, Bareilly; Gujarat Ambuja Cement Ltd11) . As this Court admitted some of the Writ Petitions, forming part of this batch, a few years ago, it would not be open to the State, at this length of time, to raise the dispute of an alterna .....

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udes a law levying tax not only on the sale of goods but also on its purchase. Tax is levied, under Section 4(4) of the Act, on a VAT dealer who, in the course of his business, purchases taxable goods from (1) a person; or (2) a dealer not registered as a VAT dealer; or (3) a VAT dealer in circumstances in which no tax is payable by the selling VAT dealer. Section 4(4) visualises imposition of tax on purchases made by a VAT dealer from a person other than a registered dealer, who could be a nonr .....

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ection 4(4) of the Act. The tax levied under Section 4(4) is not on the sale of goods by a farmer/agriculturist, but on the VAT dealer who purchases goods (agricultural produce) from the farmer. It is not every purchase of taxable goods from an agriculturist/farmer, but only such goods which fall within the ambit of clauses (i) to (iii) of Section 4(4) and its proviso, which attract levy of tax at the stage of its purchase. Broadly speaking, the effect of Section 4(4) is: tax payable at sale poi .....

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ffered any sales tax, a liability is imposed on the purchasing dealer to the extent the goods purchased by him are used as specified in clauses (i) to (iii) of Section 4(4). (M/s. P. Subbaraju & Co., Kondapalli v. State of A.P.; Hindustan Milkfood Manufacturers Ltd. (1982) 51 STC 1 (APHC)). Section 4(4)(iii) of the A.P. VAT Act stipulates that every VAT dealer, who in the course of his business purchases any taxable goods from a person or a dealer not registered as a VAT dealer or from a VAT .....

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atisfied. (1) a VAT dealer must, during the course of his business, purchase taxable goods from a person or a dealer not registered as a VAT dealer; (2) the purchase of goods must be in circumstances in which no tax is payable by the selling VAT dealer; (3) in such an event the purchasing VAT dealer is liable to pay tax at the rate of 4/5% on the purchase price of such goods; (4) the liability to pay purchase tax, on the purchase price of such goods, is if, after such purchase, the goods are dis .....

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urchase, the VAT dealer had merely transferred the stock of chillies outside the State then, as the goods would have been disposed of otherwise than by way of consumption or by way of sale within the State or in the course of interstate trade or commerce or export out of the territory of India, it would fall within the ambit of Section 4(4)(iii) of the A.P. VAT Act. In the present case, however, while the goods were no doubt transferred from the Secunderabad branch of the petitioner-company to a .....

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ion 4(4)(iii) of the Act. There is a bar, under Article 286(1)(b) of the Constitution, for the State to impose tax on the sale or purchase of goods, where such sale or purchase takes place in the course of export of goods out of the territory of India. Article 286 of the Constitution places restrictions as to the imposition of tax on the sale or purchase of goods and, under clause (1)(b) thereof, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goo .....

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ution of India, Section 5(b) of the A.P. VAT Act also stipulates that nothing contained in the A.P. VAT Act shall be deemed to impose or authorize the imposition of a tax on the sale or purchase of any goods, where such sale or purchase takes place in the course of export of the goods out of the territory of India. Under the Explanation thereto, the provisions of Chapter II of the Central Sales Tax Act, 1956 shall apply for the purpose of determining when a sale or purchase takes place in the co .....

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le 286(2) enables Parliament, by law, to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). Under the Constitution, as it originally stood, revenue from sales-tax was reserved to the States. Since the power of taxation could be exercised by the States, in a manner prejudicial to the larger public interest, it was considered necessary to restrict the power of taxation. In the exercise of this constituent power under Articl .....

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place in the course of inter-State trade or commerce or outside a State or in the course of export or import". The heading of Chapter II suggests that what is done, under Sections 3, 4 and 5 is the formulation of principles. (Consolidated Coffee Ltd. v. Coffee Board, Bangalore). Section 5(1) of the CST Act defines what Article 286(1)(b) of the Constitution forbids and, by virtue of Clause (2) of Art. 286 the Parliament, by enacting Section 5 of the CST Act, has laid down the principles when .....

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ions 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. Section 5(3) stipulates that, 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 c .....

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own general principles. A principle has been explained in Butterworths' Words and Phrases, (Second Edition, Vol. 4 at page 177) to mean a general guiding rule, and does not include specific directions, which vary according to the subject matter. (Per Shearman, J., in M'Creach v. Frearson, 1922 WN 37) . Similarly in Words and Phrases, Permanent Edition, Vol. 33A at page 327 it is explained that "principle means a general law or rule adopted or professed as a guide to action. In other .....

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der Article 286(1)(b) of the Constitution of India read with Section 5(b) and Section 4(4)(iii) of the A.P. VAT Act. It is no doubt true that the Secunderabad branch of the petitioner company only purchased chillies, among others, from farmers and transferred the stock of chillies to the Cochin branch. It is also true that the goods (chillies) were not exported by the Secunderabad branch of the petitioner company to foreign buyers. The question which necessitates examination is whether the stock .....

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egal entity even if it carries on business at different branches. (English Electric Company of India Ltd.3). The registered office and the branch offices are part of the same Company, and do not possess separate juridical personalities. The branches have no independent and separate entity and, where a branch office sells the goods to the buyer, it is a sale between the Company and the buyer. (Sahney Steel & Press Works Ltd. (1985) 60 STC 301 (SC); English Electric Company of India Ltd. (1976 .....

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an incident of the contract entered into with the foreign buyer, if it was intended that the same goods should be delivered by the branch office outside these States to the foreign buyer as there would be no break in the movement of the goods. (Sahney Steel & Press Works Ltd.2). In Nipha Export Pvt. Limited v. State of Haryana, the petitioner-company had its registered office at Calcutta, and a branch office at Faridabad; and the goods purchased by the branch office were sent to the head of .....

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territory of India within the meaning of Section 5(1) of the Central Sales Tax Act; and the adjudicating authorities had erred in holding that the movement of the goods from Faridabad to Calcutta was not occasioned in the course of export out of the territory of India. On the judgment of the Punjab & Haryana High Court, in Nipha Exports Pvt. Ltd (1998) 108 STC 337, being subjected to challenge in appeal, the Supreme Court, in Nipha Exports Pvt. Ltd (2007) 8 VST 466 (SC), agreed with the vie .....

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n which was transferred by the assessee to its head office at Bombay, and from there the same goods were exported out of the Country. Purchase tax was levied as the assessee had transferred the goods out of the State, otherwise than by way of sale, to its head office at Bombay, which were ultimately exported out of the country. Following its earlier judgment in Nipha Exports36, the Punjab & Haryana High Court set aside the levy of purchase tax on the purchase value of goods which were transf .....

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s appear to be in the course of export of the goods outside the territory of India, in terms of Section 5(1) of the CST Act. In East India Tobacco Co.1, the appeals filed before the Supreme Court were against the judgment of the Andhra Pradesh High Court. Prior to 1/10/1953, the area wherein the appellants carried on business formed part of the State of Madras, and on that date the State of Andhra was constituted, and the area in question fell within Andhra State. The law relating to the sales t .....

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obacco, was under challenge before the Andhra Pradesh High Court. On the challenge being negatived, the petitioners before the Andhra Pradesh High Court invoked the jurisdiction of the Supreme Court. Reliance placed by Sri M. Govind Reddy, Learned Special Standing Counsel, on the judgment of the Supreme Court, in East India Tobacco Co.1, is misplaced as it related to a tax regime prior to the Central Sales Act, being enacted by Parliament, in the year 1956. The petitioner s contention, that Sect .....

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dealers to claim the benefit of Section 5(3) of the CST Act; and the question of furnishing Form-H, when goods are purchased from farmers (who are not registered VAT dealers), does not arise. Learned Counsel would submit that Form-F was produced by the Secunderabad branch, to the assessing authority, as proof of stock of chillies having been transferred from the Secunderabad branch to the Cochin branch of the petitioner company. Rule 12(1)(a) of the CST (R&T) Rules requires the declaration, .....

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d goods for the purpose of export. Furnishing of the certificate, in Form-H, would enable such registered dealers to claim the benefit of a sale preceding export under Section 5(3) of the CST Act. In the present case, the chillies procured by the Secunderabad branch of the petitioner company has been stock transferred to the Cochin branch from where they are said to have been exported outside India. As neither the Secunderabad branch nor the Cochin branch have a distinct and separate legal entit .....

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at he is not liable to pay tax under the CST Act in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of the transfer of such goods by him to any other place of business, and not by reason of sale, the burden of proving, that the movement of those goods was so occasioned, shall be on that dealer and, for this purpose, he may furnish, to the assessing authority, a declaration duly filled and signed by the principal officer of th .....

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ich is a declaration to be issued by the transferee certifying that the goods transferred to them had been received and duly accounted for. Form-F is required to be furnished by the branch, which receives the goods, to the branch which transferred the goods. In the present case as the stock of chillies was transferred from Secunderabad branch to the Cochin branch of the petitioner company, the Cochin branch was required to furnish Form-F to the Secunderabad branch to enable the latter to establi .....

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from the Secunderabad branch to the Cochin branch was in the course of export. Form VAT 200 is the monthly return, for Value Added Tax, to be submitted by a registered dealer. In the present case, column 12 of the monthly return filed by the Secunderabad branch of the petitioner company relates to exempt sales, and column 13 is the zero rated sale - international exports. As the Secunderabad branch of the petitioner company had merely transferred stock of chillies to the Cochin branch, and it w .....

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ansfer from one branch of a company to another for its eventual export cannot, in view of Section 5(b) of the A.P. VAT Act, be subjected to tax under the A.P. VAT Act as it is a sale in the course of export. In any event Section 4(4)(iii) of the A.P. VAT Act is not attracted where the goods, after its purchase, are disposed of in the course of export out of the territory of India. The assessment orders, under challenge in these Writ Petitions, are, accordingly, set aside. As noted hereinabove, S .....

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er, would fairly state that the petitioners have no reason to avoid being subjected to scrutiny by the assessing authority in this regard. In Rajesh Spices Co 2008 (11) VST 303 (All), on which reliance is placed by Sri M. Govind Reddy, Learned Special Standing Counsel for Commercial Taxes, the Allahabad High Court, following the judgment of the Supreme Court, in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer, held that the phrase in the course of export in Article 286 of the Constitution .....

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tual 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; and 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. It is wholly unnecessary for us to examine whether the chillies purchased by the Secunder .....

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s, transferred from the Secunderabad branch to the Cochin branch of the petitioner company, were sold by the Cochin branch to foreign buyers outside the territory of India in terms of Section 5(1) of the CST Act. On the question of partial denial of input tax credit to the petitioner, it is necessary to note that Section 13 of the A.P. VAT Act relates to Credit for input tax and provides that, subject to the conditions, if any, prescribed, an input tax credit shall be allowed to the VAT dealer f .....

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