TMI Blog2020 (8) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... inextricable link between the sale or purchase claimed to be exempted under Section 5(3) of the Act and the export has to be established by the Assessee by leading evidence. Since such findings are not available, it cannot be held that the Assessee is entitled to such exemption under Section 5(3) of the Act, nor the order of the learned Tribunal or the Assessing Authority, allowing such exemption without the facts being fully and properly examined with due scrutiny by the Assessing Authority, can be sustained. The matter deserves to be remanded back to the learned Assessing Officer for passing fresh orders after giving an opportunity of hearing to the Assessee and allowing him to lead requisite evidence to establish such inextricable link between the sale or purchase of the raw hides and skins in question and the export of leather garments or Dressed Hides and Skins by the Assessee - Petition allowed by way of remand. - W.P. No. 3987, 3997 and 3721 of 2003 - - - Dated:- 11-2-2020 - THE HONOURABLE DR.JUSTICE VINEET KOTHARI And THE HONOURABLE MR.JUSTICE R.SURESH KUMAR For the Petitioner : Mr.Mohammed Shaffiq, Special Government Pleader (Taxes) assisted by Ms.A.N.R.Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From the above reasons stated by the Assessing Officer the following points are to be noted to decide whether levy of tax for leather at purchase point is correct or not ? 1. Whether the raw hides and skins and tanned hides and skins are two different commodities or one and the same? 2. When the commodity had already been exempted from Tax under section 5(3) of the CST Act, 1956, when called in different names can be taxed again under the TNGST Act 1959? Coming to the facts of the case, it is to be noted that the main contention of the department raw hides and tanned skins are entitled to the benefits 5(3) of the CST Act, 1956, relying on the judgement in 69 STC 325, 73 STC 228 and 95 STC 122. Further section 14(iii) of the CST Act, 1956 which reads as follows:- hides and skins whether in a raw or dressed state . Hence, it is clear that dressed hides and skins are included in the hides and skins . In the case of Mahi Traders reported in 73 STC 228, the Supreme Court relied on the Tribunal's (sic) Circular No.SET/18(495/14) dated November 11 1957, issued by the Ministry of Commerce and Industry clarified as under:- Turning to colour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the appellants had effected purchase of raw hides and skins for the purpose of export in pursuance of contract entered into between Appellants and foreign buyers. e) After the amendment is made in section 5(3) of the CST Act, 1956, 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 be deemed to be in the course of export, if such last sale or purchase took place after and was for the purpose of complying the order of the foreign buyer. In other words, even the sale or purchase precedent to export sale is also to be treated as purchase or sale in the course of export. From the above, it can be noted that no tax can be levied at the point of last purchase of raw hides and skins. Further, the judgement of Tvl.K.A.K.Anwar and company reported in 56 STC 58 (High Court) and 108 STC 258 (SC) and 91 STC P.l (Tvl.Brown Leather Company) are one and the same. But, after the judgment in Brown Leather Company recorded in 91 STC 1, the clarification in D.Dis.Acts/Cell.III/1298030/98 issued on the basis of Additional Government Pleader's opinion No.92/94 dated 29.6.94, should be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dar and sons. Hence, the penalty levied by the Assessing Officer and confirmed by the Appellate Assistant Commissioner in all the three appeals are deleted. Aggrieved by the same, the State has filed the present writ petitions. 3. Raising a preliminary objection against the maintainability of the writ petitions itself, the learned counsel for the Respondent/Assessee, Mr.A.Chandrasekaran submitted that at the point of time when the Tribunal passed the impugned order on 31 December 1999, the State had a remedy by way of filing a Tax Revision Case before the Special Tribunal constituted within the State of Tamil Nadu under Article 323B of the Constitution of India, which Tribunal, of course, now stands abolished and therefore, having not availed that proper remedy at that point of time, the State cannot be permitted later on to assail the said order by way of filing Writ Petition in the year 2003 and therefore, the present Writ Petitions are not maintainable on the ground of delay and latches. 4. However, looking into the important questions of law involved in the present case, we overrule the said objection and we have heard the Writ Petitions on the merits of the case als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Counsel for the Assessee, a while later. 7. Per contra, the learned Counsel for the Assessee Mr.A.Chandrasekaran submitted that the inextricable link between the export of the ready made garments and the purchase of Raw Hides and Skins by the Assessee is deemed to have been established by the Assessee, because in the very first round of assessment, the Assessing Officer had allowed such exemption under Section 5(3) of the Act in respect of purchase of raw hides and skins by the Assessee, but, however, only upon a revision of the original assessment order after serving a notice for the same on 16 August 1996, the Assessing Officer, had passed the impugned re-assessment order on 25 April 1997, denying such exemption, which after confirmation by the First Appellate Authority was allowed in favour of the Assessee only by the learned Tribunal by the impugned order. However, he admitted that details of export orders, purchases of the Raw Hides and Skins, names of the local sellers of raw hides and skins and their importers in the foreign country etc. are not discussed in the orders passed by the Assessing Officer as well as by the two Appellate Authorities below. 8. He urged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whom the goods are sold in a prescribed form obtained from the prescribed authority. (5) Notwithstanding anything contained in sub-section (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposes of its international flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India. Explanation.-For the purposes of this subsection, designated Indian carrier means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf.] 10. Sub Section(1) of Section 5 of Central Sales Tax Act, 1956, deals with the sale or purchase of goods which occasions the export out of India. Sub Section (2) deals with the sale or purchase in the course of import which occasions such import. Sub section (3) deals with the sale or purchase of goods preceding the sale or purchase which occasions the export of those goods and which is deemed by a legal fiction to be in the course of export. Sub section (4) attaches a condition to be fulfilled for claiming the benefit under sub section (3) viz., furnishing of prescribed declaration (Form H). Sub section (5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to grant exemption from the Central Sales Tax on such immediately preceding actual sale or purchase. 14. Some of the cases which arose in this context and propounded the theory of 'same goods' earlier are discussed in the following cases: (a) In M/s.Sterling Foods vs. State of Karnataka and anr. (1986) 3 SCC 469, three Judges Bench of the Hon'ble Supreme Court was dealing with the case of Shrimps, prawns and lobsters locally purchased for complying with the export orders and after the process of cutting their heads and tails, peeling, deveining, cleaning, freezing, such goods were exported outside India under prior contract of sale. The Court held that even after such processing of these sea food items, they retained their original identity and do not become different commodities and therefore, the Assessee was entitled to exemption from tax under Section 5(3) of the Act. The following extract from the judgment is quoted below for ready reference. In commercial parlance and according to what is understood in the trade by the dealer and the consumer, processed or frozen shrimps, prawns and lobsters retain their original character and identity as shrimps, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was occasioned by one transaction. The parties to that transaction were the appellant, STC and the foreign buyer. STC was brought into the picture as an intermediary because of the legal requirement, according to which the export of chrome concentrates was to be canalised through STC. Although the above requirement necessitated the execution of two agreements, one between the appellant and STC and the other between STC and the foreign buyer, there can, in my opinion, be no doubt that the agreements were part of one integrated transaction which resulted in the export of the goods. The interconnection between the two agreements was so intimate that one agreement could not stand without the other. It was accordingly provided that the cancellation of one agreement would automatically result in the cancellation of the other agreement. ... 59 ... The Coffee Board case [(1969) 3 SCC 349 : (1970) 3 SCR 147], which too was decided by the Constitution Bench, could not set at naught the rule laid down in a series of earlier decisions and, in fact it did not do so as is apparent from the passage reproduced above wherein Hidayatullah, C.J. dealt with the question as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase, as the case may be, must actually take place. (2) Such sale or purchase in India must itself occasion such import, and not vice versa i.e. import should not occasion such sale. (3) The goods must have entered the import stream when they are subjected to sale or purchase. (4) The import of the goods concerned must be effected as a direct result of the sale or purchase transaction concerned. (5) The course of import can be taken to have continued till the imported goods reach the local users only if the import has commenced through the agreement between foreign exporter and an intermediary who does not act on his own in the transaction with the foreign exporter and who in his turn does not sell as principal the imported goods to the local users. (6) There must be either a single sale which itself causes the import or is in the progress or process of import or though there may appear to be two sale transactions they are so integrally interconnected that they almost resemble one transaction so that the movement of goods from a foreign country to India can be ascribed to such a composite well-integrated transaction consisting of two transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the export and the goods exported being the same goods as purchased, on which exemption under Section 5(3) was claimed, prevailed. 16. Then came the decision of the Constitution Bench of the Hon'ble Supreme Court in the case of State of Karnataka vs. Azad Coach Builders (P) Ltd. And another, 2010(9) SCC 524, in which the Constitution Bench of the Hon'ble Supreme Court dealt with the case where the Respondent Assessee M/s.Azad Coach Builders was requested by exporter, M/s.Tata Motors to fabricate bus bodies on the chassis supplied to them by the exporter M/s.Tata Motors in accordance with the specifications given by the foreign buyers or importers of Sri Lanka. The said foreign buyers had written to the Tata Motors that the steel and aluminum panels of the bus bodies should be built by the Assessee Azad Coach Builders as the customers in Sri Lanka preferred them. Accordingly, the Assessee manufactured the bus bodies and mounted the same on the chassis made available by the exporter - M/s.Tata Motors, making it a complete bus body ready for export. The Assessee claimed exemption from State Sales Tax on the sale of such bus bodies as penultimate sales in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and (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 course 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' are 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. Therefore, the test to be applied is, whether there is an in- severable 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 S ection 5(3) for exemption from State Sales Tax is justified, in which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 31. In the facts and circumstances of this case, we are satisfied that the assessee has succeeded in satisfying those tests and hence, eligible for exemption under sub-section (3) of Section 5 of the CST Act. 18. We respectfully intend to underline that the exclusion of applicability of same goods theory by the Constitution Bench of the Hon'ble Supreme Court was propounded in view of the peculiar facts of the case before the Constitution Bench and the first ingredient to Section 5(3) of the Act being satisfied on facts that the local sale or purchase viz., sale of bus bodies was inextricably connected or linked to the actual sale occasioning the export of the said commodity viz., bus bodies by M/s.Tata Motors to the importers in Sri Lanka. Therefore, even though the 'chassis' and 'bus bodies' being not the same goods, the Hon'ble Supreme Court made a departure from the same goods theory and allowed the exemption in favour of the Assessee in view of the said inextricable link of sale immediately preceding the export by M/s.Tata Motors. We cannot agree with the contentions raised by the learned Counsel for the Assessee that the same goods th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of accounting, the exporter raises a bill for chassis on the assessee and instead of making entries in the accounts by first debiting the value of the chassis to the body builder (the assessee) and then deducting the amount of chassis from invoice of a complete bus, the exporter invoices the assessee only in respect of bus body and not for the entire complete bus. (Does it not sound like a contract for job work only and not sale ) It is not disputed that after getting the bus completed, nothing is done by the exporter to change the identity of the bus, thus entitling the assessee to the benefit under Section 5(3) of the Central Sales Tax Act, 1956 (hereinafter referred to as the said Act ). (Thus, 'same goods' theory is in fact impliedly adopted by the court and not rejected). 2. According to the Department, the contract given to the assessee by the exporter is for the bus body; that, bus and bus body are different articles mentioned in Entry 14 to the Second Schedule to the Karnataka State Sales Tax Act; that, the bus body is a separate saleable commodity different from chassis or from the complete bus and, therefore, according to the Department, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of India (for short CCI ) are in the course of import and, therefore immune from liability to tax under the Kerala General Sales Tax Act, 1963. In that case, on facts the Court found that there was no privity of contract between the local users on the one hand and the foreign exporter on the other and held that those two transactions could not be said to be so integrally interconnected as to represent one composite transaction in the course of import of raw cashew nuts. The Court held that those sales by CCI to the local users go out of the sweep of the exemption provisions engrafted by Section 5(2) of the CST Act, reason being that there was no privity of contract between the local users and the foreign exporters. 7. M/s Azad Coach Builders (P) Ltd., the assessee, was requested to build bus bodies by the exporter, Tata Engineering Locomotive Co. Ltd. in accordance with the specifications provided by the foreign buyer, Lanka Ashok Leyland Ltd., Colombo. The specimen copy of the purchase order dated 11- 7-1988 placed on the assessee by the exporter revealed that the assessee was asked to fabricate bus bodies on the chassis supplied by the exporter in accordance with the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 5(3) of the Act. Therefore, the words 'any goods' and 'those goods' employed in section 5(3) of the Act have to be the 'same goods' and this was the legal position which is culled out from the various other judgments of the Hon'ble Supreme Court, including the one from the Constitution Bench. Therefore, we cannot apply the decision of the Hon'ble Supreme Court in case of Azad Coach Builders ruling out the concept of same goods altogether in all cases. That is neither expressly mentioned in the judgment of Azad Coach Builders nor is intended because despite being conscious of the two goods, viz., complete bus and bus chassis being two different goods, the Hon'ble Supreme Court allowed the exemption in view of the inextricable link of the entire transaction. If complete bus body only was sold back by Azad Coach Builders to exporter M/s.Tata Motors, as can be inferred from the facts of the case quoted above, and such complete bus only was exported, where was the question of excluding the theory of 'same goods'. The goods (complete bus) was 'same goods' only. Thus, 'same goods' theory is in fact impliedly adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the export has to be established by the Assessee by leading evidence. Since such findings are not available before us, we cannot hold that the Assessee is entitled to such exemption under Section 5(3) of the Act, nor we can sustain the order of the learned Tribunal or the Assessing Authority, allowing such exemption without the facts being fully and properly examined with due scrutiny by the Assessing Authority. 23. Therefore, in our opinion, the Writ Petition filed by the State deserves to be allowed and the matter deserves to be remanded back to the learned Assessing Officer for passing fresh orders after giving an opportunity of hearing to the Assessee and allowing him to lead requisite evidence to establish such inextricable link between the sale or purchase of the raw hides and skins in question and the export of leather garments or Dressed Hides and Skins by the Assessee. Unless the facts so established with evidence, fall within the four corners of judgment of the Constitution Bench in the case of Azad Coach Builders, the Assessee would not be entitled to exemption, ignoring the theory of same goods altogether under Section 5(3) of the Act as canvassed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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