TMI Blog2022 (12) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... e First Appellate stage, the petitioner had been granted relief with respect to penalty for non-submission of statutory forms. There was neither cross-appeal nor cross-objection by the Revenue. It deserves to be noted, therefore, that in the appeal of the petitioner-dealer, the Odisha Sales Tax Tribunal was not legally correct to grant relief to the opponent-State of Odisha by remanding the matter to the Assessing Authority to take action as deemed proper as per requirement of statute qua matter of imposition of penalty. - Decided in favor of Assessee. - STREV No. 64 of 2017 - - - Dated:- 8-12-2022 - MURAHARI SRI RAMAN JUDGE AND DR. S. MURALIDHAR CHIEF JUSTICE Advocates appeared in the case: For Petitioner : Mr. Jagabandhu Sahoo, Senior Advocate with Ms. Kajal Sahoo, Advocate For Opposite Party : Mr. Susanta Kumar Pradhan, Additional Standing Counsel (CT GST Organisation) JUDGMENT Murahari Sri Raman, J. 1. The petitioner, a partnership firm, assailed Order dated 18.05.2017 in Second Appeal No.58(C) of 2015-16 passed by the learned Odisha Sales Tax Tribunal, Cuttack ( Tribunal ) directed against Order dated 30.04.2015 of the Additional Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the course of export, as penultimate seller it claimed exemption under sub-section (3) on compliance of requirement under sub-section (4) of Section 5 of the CST Act. 3.2. On the contrary while disallowing such a claim of the petitioner, the Assessing Authority has observed as follows: *** The dealer claimed that the contract between the Indian Exporters with him and the contract between the Indian Exporter and foreign buyers formed an integrated activity in the course of export. So, all the sales effected by him to the Indian Exporters are exempted from payment of tax as per Section 5(3) of the CST Act. Here, the instant dealer-firm is not a direct exporter. The Indian Exporters have purchased goods from the dealer-assessee in order to fulfill a contract with the foreign buyers. The dealer-assessee was under no contractual obligation to the foreign buyers either directly or indirectly. The obligations of the dealer were to the Indian Exporters. The immediate and direct cause of the movement of goods and export was the contract between the Indian Exporter and foreign buyers. That was the contract which occasioned export and not the contract between the instant dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the period 2007-08. In absence of declaration Form H the claim of exemption of export sale is not considered and the same is taxed at the appropriate rate. Further the dealer-appellant has been allowed sufficient opportunity for production of copies of agreement between Indian Exporter and Foreign Buyer but the dealer-appellant could not be able to produce such copies of agreement. Hence, in absence of supporting documentary evidences the transaction of export sale invoking provision of Section 5(3) of the CST Act could not be considered as true and correct and the above transaction is treated as deemed sale under the CST Act and is taxed at appropriate rate. Observing thus, the Appellate Authority confirmed the disallowance of claim of the petitioner for exemption in respect of transactions of sale in the course of export under Section 5(3) of the CST Act. 3.4. The petitioner-M/s. General Traders carried the matter further before the Tribunal in Second Appeal invoking provisions of Section 9(2) of the CST Act, 1956 read with Section 78 of the Odisha Value Added Tax Act, 2004. The learned Tribunal affirmed the Appellate Order by observing thus: 6. *** in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale in course of export falling within ambit of subsections (3) and (4) of Section 5 of the CST Act. When the Certificate of Export H , prescribed under Rule 12(10), issued by the exporter as per requirement of provisions contained in subsections (3) and (4) of Section 5 was produced supported by documents, like purchase order and bill of lading, before the authorities, in absence of defects being pointed out in such certificate(s), there was no occasion for the Revenue Authorities to discard statutory form and doubt the veracity of the transactions particularly when the exporter filled up said form by disclosing inter alia agreement number/purchase order number and furnished information regarding bill of lading indicating transport of goods to outside the territory of India. 4.1. It is next urged by Sri Jagabandhu Sahoo, learned Senior Advocate for the petitioner that the First Appellate Authority being satisfied that the Assessment in question was framed on the basis of observations made in the Audit Visit Report after thorough examination of books of account and other documents. The demand is raised on account of non-production of copy of agreement between the Indian Exporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Odisha Sales Tax Tribunal were satisfied that there is requirement of production of copy of agreement between the Indian Exporter and the Foreign Buyer as the same would not only indicate that the sale by the petitioner-penultimate seller to the exporter is in order to comply with the terms of agreement or order for such export , but also would show that the goods so supplied by the petitioner to the exporter have, in fact, been move out of the territory of India. This facilitates ascertainment of the quantum of goods sold in the course of inter-State trade or commerce by way of export so as to enable the Assessing Authority to consider exemption under Section 5(3) of the CST Act. 5.1. With regard to imposition of penalty under Rule 12(3)(g) of the CST (O) Rules, Sri Susanta Kumar Pradhan, learned Additional Standing Counsel for the CT GST Organisation would submit that Circulars being issued for guidance, the quasi judicial authority like Odisha Sales Tax Tribunal is not bound by such circular issued by the Commissioner of Commercial Taxes. He submitted that Rule 12(3)(g) of the CST (O) Rules mandates imposition of penalty at the rate of twice the amount of tax assessed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export. Section 5 thereof deals with when is a sale or purchase of goods said to take place in the course of import or export . While sub-section (1) of Section 5 speaks about direct export and claim of exemption by the exporter; sub-section (3) as inserted with effect from 01.04.1976 by virtue of Central Sales Tax (Amendment) Act, 1976, entitles the penultimate seller to claim exemption in respect of sale of goods to the exporter. To avoid difficulties for claiming exemption under sub-section (3), sub-section (4) has been inserted vide Finance Act, 2005. 6.4. The provisions contained in sub-sections (3) and (4) of Section 5 of CST Act read as follows: (3) Notwithstanding anything contained in subsection (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. (4) The provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1956 Certificate I: Certified that the goods (the particulars whereof have been specified in items (1) and (2) of the Schedule below) supplied in pursuance of our purchase order No. ____________ dated ____________ purchased from you as per Bill/Cash Memo/Challan No. _____________ dt. _____________ for Rs. ____________ have been sold by me/us, in the course of export out of the territory of India, as per details given in Item (3) to (6) of the said Schedule, and that the said goods were purchased from you by me/us after, and for the purpose of complying with, the agreement or order No. ____________ dated _________ for or in relation to such export. Certificate II: It is further certified that non-liability to tax under the Central Sales Act, 1956, in respect of goods referred to in Certificate I has not been claimed from any other person and that no other certificate for such non-liability has been issued to any other person in India in respect of those goods. Certificate III: It is further certified that in case the goods covered by this certificate are reimported into India by me/us after their export, I/we undertake to inform the sales tax authority of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fill in the agreement number and date entered into between the exporter and the foreign buyer. As per Certificate-I appended to Form H, the exporter certifies that the very goods purchased from the penultimate seller is for the purpose of complying with the agreement for or in relation to such export. Descriptions as regards goods and details of transport are required to be furnished by the exporter as required under the Schedule appended to said Form H. The exporter is also required to supply copy of consignment note/bill of lading/railway receipt/goods vehicle record/postal receipt, etc. Nothing in the said Form H is required to be done by the penultimate selling dealer. The penultimate selling dealer is only required to furnish the Certificate of Export in Form H as received from the exporter to the prescribed authority with the copies of documents as specified in said Form H . Neither the statute nor the rules or the contents of Certificate of Export in Form H requires the penultimate selling dealer to furnish the agreement copies or sale contract or purchase order of the foreign buyer with the Indian Exporter . 6.10. Apt here to refer to the decision rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners to avail such opportunity, set aside. 6.11. It is apposite to refer to the Judgment of this Court in the case of Tilakraj Mediratta Vrs. State of Odisha and Others, (1992) 86 STC 453 (Ori) rendered in the context of declaration forms vis- -vis claim of deduction from gross turnover while computing taxable turnover under the Odisha Sales Tax Act, 1947. In the said case selling dealer in order to be entitled to the deduction was required to produce at the time of assessment the declaration in Form IA, which he was required to obtain from the purchasing dealer. This Court held, 6. Under Section 5(2)(A)(a)(i) the sale of any goods notified from time to time as tax-free under section 6 is deducted from the gross turnover of a selling dealer for the purpose of computation of taxable turnover. In other words, a selling dealer who produces evidence to show that it sold goods covered by notification issued under Section 6 and the conditions and exceptions are complied with, is entitled to a deduction while its taxable turnover is computed. The selling dealer in order to be entitled to the deduction has to produce at the time of assessment the declaration form I-A w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Act, as contained in Section 5(2)(A)(a)(i) and Section 5(2)(A)(a)(ii) and decisions in the case of State of Odisha Vrs. M/s. Sahoo Traders (supra) and Tilakraj Mediratta Vrs. State of Odisha, (supra), we are of the considered view that there is no conflict of opinion in the decisions rendered by this Court in both the aforesaid cases, i.e., State of Odisha Vrs. M/s. Sahoo Traders (SJC No.27 of 1990, disposed of on 22.12.1994) and Tilakraj Mediratta Vrs. State of Odisha, (1992) 86 STC 453 (Ori). 6.13. While answering the question Whether in the facts and circumstances of the case, the Tribunal was correct in rejecting the declarations in Form-IV, which were furnished by the purchasing dealers to the Petitioner, for purchase of logs, as manufacturers , this Court in the case of Odisha Forest Development Corporation Ltd. Vrs. State of Odisha, STREV 74 of 2004, vide Judgment dated 22.03.2022, held as follows: 9. *** As far as issue (i) is concerned, the Court notes that in the present case nothing has been brought on record to enable either the Tribunal or this Court to come to a conclusion that the saw mill manufacturers who purchased the logs of wood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. Vrs. State of Orissa, (1975) 36 STC 136 (SC) and a certain interpretation had been accorded by this Court to the expression in the course of export and according to these decisions the last sale, immediately preceding the sale occasioning the export of goods out of India (hereinafter called the penultimate sale ), however closely related to the final export, was held not to be the course of export but only for export and hence liable to tax and according to the petitioners it was with a view to remove the difficulties caused by these and other similar decisions that the Parliament enacted the new sub-section (3) of Section 5 and added a proviso to Section 6(1) by the Amending Act (103 of 1976). *** It is thus clear to us that Section 5(3) formulates a principle of general applicability in regard to all penultimate sales provided they satisfy the specified conditions mentioned therein and there is no question of the said provision creating a legal fiction as has been contended for by counsel. The contention, therefore, that Section 5(3) is beyond the power or authority of Article 286(2) and, therefore, ultra vires, must be rejected. *** The material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and secondly, penultimate sales made by small and medium scale manufacturers to an export canalising agency or private export house to enable the latter to export those goods in compliance with existing contracts or orders are regarded as inextricably connected with the export of the goods and hence earmarked for conferral of the benefit of the exemption. But here again, existing contract with whom is not clarified. In other words, on this crucial point the Statement is silent and does not throw light on whether the existing contract should be with a foreign buyer or will include any agreement with a local party containing a covenant to export. Therefore, the question will again depend upon proper construction and, as we have said above, in the matter of construction the two aspects discussed earlier show that by necessary implication the agreement spoken of by Section 5(3) refers to the agreement with a foreign buyer. *** However, in support of his construction counsel for the petitioners pressed into service two aspects arising from the Statement of Objects and Reasons, namely, (a) that the exemption was intended to be extended even to small and medium scale manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the entire procedure for export]. As regards the other aspect it is clear to us that two public interests are involved; promotion of the exports of the country is one public interest while augmentation of the States revenues through sales tax is the other and it is obvious that if the liberal construction, as suggested by the counsel for the petitioner, is accepted the former public interest will undoubtedly be served while the latter will greatly suffer and if the narrow construction is accepted the latter public interest will be served and the former will suffer. It is difficult to say that the Parliament intended to prefer one and sacrifice the other. In fact the granting of exemption to penultimate sales was obviously with a view to promote the exports but limiting the exemption to certain types of penultimate sales that satisfy the two specified conditions displays an anxiety not to diminish the States revenues beyond a certain limit. The section in any case gives no indication that one public interest is to be preferred to the other and therefore, in our view, the matter must again depend upon the proper construction of the language employed. On construction we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 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. *** 29. We may also indicate that the burden is entirely on the assessee to establish the link in transactions relating to sale or purchase of goods and to establish that the penultimate sale is inextricably connected with the export of goods by the exporter to the foreign buyer, which in this case the assessee has succeeded in establishing. 6.17. As is revealed from the orders of the authorities in the instant case it is not in dispute that Certificate of Export in Form H as issued to the petitioner-penultimate seller is in order and free from defect. This indicates that the exporter has supplied information with regard to date of agreement with the foreign buyer or the date of purchase order placed by the foreign buyer. Said form also contains details of transport and bill of lading. It is recorded as a matter of fact by the authorities that the petitioner produced purchase order and bill of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of National Aluminium Company Ltd. Vrs. Deputy Commissioner of Commercial Taxes, Bhubaneswar-III Circle, Bhubaneswar, 2021 (I) OLR 828; Jindal Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori) and State of Odisha Vrs. Chandrakanta Jayantilal, Cuttack, STREV No.69 of 2012, vide Order dated 05.07.2022 are applicable to the instant case, for the Commissioner of Commercial Taxes has issued Circular dated 20.04.2015. Said Circular has been issued by taking conscious decision by respecting Judgments of the Karnataka High Court, the Himachal Pradesh High Court as also the orders of the Odisha Sales Tax Tribunal. The circular being a benevolent one, this Court feels it expedient to impress upon all concerned to follow it in the circumstances enumerated therein. 7.3. It may be beneficial to reproduce the Circular dated 20.04.2015 issued by the Commissioner of Commercial Taxes, Odisha, which was circulated amongst Special Commissioner of Commercial Taxes (Enforcement), All Additional Commissioners (Head Office), Joint Commissioners of Commercial Taxes of all Territorial Ranges, All Deputy Commissioners of Commercial Taxes, Assistant Commissioners of Commercial Taxes, Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns precedents for imposition of penalty under Clause (g) of Rule 12(3) as provided in Clause (a) of the said Rule are: 1. Suppression of purchase or sale or both; 2. Erroneous claim of exemption or deduction; 3. Evasion of tax; 4. Contravention of any provision of the Act affecting the tax liability of the dealer. It is required to determine whether failure to furnish declaration in Form C against the bona fide claim of concessional rate of tax falls under the ambit of any of the offences stated above. The Odisha Sales Tax Tribunal in the case of M /s Sri Lalbaba Roller Flour Mills, Nayabazar, Cuttack Vrs. State of Odisha in S.A. No. 87 (C) of 2012-13 dated 03.04.2014 have observed that [to quote] The dealer respondent has been assessed under Rule 12(3) of the CST (O) Rules, 1957 and the disputed amount of penalty has been imposed on the amount of the tax assessed or the turnover not supported with declarations due to failure on the part of the dealer to furnish the required declaration in Form C and H . Since there was no allegation of Audit visit report and the dealer respondent has produced the required books of accounts excepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the relevant portion: Case law are innumerable where the courts, including the apex Court, have held that even at the appellate stage the assessee may be allowed to file C forms or file rectified and proper forms if those filed were found to be defective in any manner or for any reason. Further Sri Shanti Bhusan learned Senior Counsel is also right in contending that in a case where the availing of concession is dependent upon filing C form, the non-filing of C form or filing of defective C forms may only render the assessee liable to pay at the full rate of taxation without the benefit of concessional rate in their favour, and the filing of C forms being optional and a mere condition to avail of the concessional rate contemplated in the statutory provision as such, the lapse, if any, cannot be considered to operate as a penal or forfeiture of clause. Being an optional benefit available, non-availing of the same or non-compliance of such provision, in any event, cannot be held to be non-compliance with the provisions of the Act, Rules and notifications, envisaged in the notification dated January, 1996. Placing such interpretation would amount to being not merely pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such imposition under the Section 9(2) of the CST Act or CST (R T) Rules. Commissioner of Commercial Taxes Odisha, Cuttack Dated: 20/04/2015 7.4. In view of the aforesaid Circular issued by the Commissioner of Commercial Taxes, instructing not to enforce penalty under Rule 12(3)(g) in the circumstance where there was non-filing of declaration forms in respect of bona fide transactions, particularly in absence of substantive provision for such imposition under Section 9(2) of the CST Act, this Court is of the considered opinion that the First Appellate Authority was justified in deleting penalty as imposed by the Assessing Authority while finalizing Audit Assessment. 7.5. In the First Appellate stage, the petitioner had been granted relief with respect to penalty for non-submission of statutory forms. There was neither cross-appeal nor cross-objection by the Revenue. It deserves to be noted, therefore, that in the appeal of the petitioner-dealer, the Odisha Sales Tax Tribunal was not legally correct to grant relief to the opponent-State of Odisha by remanding the matter to the Assessing Authority to take action as deemed proper as per requirement of statute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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