TMI Blog2023 (1) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... such penultimate sale prior to the export is exempt from sales tax under the respective enactment when read in conjunction with Article 286 of the Constitution of India - It is on the strength of Form H given by an exporter, the local dealer effecting a local sale or an inter-State sale can treat the sale as an exempted sale under Section 5(4) of the Central Sales Tax Act, 1956. This is the statutory mechanism prescribed for exempting a dealer effecting penultimate sale of goods to an exporter prior to export. As far as payment of purchase tax under Section 7A is concerned, there is no mechanism provided under the Act. If the ratio of the Hon ble Supreme Court in STATE OF KARNATAKA VERSUS AZAD COACH BUILDERS PVT. LTD. AND ANOTHER [ 2010 (9) TMI 879 - SUPREME COURT] is to be applied to the facts of the present case, the petitioner would be entitled to claim exemption provided the petitioner is able to establish an inextricable link between the purchase of raw hides and the export of goods viz., raw hides with the export order. There are no records to establish the same in the present case. Further, the petitioner also had local sales of dressed hides and skin. Though, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposal of the Civil Appeal No.3773/2000 pending on the files of the Supreme Court and the reference made to the Constitutional Bench of the Apex Court in C.A.Nos.5616 5617 of 2000 reported in 145 STC 176 in relation to Section 5(3) of the Central Sales Tax Act, 1956. 2. The petitioner is aggrieved by the first mentioned impugned Assessment Order dated 29.10.2004 passed by the first respondent Commercial Tax Officer for the Assessment Year 2002-2003, wherein, the total and taxable turnover were determined as against the total and taxable turnover reported by the petitioner in the return filed by it. Details of total and taxable turnover are given below:- Turnover Reported by the petitioner Determined by the first respondent Total Rs.4,68,46,396/- Rs.5,59,31,898/- Taxable Rs.60,93,882/- Rs.5,54,07,663/- 3. By the second mentioned order dated 08.03.2006 in AP.No.04 of 2005, second respondent has partly set aside and partly confirmed the first mentioned impugned order dated 29.10.2004 of the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner and within the prescribed period, a declaration duly filled in and signed by the dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority. Provided further that any dealer who, after purchasing the goods in respect of which he had furnished any declaration, fails to make use of the goods so purchased for the purpose specified in the declaration but disposes of such goods in any other manner, shall pay the difference of tax payable on the turnover relating to sale of such goods at the rate prescribed and three per cent: Provided also that the dealer purchasing the goods maintains a separate stock account for each of the goods purchased by him showing such particulars as may be prescribed. Where any dealer, after availing the concessional rate of tax under sub-section (3), does not sell the goods so manufactured, but despatches them to a place outside the State either by branch transfer or by transfer to an agent, by whatever name called, for sale, or in any other manner, except as a direct result of sale or purchase in the course of inter- State trade or commerce, shall p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after paying purchase tax will be liable to sales tax when he sells them after dressing. Recently in a similar issue the apex court in the case of ShafeeqShameel Co., vs. Assistant Commissioner (CT) and others reported in 129 STC 1 has held as follows: that Section 5(3) of the Central Sales Tax 1956, was not applicable where the goods which were sold or purchased had undergone any transformation. Since the dressed hides and skins exported by the appellants were goods different from raw hides and skins purchased by it, the appellant was not entitled to the benefit of exemption of the penultimate sale or purchase under Section 5(3) . Following the principles laid down in the case laws referred to above to the facts of the case on hand, I see no valid reason to interfere with the assessment made on the turnover of Rs.4,02,28,278/- at 4% and accordingly, it is ordered to be sustained. 11. Thus, only with reference to imposition of penalty under Section 12(3)(b) of the TNGST Act, the Assessment Order dated 29.10.2004 was set aside and the case was remitted back by the second respondent to the first respondent Assessing Officer applying the ratio of the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner under Section 7-A of the TNGST, Act, 1959. Section 7-A of the TNGST, Act, 1959 as it stood during the period in dispute reads as under:- Section 7-A.-Levy of purchase Tax. (1) Subject to the provisions of sub-section (1) of section 3, every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods, (the sale or purchase of which is liable to tax under this Act) in circumstances in which no tax is payable under sections 3 or 4, as the case may be, not being a circumstance in which goods liable to tax under subsection (2) of section 3 or section 4, were purchased at a point other than the taxable point specified in the First, the Fifth, the Eleventh or the Second Schedule and either, (a) consumes or uses such goods in or for the manufacture of other goods for sale or otherwise; or (b) disposes of such goods in any manner other than by way of sale in the State, or (c) despatches or carries them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to the purchase aforesaid at the rate men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods after the goods have crossed the customs frontiers of India. Such transaction is exempt from payment of tax in terms of Article 286 of the Constitution of India. 25. As per Section 5(2) of the Central Sales Tax Act, 1956, a sale or purchase of good 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. 26. Section 5(1) and Section 5(2) of the Central Sales Tax Act, 1956 read as under:- Section 5(1) of the Central Sales Tax Act, 1956 Section 5(2) of the Central Sales Tax Act, 1956 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 frontie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned sale or purchase was made in furtherance of a pre-existing commitment under an export agreement or export order on the exporter. 31. The seller or the purchaser, as the case may be, has to establish an inextricable link between the export order, sale/purchase i.e local sale/purchase and/or inter-state sale/purchase with the eventual export. 32. The seller or purchaser, as the case may be, is required to establish that a pre-existing export existed and the sale or purchase was made for the export of the goods. They have to establish an inextricable link between local/inter-state sale or purchase with a pre-existing export order and eventual link. For the sake of clarity, Sections 5(3) and 5(4) of the Central Sales Tax Act, 1956 are reproduced below:- Section 5(3) of the Act Section 5(4) of the Act, 1956 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has to establish the identity of the goods sold to be exported out of the territory of India. In order to fulfil an export obligation, if an exporter purchases goods and as a result of some processing the identity and character of the goods change, then it will not be a case of export of the same goods. . 37. Thus, same goods theory is still relevant and cannot be said to be no longer applicable. The decision of the Full Bench of the Hon ble Supreme Court in Azad Coach Builders (P) Ltd. case referred to supra , dealt with a situation where exporter Tata Engineering Locomotive Co. Ltd., the manufacturer of chassis had an export order for supply of bus to Lanka Ashok Leyland Ltd., Colombo. Therefore, Tata Engineering Locomotive Co. Ltd, supplied chassis to assessee Azad Coach Builders (P) Ltd. for bus building for export to Lanka Ashok Leyland Ltd., Colombo. 38. The assessee, M/s.Azad Coach Builders (P) Ltd., 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. 39. The Court took cognisance of the specimen copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merge:- To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export. There must be obligation to export, and there must be an actual 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. 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, without which a transaction sale cannot be called a sale in the course of export of goods out of the territory of India. 46. Ultimately, the test laid down by the Hon ble Supreme Court in Paragraph 27 of the above case reads as under:- 27. ...... Therefore, the test to be applied is, whether there is an inseverable link between the local sale or purchase 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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