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TMI Blog2024 (6) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... time gap exceeding 100 days between the end of transit and date of lifting by the foreign buyer? (for the months of July, August and December 2006) 2) Whether, on the facts and in the circumstance of the case, the Honourable Karnataka Appellate Tribunal was right in law in considering the value of stock transfer of finished goods, manufactured out of non-local inputs, in computing the non-deductible input tax as per Rule 131 of the KVAT Rules read with Section 17 of the KVAT Act? (for the months of June, July, August, October, November, December 2006 and, January and February 2007) 3) Whether, on the facts and in the circumstances of the case, the Honourable Karnataka Appellate Tribunal was right in law in not addressing the issue of apportionment methodology adopting a proper trade cycle as per Rule 132 (1) of the KVAT Rules, thereby impliedly approving the action of the lower authorities? (for the months of September 2006 and March 2007) 4) Whether, on the facts and in the circumstances of the case, the Honourable Karnataka Appellate Tribunal was right in law in not allowing the concessional rate of 4%, in accordance with notification No. FD 300 CSL 2005 dated 24.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company on its own and the same cannot be considered as export. 6. The dealer being further aggrieved preferred appeal before the Karnataka Appellate Tribunal. The Appellate Tribunal by order dated 29.11.2010 held that the goods exported outside India and stored in the godowns owned by the dealer would be considered as export for a period of 100 days. If the goods are not sold to the respective buyers within 100 days, the same will be considered as stock transfer by the dealer. 7. Learned counsel for the dealer submits that Section 5 (1) of the CST Act considers the sale of goods in the course of export out of India, if the sale occasions such export. It is further submitted that the export in the present case is made to Netherlands in pursuance of firm orders placed by the firm buyers. It is submitted that foreign buyers place orders with the appellant-company with a specified quantity required by each of the foreign buyer, price of the goods is fixed and with quality specifications to the particular goods required by the foreign buyers. The dealer to comply with such orders placed by foreign buyers, exports the goods by earmarking such goods for a particular foreign buyer. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll portions. Considering the period of storage before goods are sold to the concerned foreign importers, the Tribunal was justified in fixing the reasonable time of 100 days from the receipt of goods in foreign country to be considered as export and beyond 100 days to be considered as stock transfer. 11. The provisions of Section 5 (1) of the CST Act reads as under: "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." Section 2 (14) of the CST Act defines Export as: "Export" means a sale of goods taking place in the course of export of the goods out of the territory of India only if the sale 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 and includes the last sale of any goods preceding the sale occasioning the export o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n supplied other than to the importers to consider it as a local sale. In view of finding of fact recorded by the Tribunal that firm orders were placed by the buyers with specification of quality, quantity and price and export is against such orders, merely because out of the quantity exported, supply is made through the agent of the dealer in smaller portion of the buyer/ importers, the same would not ceases to be sale in the course of export and can be termed as local sale. The transaction in disputes satisfy all the three essentials to constitute sale in the course of export as enunciated by the Hon'ble Supreme Court in the case of Coffee Board (supra). We hold that transaction is sale in the course of export. 15. The Tribunal though considered the export of goods as sale in the course of export by referring to the judgment of the Hon'ble Supreme Court in the Consolidated Coffee Limited V/s Coffee Board 46 STC 164, held that the period of 100 days from the date of receipt of goods at Netherlands would be considered as transit of goods in the course of export and beyond 100 days, it has to be considered as mere stock transfers. The judgment referred to by the Tribunal supra in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the State. It is contended that purchase to the extent of Rs. 98,03,802/- cannot be considered for the purpose of applying the formula under 131 of KVAT Rules. 20. Per contra, learned High Court Government Pleader appearing for the State submits that the said contention was not raised before any of the authorities. It is not permissible to the dealer to raise such contention for the first time before this Court. 21. In re-joinder, learned counsel for the appellant submits that by reply under letter dated 11.08.2008, the said contention has been specifically raised along with table and the impugned orders have no reference to the said reply. Learned counsel further submits that the contentions urged in the reply dated 11.08.2008 forms part of the appeal memo at Page 20. 22. We have perused the orders passed by the prescribed authority, appellate authority and the Tribunal. It is the specific contention of the dealer that out of stock transfer of Rs. 4,20,82,147/-, total of Rs. 3,22,78,345/- is from the goods purchased locally and Rs. 98,03,802/- is from the goods purchased outside the State. To the extent the goods purchased outside the State cannot form part of the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner in terms of Section 17 of the KVAT Act and Rule 131 of the Rules ought to have provided a different trade cycle to the appellant for partial rebating. It is specifically contended that the trade cycle ought to have been considered from December to December instead of April to March. In support of the said contention relies on the Circular No. 13/2006-07 dated 26.06.2006 prescribing the procedure for partial rebating. The circular has mandated fixing of a trade cycle depending on the nature of the business carried on by the dealer. Thus, submits that the order of the Tribunal in not adjudicating the said issue is erroneous. 25. Learned HCGP appearing for the State submits that Section 17 of the KVAT Act and Rule 131 and 132 of the KVAT Rules provides for partial rebating and apportionment of input tax. Rule 132 of the KVAT Rules mandates to complete the return on provisional basis each month and true apportionment for the year shall be made in the return furnished for the 6th and final month of the year after calculating apportionment under Rule 131 (3) or 131 (5) of the KVAT Rules for the part period and the whole year. It is further submitted that the circular rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 11. (3) Any input tax relating to both sale of taxable goods and exempt goods, including inputs used for non-taxable transactions, the non-deductible input tax, may be calculated on the basis of the following formula: (Sales of exempt goods + non-taxable transactions) x total input tax Non-deductible input tax (including non-taxable Transaction) = Total sales (4) For the purpose of clause (3).- (a) "Sale of taxable goods" would be the aggregate of the amounts specified in clauses (b), (c), (d), (e) and (f) of sub-rule (1) of Rule 3 relating to sale of goods other than those exempt under Section 5 which are not sold in course of export out of the territory of India [and those sold in the course of import into the territory of India]; and (b) "total sales" means total turnover less.- (i) the amount specified in clause (a) of sub-rule (1) of Rule 3; (ii) the deductions specified in clause (e) of sub-rule (2) of Rule 3; (iii) the aggregate of sale prices received or receivable in respect of subsequent sale in the course of inter-State trade or commerce of any goods purchased in the course of inter-State trade or commerce during their inter-State movement; (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure under Rule 132, the circular provided for change of the trade cycle from Rule 131. The change is only to the extent of the true apportionment for the 6th or the final month is permitted to be altered depending on the nature of the business. The said Rule would not permit to go beyond the year i.e. end of March 2006. Section 17 of the KVAT Act r/w Rule 131 and 132 of the KVAT Rules in no way indicate the partial rebate and apportionment beyond the year. 30. Section 2 (38) of the KVAT Act defines the year means the year commencing on the first day of April. Even the circular No. 13/2006-07 dated 26.06.2006 only provides for alteration of the months during which provisional or final returns to be filed. In other words, as mandated under Rule 132 (5) of the KVAT Rules only the period of true apportionment for the sixth and final months of the year can be altered. However, the mandate remains that the said alteration provided would remain within the year. Hence, the contention of the appellant that the trade cycle to be permitted from December to December is contrary to Rule 132 of the KVAT Rules. 31. Further Section 17 r/w Rule 132 and the circular dated 26.06.2006 clearly m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the petitioner submits that the circular has been misinterpreted by all the three authorities. Learned counsel contends that the car was sold during the period 2006-07. The notification dated 24.10.2005, during the relevant period reads as under: NOTIFICATION NO. FD 300 CSL 2005, Bangalore, dated: 24.10.2005. In the exercise of the powers conferred by sub-section (3) of section 4 of the Karnataka Value Added Tax Act, 2003 (Karnataka Act 32 of 2004) the Government of Karnataka hereby reduces with immediate effect, the tax payable [under sub-section (1) of Section 4 the said Act by a dealer engaged in the purchase and sale of user cars, on the sale of used car] to four percent of the difference between the taxable turnover in respect of such sale and the amount paid towards purchase of such car subject to the condition that,- (i) no deduction of input tax is claimed by the dealer in respect of purchase of any goods used in the car sold; and (ii) such car has been registered in the State prior to its sale under the provisions of the Motor Vehicles Act, 1988 (Central Act 59 of 1988) Note: (1) The words (by a dealer under sub-section (1) of Section 4 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subject to conditions at (i) and (ii). As all the authorities proceeded to reject the claim of the dealer holding notification dated 24.10.2005 is not applicable, no finding has been recorded on compliance of the conditions. As submitted by the dealer, the sale of the Qualis vehicle was during the month of May 2006. The said submission is not disputed. Hence, we are of the considered view that only to the limited extent to verify the compliance of conditions of the notification dated 24.10.2005, we remit the issue to the prescribed authority for fresh consideration. We make it clear that the scope of remand is only to the extent to verify compliance of conditions at (i) and (ii). We answer the above question of law in favour of the dealer. 41. Regarding 5th question of law:- This question is not admitted by this Court. We have considered the submission of both counsels. We are satisfied that this question arises for our consideration. Hence, we proceed to consider and answer the same. The prescribed authority while determining the tax liability has levied penalty u/sec. 72 (2) of the KVAT Act on the basis of percentage of tax quantified. The levy of penalty has not been distur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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