Andhra HC (Pre-Telangana)
Spares Corporation vs State Of Andhra Pradesh And Ors. on 15 December, 1994
Equivalent citations: [1995]97STC645(AP)
Author: Syed Shah Mohammed Quadri
Bench: A.S. Bhate, S.S. Mohammed Quadri
JUDGMENT Syed Shah Mohammed Quadri, J.
1. These three tax revision cases and the writ petition are filled by the same person, who is an assessee under the Andhra Pradesh General Sales Tax Act, 1957, for short, "the State Act".
2. The assessee is carrying on business in machinery spares for fishing trawlers at Visakhapatnam, in the name and style of "M/s. Spares Corporation". For the assessment years 1988-89, 1989-90 and 1990-91 the assessing authority assessed the disputed transaction to tax under the State Act by the assessment order passed on March 28, 1992. The assessee filed three appeals against the said orders of assessment before the Appellate Deputy Commissioner (CT), Kakinada. The appeals were dismissed, by common order, on March 24, 1993. The assessee then carried the matter in second appeal before the Sales Tax Appellate Tribunal. By common order dated April 22, 1994, the Tribunal dismissed the appeals filed by the assessee. The said order gave rise to the abovesaid three tax revision cases.
3. The methodology adopted by the assessee is that it imports spares from overseas and warehouses them in "the customs licensed bonded warehouse". Those goods are cleared by the assessee at times for sale in the local market. They are also sold by him to the owners of the fishing trawlers, which he calls as "export sales". The disputed turnover relates to the so-called "export sales". In respect of the said sale he claimed exemption under section 38 of the State Act on the ground that the sales have taken place in the course of export of goods out of the territory of India. The said authority rejected the claim of exemption, treated them as "local sales" and assessed the disputed turnover to tax. This view was confirmed by the Appellate Deputy Commissioner on appeal. On further appeal, the Tribunal agreed that the sales are not "export sales" and confirmed the order of the Appellate Deputy Commissioner.
4. The learned counsel for the petitioner submits that the term "export" is not defined either under the State Act or under the Central Sales Tax Act, 1956, therefore, the definition of "export", given under the Customs Act, 1962 and the procedure adopted for clearance of the goods for export under the said Act should be adopted as guidance and that the order passed under the Customs Act is binding on the sales tax authorities; as in those cases the customs authorities treated the sales as export sales, the sales tax authority could not have reached a different conclusion. In the alternative, he submits that on proper inference from the facts of the case the transaction cannot but be said to be export sales.
5. The learned Government Pleader for Commercial Taxes submits that the definition of "export" under the Customs Act and the orders passed by the customs authorities are for a different purpose and they are not binding on the sales tax authorities and therefore the Appellate Tribunal was right in rejecting the contention of the assessee. It is further contended that as the seller of the spares is in Visakhapatnam, the sale of the spares has taken place in Visakhapatnam; the goods also were delivered at Visakhapatnam Port therefore they are local sales and merely because the goods were taken by the trawler owner to high seas for purposes of replacing the spares, the transaction cannot be said to be export sale.
6. On the above contentions, the short question that arises for consideration is whether the disputed turnover is exempt under section 38 of the State Act.
7. It would be useful to read here section 38 of the State Act, which is in the following terms :
"38. Act not to apply to sales or purchases outside the State, in the course of import or export, etc. - Nothing contained in this Act shall be deemed to impose or authorise the imposition of a tax on the sale or purchase of any goods, where such sale or purchase takes place, -
(i) outside the State; or
(ii) in the course of the import of the goods into, or export of the goods out of the territory of India; or
(iii) in the course of inter-State trade or commerce.
Explanation. - The provisions of Chapter II of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), shall apply for the purpose of determining when a sale or purchase takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export."
8. From a perusal of the provision extracted above, it is evident that where sale or purchase of goods takes place outside the State or in the course of the import of the goods into, or export of the goods out of the territory of India or in the course of inter-State trade or commerce, the authorities under the State Sales Tax Act have no jurisdiction to levy tax on the turnover of such sales or purchases. The Explanation appended to the said section makes Chapter II of the Central Sales Tax Act, 1956, applicable for purposes of determining when a sale or purchase takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export. The relevant provision for our purpose is section 5 of the Central Sales Tax Act, 1956, which falls in Chapter II. Section 5 raises statutory presumption and in so far as it is relevant for our purpose, 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.
(2) ......................"
9. To raise the statutory presumption that the sale or purchase has taken place in the course of the export of the goods, either of the two conditions must be satisfied, viz., (1) the sale or purchase should occasion such export; or (2) such sale or purchase is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Here the controversy relates to the first condition, viz., whether the sales had occasioned export of goods out of the territory of India. It is an admitted case that the seller of the goods, viz., the assessee has completed the sale in Visakhapatnam and the goods, which were warehoused in the customs licensed bonded warehouse, were handed over to the purchaser, viz., fishing trawler owners in Visakhapatnam. It is true that merely because the seller is in Visakhapatnam or the purchaser happens to be in Visakhapatnam or even if the delivery has taken place in Visakhapatnam, it would not be conclusive of the fact that it is not an export sale. To prove that it is an export sale, one has to show that the sale has occasioned export of the goods in question, that is, by virtue of the sale, the goods would have to move from a place in inside India to a place outside India. Mere taking the goods out of India does not amount to exporting the goods. What happened here is not that the goods had moved by virtue of sale of spares to the trawler owners from Visakhapatnam port to high sea but by virtue of the sale of spares the trawler owners were enabled to take the spares for utilisation at high sea outside India. This, in our view, cannot be said to occasion the movement from a place in India to a place outside India to treat the transaction as "export of goods". It follows that the sales in question cannot be treated as "export sale" within the meaning of section 5 of the Central Sales Tax Act, 1956. For the above reasons, the assessee is not entitled to exemption of turnover of the sales under section 38 of the State Act.
10. We may refer to the decision cited at the Bar. In Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer , the question somewhat analogous to the present one, fell for consideration of the Supreme Court. The appellants before the Supreme Court were dealers in petroleum and petroleum products and were carrying on business at Calcutta. They maintained supply depots at Dum Dum Airport from which aviation spirit was sold and delivered to aircraft proceeding abroad for its consumption. The question was whether the sale of the aviation spirit was liable to sales tax under the Bengal Motor Spirit Sales Taxation Act, 1941. The appellants' contention was that the sales were made in the course of export of aviation spirit out of the territory of India. Therefore, such sales would not fall within the Explanation (Explanation to clause (1) is since omitted by Constitution (Sixth Amendment) Act, 1956) to sub-clause (a) of the first clause of article 286 of the Constitution of India and as such the turnover was not liable to sales tax. M. Hidayatullah, J., as he then was, speaking for the Supreme Court, explained the principle in the following terms :
"........... Here, the buyer does not export the goods to a foreign country, but purchases them for his own use on the journey of the aircraft to foreign countries. This difference is vital, and makes the position of the appellant-companies, if anything, weaker. It is for this reason that the appellant-companies depend on a wide meaning of the word 'export', which they illustrate from other Acts where the word is tantamount to 'taking out of the country'. We are of opinion that this meaning cannot be given to the word 'export' in the clause. The word 'export' may conceivably be used in more senses than one. In one sense, 'export' may mean sending or taking out of the country, but in another sense, it may mean sending goods from one country to another. Often, the latter involves a commercial transaction but not necessarily. The country to which the goods are thus sent is said to import them, and the words 'export' and 'import' in this sense are complementary. An illustration will express this difference vividly. Goods cannot be said to be exported if they are ordered by the health authorities to be destroyed by dumping them in the sea, and for that purpose are taken out of the territories of India and beyond the territorial waters and dumped in the open sea. Conversely, goods put on board a steamer bound for a foreign country but jettisoned can still be said to have been 'exported', even though they do not reach their destination. In the one case, there is no export, and in the other, there is, though in either case the goods go to the bottom of the sea. The first would not be within the exemption even if a sale was involved, while any sale in the course of the second taking out would be. In both, the goods were taken out of the country. The difference lies in the fact that whereas the goods, in the first example, had no foreign destination, the goods, in the second example, had. It means, therefore, that while all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported."
11. The above principle was applied by a Division Bench of our High Court in Fairmacs Trading Company v. State of Andhra Pradesh [1975] 36 STC 260. There, the assessee imported ship-stores from foreign countries and kept them in bonded warehouses of the Customs department without the levy of customs duty. He later on sold the said goods and delivered them to ships' masters for consumption aboard the ship after crossing the port boundaries. On those facts, the question which fell for consideration was, whether the sales were outside the State or in the course of export and therefore not liable to tax under the State Act. It was held that a mere movement of the goods out of the country following a sale would not render the sale one in the course of export within article 286(1)(b) of the Constitution of India and that before a sale can be said to be a sale in the course of export, the existence of two termini as those between which the goods are intended to move or to be transported was necessary.
12. In State of Kerala v. Cochin Coal Company Ltd. [1961] 12 STC 1; AIR 1961 SC 408, the question which fell for consideration of the Supreme Court was whether the transactions of sale of bunker coal to be supplied from the assessee's depot in Candle Island in Madras State and trimmed into the steam-ships standing in the waters of Port Cochin to enable them to sail out of India, can be said to be sales in the course of export within the meaning of article 286(1)(b) of the Constitution of India. Relying on the decision of Burmah - Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer , the Supreme Court answered the question in the negative.
13. However, Sri Koka Raghava Rao, the learned counsel for the petitioners, argued that in the absence of definition of the term "export" either under the State Act or under the Central Sales Tax Act, the definition of the said word must be taken as under the Customs Act, 1962 and the order passed by the authorities thereunder should be treated as binding on the sales tax authorities acting under the State Act or the Central Sales Tax Act.
14. We shall examine the validity of the above submission made by the learned counsel for the petitioners. At the outset we would like to point out that neither the State Act nor the Central Act defined the term "export" by reference to the Customs Act. Be that as it may, section 2(18) of the Customs Act, 1962 defines the term "export" in the following terms :
"'Export' with its grammatical variations and cognate expressions, means taking out of India to place outside India."
15. The term is not a technical expression or word of art. The meaning of the term in the Customs Act is the same as it is commonly understood. Reliance is placed on sections 68 and 69 of the Customs Act 1962. Section 68 deals with clearance of warehoused goods for home consumption and section 69 provides for clearance of warehoused goods for exportation. It postulates that any warehoused goods may be exported to a place outside India without payment of import duty if a shipping bill or a bill of export has been presented in respect of such goods in the prescribed form and, among other things, an order for clearance of such goods for exportation has been made by the proper officer. It may be relevant to point out here that the goods in question were cleared by the order of the proper officer for exportation on presentation of the shipping bill and the other relevant documents without payment of import duty. The argument proceeds that at the time of clearance of goods by the assessee no customs duty was charged as the clearance was treated for export and that had it not been for export, the assessee would have been made to pay customs duty in view of the provisions of section 68, therefore, the sales tax authorities shall treat the sale as "export sale" and not "local sale". We are afraid, we cannot accede to the contention of the learned counsel for the petitioners. The criteria for purposes of clearance of warehoused goods as contained in section 69 is presentation of bill of export in respect of those goods and an order for clearance of such goods for exportation, that is, for taking the goods to a place outside India. Whether the sale of goods has occasioned such export of goods, is not the relevant factor under section 69 whereas it is a germane consideration for treating the sale as export sale. We are, therefore, of the view that merely because the goods were allowed to be cleared under section 69 for purposes of export, the same cannot be treated as "export" for purposes of section 5(1) of the Central Sales Tax Act. In this view of the matter, we find no error of law in the order of the Tribunal under revision. The tax revision cases are without any merit. They are accordingly dismissed but, in the circumstances, without cost.
16. The contention of the assessee-petitioner in the writ petition is that while the tax revision cases are pending consideration by the High Court, making provision in the assessment on the same ground which is a subject-matter of adjudication in the T.R.Cs., is illegal; the further prayer is as there is no provision in the State Act enabling the Tribunal to grant stay of the recovery of tax in dispute, this Court, in exercise of the jurisdiction under article 226 of the Constitution of India, may issue appropriate writ directing the respondents not to take coercive steps for recovery of the tax. In so far as the question pending consideration in the T.R.Cs., is concerned, we have just, now decided that the transactions in question cannot be treated as "export sales" and, therefore, the turnover of the said transaction is liable to tax. Therefore, there is no reasonable ground to issue a direction to the respondents not to take coercive steps. However, we consider it appropriate to grant 3 (three) months' time to the assessee to pay the balance of the tax.
17. Subject to the above, the writ petition is dismissed. There will be no order as to costs.
18. Petitions dismissed.