State Taxation Tribunal - Tamil Nadu
L.G. Balakrishnan Brothers Ltd. And ... vs State Of Tamil Nadu And Ors. on 6 June, 2000
Equivalent citations: [2001]123STC508(TRIBUNAL)
JUDGMENT
L. Palamalai, Administrative Member
1. As the tax revision cases and the tax appeal case raise mainly the common issue of disallowance of exemption under Section 5(3) of the Central Sales Tax Act, 1956 (hereinafter called "the Central Act"), in respect of bus bodies built on chassis of manufacturers and exported to foreign countries, they are dealt with together in this order, since common submissions were made by learned counsel appearing on both sides. The details of the cases are as indicated below ;
Case No. Against Authority who passed the order Name of the dealer Assmt. year Turnover under dispute Rs.
(1) (2) (3) (4) (5) (6)T.C.R. No.' 2169 of 1997 M.T.A. 477 of 1990 dated 10-1-1991.
S.T.A.T. (AB), Madurai Sundaram Industries Ltd.
1987-88 1,16,98,263 at 16 per cent SC & ASC on raw rubber purchase turnover of 1,04,56,050 and 26,32,108 [section 12(5)(iii>] penalty.
T.C.R. No. 1997 of 1997C.T.A. 206 of 1990 dated 25-6-1990 S.T.A.T. (AB), Coimbatore Anamallais Engineering 1988-89 79,79,925 at 15 per cent, 33,33,498 at 8 per cent and 25,57,501 [section 12(5)(iii)] penalty.
T.C.A. No. 1841 of 1997N2/22665 of 1991 dated 28-5-1991 JC (SMR), Chennai L.G. BalaKrishnan Brothers 1983-84 4,06,870 at 15 per cent.
2. The brief facts in respect of the main dispute relating to disallowance of exemption claimed under Section 5(3) of the Central Act, are as follows :
T.C. (R) No. 2169 of 1997 :
In this case, the assessing authority stated that Tvl. Ashok Leyland Ltd., Madras, had entered into contract with the foreign buyer for export of passenger buses, but Tvl. Sundaram Industries, Ltd., sold only bus bodies mounted on the chassis supplied by the exporter. The sale of bus body by Tvl. Sundaram Industries, Madurai, was not the goods which was exported by Tvl. Ashok Leyland Ltd., the exporter. Thus, the exported goods was different from the supply of bus body by the assessee. Entry 3 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Local Act") has classified chassis and bus body as different commercial commodities. Therefore, the sale of bus body is not a last sale prior to export, so as to allow the claim of exemption under Section 5(3) of the Central Act. The sale of bus body took place at the factory premises at Madurai and therefore, the entire claim under Section 5(3) of the Central Act has to be disallowed. While considering the objections, the assessing authority further observed that the manufacture of bus body has changed the character and use of the chassis supplied by the exporter. In commercial parlance also, the chassis and bus body are different commercial commodities. Further, as per the contract with the foreign buyer, the exporter sold only passenger buses. Therefore, there is no case to allow the claim under Section 5(3) of the Central Act. While considering the alternative plea that the G.O. Ms. No. 115, Revenue, dated January 17, 1972 granted exemption by way of refund of tax, in respect of bodies built and supplied to the chassis manufacturers in India for onward export to foreign countries, the assessing authority remarked that after the introduction of Section 5(3) of the Central Act in the year 1976, there is no case to consider the exemption by way of refund contemplated in G.O. Ms. No. 115, Revenue, dated January 17, 1972.
In the first appeal, the order of the assessing authority, in regard to disallowance of exemption claimed under Section 5(3) of the Central Act, was confirmed. The Appellate Assistant Commissioner further observed that in the order form, the name of the body builder, Tvl. Sundaram Industries Ltd., was found to have been inserted subsequently and further the original contract entered into by the exporter with the foreign buyer was also not produced before him. As the chassis and body built on the chassis are different commercial commodities and that the exporter sold only passenger buses, the claim of exemption under Section 5(3) of the Central Act was negatived. The reasoning given by the assessing authority to reject the refund of tax, in terms of G.O. Ms. No, 115, Revenue, dated January 17, 1972, was also affirmed.
However, in the second appeal, the Appellate Tribunal observed that the order placed by the foreign buyer with Tvl. Ashok Leyland Ltd., revealed that the order was for a vehicle consisting of Ashok Leyland chassis with body constructed by Tvl. Sundaram Industries Ltd. The shipping documents also revealed that the buses exported consisted of the chassis manufactured by Tvl. Ashok Leyland Ltd., and the body constructed by Tvl, Sundaram Industries Ltd. Thus, the body constructed on the chassis was taken as such and exported as a bus, without making any change in the bus, after taking delivery. The description in the shipping document reads as follows :
"Ashok Leyland ALPSV 2/2-L-210 W.B. Passenger chassis complete with 61+1 seater bus body in 3 X 2 layout and as per invoice No. PS/Veh/31-87 dated May 14, 1987. Chassis manufactured by Ashok Leyland Limited, Hosur. Bus body manufactured and mounted by Sundaram Industries, Bus Body Model No. SI-148."
The bill of lading also described the goods exported as passenger buses consisting of chassis manufactured by Tvl. Ashok Leyland Ltd. and body constructed by Tvl. Sundaram Industries Ltd. Therefore, when bus body as indicated by the foreign buyer, was manufactured and supplied, then naturally, the claim of exemption under Section 5(3) of the Central Act has to be allowed, by treating the sale of bus body as penultimate sale prior to an export, as contemplated under Section 5(3) of the Central Act. Referring to the alternative relief in terms of G.O. Ms. No. 115, Revenue, dated January 17, 1972, the Appellate Tribunal observed that the Government Order No. 115, dated January 17, 1972 clearly allowed exemption, if the assessee was able to show that bus bodies were sold to an exporter, who in turn, actually exported the goods to a foreign country. As the Government order was not withdrawn or rescinded by the Government, the statutory exemption has to be granted by construing that the exemption was granted under Section 17 of the T.N.G.S.T. Act, 1959, though specifically the section was not mentioned. In this connection, the Appellate Tribunal relied on the decision of the Supreme Court reported in [1988] 70 STC 59 in the case of Assistant Commissioner of Commercial Taxes (Assessment), Dharwar v. Dharmendra Trading Co. Though the Government order contemplated refund of tax paid, having regard to the completion of final assessment and the fact that the assessee filed all documents to prove that the bus bodies built on the chassis of manufacturers were supplied to exporters, who in turn, exported, the Appellate Tribunal held that the assessing authority can straightaway grant exemption claimed in terms of the Government order. Further, the Appellate Tribunal observed that the Government order was passed with a view to grant relief on payment of tax by Tvl. Sundaram Industries Ltd., on the sales of bodies built on the chassis supplied by the manufacturers in India for onward export to foreign countries and therefore, the denial of the exemption by the department, is not in order. The Appellate Tribunal categorically held that the exemption could be claimed in terms of Government order, notwithstanding the introduction of Section 5(3) of the Central Act during 1976. The penalty levied under Section 12(5)(iii) of the local Act was deleted.T.C. (R) No. 1997 of 1997
In this case Tvl. Anamallais Engineering, the assessee, built bus body on chassis of Tvl. Tata Engineering and Locomotive Co. Ltd. (hereinafter called TELCO) and buses were exported to foreign countries by Tvl. Tata Exports Ltd., as agents of TELCO. The assessing authority disallowed the exemption on the ground that the exported commodity, namely, bus was different from bus body sold by the assessee and therefore, the claim of exemption under Section 5(3) of the Central Act is not admissible. Further, the claim to assess the turnover in respect of 51 bus bodies under the Central Act on the ground that the goods were exported from Bombay Port was also disallowed on the ground that bus bodies were found built at Pollachi and invoices raised therein and in the absence of any recorded evidence to support the claim, there is no case to allow the portion of the turnover as assessable under the Central Act. Penalty under Section 12(5)(iii) of the local Act was also levied to the extent of Rs. 25,57,501.
In the first appeal, the Appellate Assistant Commissioner referred to entry 3 of the First Schedule to the local Act in the following terms :
"Motor vehicles including motor cars, motor taxi-cabs, motorcycles and cycle combinations, cycles (including bicycles, tri-cycles, cycle-rickshaws, tandem cycles, cycle combinations and perambulators) fitted with motor engines, motor scooters, motorettes, motor omni buses, motor vans and motor lorries, chassis of motor vehicles, bodies built on chassis of motor vehicles belonging to others........................"
On that basis, the Appellate Assistant Commissioner observed that bus, chassis of motor vehicles and bodies built on chassis of motor vehicles belonging to others are separate and distinct items as per entry 3 of the First Schedule to the local Act. As the agreement between Tvl. Tata Exports Ltd., Bombay, and the foreign buyer, namely, Tvl. Mercantile Credits Ltd., Columbo, was for the export of buses, the claim of exemption for body built on the chassis of the exporter cannot be allowed under Section 5(3) of the Central Act. Out of the 90 buses exported, it was found that 39 buses were exported from Madras Port and the remaining 51 buses were exported from Bombay Port. It was also found that out of 90 buses, 20 buses were converted into domestic vehicles, Therefore, the Appellate Assistant Commissioner found that the denial of a portion of turnover being assessable under the Central Act, was also in order. The penalty levied under Section 12(5)(iii) of the local Act, was also confirmed.
In the second appeal, the Appellate Tribunal observed that the bus body built by the assessee on the chassis supplied by the exporter, was only an improvement to chassis, so as to suit the taste of the foreign buyer and his specifications, so as to fulfil the export obligation and in such circumstances, the supply of bus body was the penultimate activity, which was in pursuance of the export agreement and therefore, it is eligible for exemption under Section 5(3) of the Central Act. Referring to the alternative relief of exemption in terms of G.O. Ms. No. 115, Revenue, dated January 17, 1972, the Appellate Tribunal observed that the expression "assessees" obviously indicated that the exemption is not to be restricted to Tvl. Sundaram Industries Ltd., alone and it could be extended to others also and in such circumstances, the claim of exemption in terms of G.O. Ms. No. 115, dated January 17, 1972 has to be extended to the assessee's case also. The penalty imposed under Section 12(5)(iii) of the Local Act, was also cancelled.
T.C. (A) No. 1841 of 1997 :
In this case, the claim of exemption in respect of two bus bodies built on the chassis supplied by Tvl. Ashok Leyland Ltd., Madras, in pursuance of the foreign buyers orders for two buses, was allowed to the extent of Rs. 3,72,000, while considering the assessment under the Central Act for the assessment year 1983-84. However, a further claim of Rs. 34,735 pertaining to extra fittings was disallowed on the ground that it was not in accordance with the orders placed by the foreign buyer with the actual exporters, namely, Tvl. Ashok Leyland Ltd. This turnover of Rs. 34,735 was assessed at 15 per cent.
3. In the first appeal before the Deputy Commissioner of Commercial Taxes, Coimbatore division, it was observed that there was no evidence to show that the foreign buyer placed orders for extra fittings and further, the order produced is dated August 5, 1983 when the export itself took place on June 9, 1983 and therefore, the disallowance of exemption to the tune of Rs. 34,870 was in order. However, as the sale took place in Tamil Nadu itself, the assessment made under the Central Act, is not in order. On that ground, the assessment was set aside with direction to assess the turnover under the local Act,
4. Thereafter, the Joint Commissioner of Commercial Taxes in suo motu revision, reviewed the orders passed under the local Act and the Central Act by the assessing authority for the assessment year 1983-84 and also the appeal order of the Deputy Commissioner in respect of the CST assessment for the year 1983-84 and resorted to assess the turnover relating to bus bodies and the extra fittings supplied under the local Act for the assessment year 1983-84 by observing that Tvl. Pillayar Stores, Jaffna, Sri Lanka, placed orders with Tvl. Ashok Leyland Ltd., Madras, for supply of two Ashok Leyland buses and thereafter, the exporters placed orders with the assessee for building bus bodies on chassis supplied by them. Thereafter, the completed buses were exported to Sri Lanka vide bill of lading No, 2 dated June 9, 1983. As bodies built on chassis and buses exported are independent commercial commodities, no claim of exemption under Section 5(3) of the Central Act could be allowed. Therefore, under Section 34 of the local Act, it was proposed to assess a turnover of Rs. 3,72,000 at 15 per cent relating to bus body and a turnover of Rs. 34,870 relating to extra fittings at 15 per cent for the assessment year 1983-84. After considering the objections, the Joint Commissioner observed that what was sold by the assessee, namely, bus body was different from what was exported by Tvl. Ashok Leyland Ltd., Madras, namely, bus and therefore, the disallowance of exemption under Section 5(3) of the Central Act, is quite in order. Similarly, the assessment made on extra fittings and accessories amounting to Rs. 34,870 at 15 per cent, is also in order.
5. Mr. C. Natarajan, learned senior counsel for the assessees, contended that the claim of exemption in respect of bus body turnover has to be allowed in terms of Section 5(3) of the Central Act as well as G.O. Ms. No. 115, Revenue, dated January 17, 1972. The Appellate Tribunal was right in granting exemption under Section 5(3) of the Central Act, which grants exemption to the last sale of any goods preceding the sale occasioning the export of those goods out of the territory of India. The condition is that the sale should take place after and for the purpose of complying with the agreement or order for or in relation to such export. In these cases, the export order stipulated--(1) the shipment of a bus of a particular specification of the vehicle manufacturer and (2) body of a particular specification to be built by the respondent/assessee. Therefore, the fact that what was exported is a bus does not obliterate the identification with features of the chassis as well as the identification with features of the body thereon. Where the export order mentions shipment of different goods and there is a bargain spelt out in such export order, the benefit of Section 5(3) of the Central Act should be available to the referred goods.
6. The commercial documents like export order, export invoice, the shipping bill submitted as part of an application for export, bill of lading, certificate of export, excise documents including export applications and in-bond clearance documents indicate and maintain the commercial identity of the chassis and the export of the body. They are consistent with the commercial practice of negotiating for an export involving chassis with body of definite specification, though compendiously called bus.
7. In this case, the export order was as much an order for the export of a bus body of a definite specification and feature, which has been found actually exported.
"Serial No. 6 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, specifies :
......................bodies built on chassis of motor vehicles belonging to others (on the turnover relating to bodies), ....................."
Which is in conformity with the body being identified, whether before or after being built on a chassis. This is again consistent with the commercial practice of dealing with chassis and body, and negotiating for export realisation.
8. To claim exemption under Section 5(3) of the Central Act, it is enough if the last sale is for the purpose of complying with the agreement or in relation thereto. The expression "in relation to" as per AIR 1988 SC 782 (Doypack Systems Pvt. Ltd. v. Union of India) is of wide import and a word of comprehensiveness. It is equivalent to "pertaining to", "arising out of, "concerning", etc. In situations where the export agreement relates to a product which comprises of two constituents, the benefit of Section 5(3) of the Central Act was held available to the penultimate sale of one of the constituents. In regard to packing materials used for packing the product exported, it was held that such packing material or container was eligible for exemption under Section 5(3) of the Central Act, as held in State of Andhra Pradesh v. Standard Packings [1995] 96 STC 151 (AP), Chettiar Industrial Corporation v. State of Tamil Nadu [1999] 113 STC 334 (Mad.), Kusum Laminating & Packaging Industries v. State of Tamil Nadu [1996] 101 STC 476 (Mad.). In the case of export of football and Volley ball, the penultimate sale exemption under Section 5(3) of the Central Act, was held to be available to rubber bladder sold to the exporter, as per Commissioner, Sales Tax v. Girdhari Lal Football Maker [1987] 65 STC 287 (All), Munjal Rubber Industries v. Commissioner of Trade Tax, U.P., Lucknow [1999] 115 STC 118 (All.) and [1999] 115 STC 116 (All.). This is a fortiori a situation where invariably the foreign buyers mentioned specifications for the body and approved the body built. In the case of Tvl. Sundaram Industries Ltd., the name of body builder was mentioned in the export order. The judgment in [1996] 100 STC 571 (SC) in the case of Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer does not deal with export order containing bargaining for two constituents going into a product being exported. The decisions in [1993] 91 STC 584 (MP)[App.] (Bharat Saw Mills v. Commissioner of Sales Tax, Madhya Pradesh) and State of Gujarat v. Zalawar Petroleum Co. [1993] 91 STC 630 (Guj) are appropriate, in so far as maintaining distinction between chassis and body for single point exemption. The decision in [1990] 76 STC 115 (Mad.) (South India Automotive Corporation Private Ltd, v. State of Tamil Nadu) is wholly irrelevant as it dealt with a single point scheme of second sale exemption. In that case, the auto-rickshaw had suffered tax and the body was fitted by the assessee/manufacturer. That was a case of two invoices being raised by the assessees, which were discredited, The question there, was whether there was sale of finished vehicle or two independent goods. In [1995] 98 STC 330 (Bom) (Tata Engineering and Locomotive Company Ltd. v. State of Maharashtra), the question considered was the resale of goods and form 14 with obligation to resell. In Azad Coach Builders Pvt. Limited v. State of Karnataka (S.T.R.P. Nos. 4 of 1997 and 5 of 1998 dated 8-2-2000) reported in [2001] 123 STC 473, the Karnataka High Court, in an identical case, has clearly held that the contract with the foreign buyer was for the export of bus having the chassis and body of definite specification and therefore, the body built on chassis is eligible for exemption under Section 5(3) of the Central Act, inasmuch as all the conditions contemplated under Section 5(3) of the Central Act have been fulfilled. The Karnataka High Court categorically held that both chassis and body constituted a single item called bus and therefore, the bus bodies supplied to the exporter was to be exempted under Section 5(3) of the Central Act. In the present case also, the circumstances are identical and therefore, the claim has to be allowed.
9. Further, as could be seen from the letter dated October 14, 1971 addressed by Tvl. Sundaram Industries Ltd., to the Secretary to Government, Department of Industries and Commerce, Government of Tamil Nadu, a general scenario of body building industry in Tamil Nadu was presented, so as to obtain exemption in respect of body built on the chassis intended for export to foreign countries as complete vehicles. Therefore, the exemption granted by the Government of Tamil Nadu on the bodies built and supplied to the chassis manufacturer in India for onward export to foreign countries in G.O. Ms No. 115, Revenue dated January 17, 1972 should not be confined to Tvl. Sundaram Industries Ltd. alone and this should be extended to all body builders in Tamil Nadu, who are engaged in similar transactions. As mentioned in the Government order and as confirmed by the Appellate Tribunal, the expression "assessees" in the Government order obviously means that the Government order is not to be restricted to Tvl. Sundaram Industries Ltd. alone. The benefit of exemption cannot be confined to one manufacturer and the denial of exemption to similarly situated manufacturer, violates Article 14 of the Constitution of India. In fact, this principle was adopted by the Special Tribunal in the case of Siemens Ltd. v. State of Tamil Nadu reported in [1998] 110 STC 313. The benefit of Government order, being general in nature, was held to be extended to all and not confined to a few only, as held in AIR 1983 SC 656 (Lakshman v. State of Madhya Pradesh), AIR 1984 SC 1499 (Sengara Singh v. State of Punjab), AIR 1991 HP 15 (G.D. Khanna and Sons v. State of Himachal Pradesh) and AIR 1983 Delhi 434 (D.S. Sharma v. Delhi Administration).
10. Though body built on chassis is construed as a manufacture under the Central Excise Tariff (Heading No. 87.02), the goods delivered to the exporters for export, is a motor vehicle, namely, chassis plus body and therefore, the goods delivered under sale to exporter, is not different from the goods exported under Section 5(1) of the Central Act. The fact of levy of sales tax on the value of bus body is only a measure for levy of tax. Therefore, in the absence of any change in the identity between the goods delivered under sale by the assessees and the goods exported by the exporters, the claim has to be allowed under Section 5(3) of the Central Act. Absolutely, there is no case to levy any penalty and the Appellate Tribunal was right in setting aside the penalty levied under Section 12(5)(iii) of the local Act.
11. Mr. K. Soundararajan, learned Government Advocate, contended that the foreign buyers' contract was for buses and the assessees supplied only bus body, which is commercially a different commodity and therefore, the Appellate Tribunal was not right in allowing the claim under Section 5(3) of the Central Act. The decision of the Madras High Court in South India Automotive Corporation Private Ltd. v. State of Tamil Nadu [1990] 76 STC 115 is relevant in this case, inasmuch as the auto-rickshaw and body built on chassis were held to be different goods. Once it is admitted that body built by the assessee and the bus exported are different goods, then naturally, no claim is admissible under Section 5(3) of the Central Act. The Government order in G.O. Ms. No. 115, Revenue dated January 17, 1972 was held inapplicable to allow exemption, on the ground that Section 5(3) of the Central Act was introduced during 1976. In revision, no plea of violation of Article 14 of the Constitution of India could be raised.
12. We have considered the rival submissions and perused the records. At the outset, we want to make it clear that in all these cases, the foreign buyers placed orders for complete buses, of which, the chassis and bus body formed the components. It is true that specifications have been furnished in the foreign order, in regard to the components which constituted the complete bus and in respect of chassis and bus body also, in certain cases, the name of the manufacturer was also specified, but the fact remains that what was ordered by the foreign buyer was for complete buses. In no case, exporter sold bus bodies and the foreign buyer also did not buy bus bodies. The consideration in the order placed by the foreign buyer was for complete bus and only buses were exported in pursuance of the foreign order. Bus body built on the chassis was really manufactured and resulted in the emergence of a new commercial commodity, namely, bus. Chassis, bus body and complete bus are different commercial commodities in common parlance. Therefore, consequent on the construction of bus body on chassis, a new commercial commodity, namely, bus comes into existence and only bus is sold. In the course of export in pursuance of the order placed by the foreign buyer, naturally, the sale of bus body by the assessees cannot be construed as penultimate sale for the purpose of allowing exemption under Section 5(3) of the Central Act. The material portion of Section 5(3) of the Central Act, which came into effect from April 1, 1976, reads as follows :
"5. When is a sale or purchase of goods said to take place in the course of import or export.--
(1).............................
(2).............................
(3) 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 was for the purpose of complying with, the agreement or order for or in relation to such export."
13. The assessee, to claim exemption under Section 5(3) of the Central Act, has to establish the identity of the goods purchased with the goods exported out of the territory of India. In this connection, the following observations of the Supreme Court in the case of Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer reported in [1996] 100 STC 571 are relevant :
"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. There is no dispute that every change does not bring into existence new goods nor can it be said that however small the change may be due to the processing, the identity of the goods will be completely lost. It is a question of fact and degree."
14. Referring to the decision in the case of Sterling Foods v. State of Karnataka reported in [1986] 63 STC 239 (SC), it was observed that the processing of shrimps of prawns and lobsters did not change the identity of the goods and commercially also, they were regarded as the original goods. Therefore, the exported goods were held to be "those goods" purchased and on that account, the claim of exemption under Section 5(3) of the Central Act was allowed. In the context of the observation of the Supreme Court in the case of Vijayalaxmi Cashew Company reported in [1996] 100 STC 571, if we analyse the present cases before us, it is quite clear that the buses, for which foreign orders were received, came into existence only after bus bodies were built on chassis supplied by the manufacturers. Thus, no penultimate sale of buses took place in these cases. Only bus bodies were sold by the assessees on the basis of orders placed by exporters and these bus bodies are commercially different from the buses, ultimately, exported. It is an admitted fact that building a body or fabrication or mounting or fitting of structures or equipment on the chassis amounted to manufacture of a motor vehicle. As a result of the intricate processes involved in body building, a new commercial commodity emerges. After body built on the chassis, the complete identity of chassis as well as body is lost and the new commercial commodity is known in common parlance as bus only. Thus, it cannot be said that chassis or bus body was exported, when actually a complete bus was exported to foreign countries. When the identity of the goods is changed and commercially, a bus is regarded as a different commercial commodity from chassis or bus body, then naturally, no claim of exemption can be granted under Section 5(3) of the Central Act, as the exported goods are not "those goods" purchased.
15. In regard to cases relating to packing materials, it was held that the identity of goods was not lost, because it was packed. In [1999] 113 STC 334 (Mad.) (Chettiar Industrial Corporation v. State of Tamil Nadu), frozen sea foods were sold after packing and in that context, it was held that the sale of packing materials was effected by the assessee for the purpose of complying with the agreement in relation to the export of Indian frozen sea foods and on that basis, claim of exemption under Section 5(3) of the Central Act was allowed. It was observed that the concomitant of the export of the sea foods is the proper packing and the sale by the assessee of the packing material is necessary to comply with the agreement for export. Similarly, in State of Andhra Pradesh v. Standard Packings [1995] 96 STC 151 (Mad.) the Appellate Tribunal found that gunny bags sold for use as containers, were for export and complying with the agreement or order. Similarly, in [1996] 101 STC 476 (Mad.) (Kusum Laminating & Packaging Industries v. State of Tamil Nadu), the polythene bags used for packing barium sulphate were held to be in pursuance of contract, which contemplated packing and therefore, exemption was to be allowed under Section 5(3) of the Central Act. First of all, when the export order specifies the nature of packing and when the goods exported does not loose its character because of the packing, it was held that the claim of exemption under Section 5(3) of the Central Act could be extended in respect of packing material also, on the ground that it was for the purpose of complying with the agreement or order for or in relation to such export. But, in the cases before us, the buses, the subject-matter of export contract, came into existence as a new commercial commodity only after bodies were built on the chassis. As a result of body built, the character of the commodity itself changed as discussed supra. Therefore, the line of decisions pertaining to packing materials, are not relevant to the present cases.
16. As regards rubber bladder, in Commissioner, Sales Tax v. Girdhari Lal Football Maker [1987] 65 STC 287 (All.) the finding of the Appellate Tribunal was that the export order was for football and volleyballs including bladders and that the goods were exported in the same condition in which they were received by the exporters and this view was confirmed by the High Court. However, in [1999] 115 STC 118 (All.) (Munjal Rubber Industries v. Commissioner of Trade Tax), it was held that football has three main components, namely (1) the leather jacket, (2) the rubber bladder and (3) the lace that is used for closing the opening through which the bladder is put inside the Leather Jacket. Therefore, it was held that the export of football along with the bladder results in the export of bladder also and therefore, the claim of exemption is to be allowed under Section 5(3) of the Central Act. With due respect, we wish to disagree from the views of the Allahabad High Court inasmuch as the claim of exemption under Section 5(3) of the Act was extended even for the component part of the finished product, which is a different commercial commodity. In fact, the statement of objects and reasons in the Bill, which introduced Section 5(3) of the Central Act, are as under :
"According to Section 5(1) of the Central Sales Tax Act, a sale or purchase of goods can qualify as a sale in the course of export of the goods out of the territory of India only if the sale or purchase has either occasioned such export or is by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. The Supreme Court has held (vide Mod. Serajuddin v. State of Orissa [1975] 36 STC 136) that the sale by an Indian exporter from India to the foreign importer alone qualifies as a sale which has occasioned the export of the goods. According to the Export Control Orders, exports of certain goods can be made only by specified agencies such as the State Trading Corporation. In other cases also, manufacturers of goods, particularly in the small-scale and medium sectors, have to depend upon some experienced export house for exporting the goods because special expertise is needed for carrying on export trade. A sale of goods made to an export canalising agency such as the State Trading Corporation or to an export house to enable such agency or export house to export those goods in compliance with an existing contract or order is inextricably connected with the export of the goods, Further, if such sales do not qualify as sales in the course of export, they would be liable to State sales tax and there would be a corresponding increase in the price of the goods. This would make our exports uncompetitive in the fiercely competitive international markets. It is, therefore, proposed to amend, with effect from the beginning of the current financial year, Section 5 of the Central Sales Tax Act to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning 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."
17. Thus, Section 5(3) was introduced in the Central Act with a view to encourage those who produce export commodities and effect export sales through export houses, who secure foreign contracts. Section 5(3) of the Central Act was not intended to exempt all components which go into manufacture of a new commercial commodity, which was exported in pursuance of the foreign export order. The decision of the Allahabad High Court reported as Munjal Rubber Industries v. Commissioner of Trade Tax [1999] 115 STC 118 is contrary to the views of the Supreme Court reported in [1996] 100 STC 571 (Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer) as discussed supra.
18. In [1993] 91 STC 630 (Guj) (State of Gujarat v. Zalawar Petroleum Co.), after removing the tank mounted on the chassis, the assessee sold chassis and claimed exemption as resale. Only in that context, the sale of chassis in the same form was considered as a resale. In [1993] 91 STC 584 (MP) (Bharat Saw Mills v. Commissioner of Sales Tax, Madhya Pradesh), it was held that tax deduction could be given for chassis, though the sale was a truck. This view is contrary to the view of the Karnataka High Court reported in [1993] 91 STC 572 (State of Karnataka v. M. Madhvaraj) as indicated below :
"We are of the view that in the face of the language employed by the Act, there is no scope to apply the above principle. The assessees purchased TPC frames and built bodies on them ; used the vehicles for their own purposes. The vehicles sold by the assessees were, all old vehicles. In the very nature of these vehicles, their different parts may not have distinct, usable, independent identities. The theoretical possibility that the vehicle could have been dismantled into (i) TPC frame' and (ii) 'the body' before selling them ignores the commercial realities. A purchaser very rarely purchases a vehicle treating it as a federation of two articles ; the purchaser purchases the vehicle, as a single, integrated, identifiable article."
19. The decision of the Madras High Court in [1990] 76 STC 115 (South India Automotive Corporation Private Ltd. v. State of Tamil Nadu) though related to levy of single point tax, the principle laid therein is quite relevant. The question considered in that decision was whether there was sale of a finished vehicle or of two independent goods, namely, the chassis and the body. Since the orders placed by the customers were only for finished vehicles, it was held that there was no basis to construe the sale of chassis and the construction of the body. The decision of the Bombay High Court reported in [1995] 98 STC 330 (Tata Engineering and Locomotive Company Ltd. v. State of Maharashtra) also is relevant. In that case, the Bombay High Court considered the levy of purchase tax in the context of purchasing bus bodies free of tax against declaration for resale, fitting bus body and supplying complete bus. It was held that it was not a case of resale of bus bodies and therefore, there was violation of declaration and in such circumstances, purchase tax was leviable on purchase turnover of bus bodies. In that case, it was held that the assesses did not sell bus bodies, which it had purchased free of tax by furnishing declarations, but what was sold as bus is a different commodity altogether and therefore, the levy of purchase tax on bus bodies for violation of the conditions specified in form 14 was justified. In that case also, a foreign order was received from a buyer in Egypt for supply of eight "Mercedes Benz diesel complete buses". The description of the goods to be supplied, as set out in the letter of the customer dated November 23, 1968, which is as follows :
"Quantity Description
8 (eight) Mercedez Benz--110 BHP left-hand drive, diesel engined
complete bus type LP 1210/52 wheel-base 5195 mm.
with aluminium superstructure and all steel body with
54 passenger seats 3 X 2 to the drawing No. 200/412
complete with 7 wheels size 7 X 20 and 7 tyres size
9 x 20 - 12 ply. The bus will have two doors besides
a driver's door and emergency exit.
(a) Normal seats with foam rubber.
(b) No luggage carrier required.
(c) Doors to be open outside with key and lock arrangement.
(d) Roof to be painted in cream and body in Grey.
The price payable was set out in the following terms :
"Price f.o.b. Bombay
per unit. 71,039
Price f.o.b. Bombay
for 8 units Irs 568,312."
The assessee was manufacturing only bus chassis and the order received by it was for supply of complete buses with aluminium superstructure and all steel bodies with passenger seats, etc., specified therein. The assessee placed an order for building bus bodies on the chassis belonging to it with one, Tvl. Ruby Coach Builders. The purchase order reads as follows :
"Building and mounting passenger bus bodies on the assessee's LP 1210/52 T.M.B. chassis for export to U.A.R. at the rate of Rs. 28,000 each."
The sale invoice issued to the foreign buyer contained the following description :
"Two buses--Mercedes Benz Two complete buses type LP 1210/52 LHD 110 BHP diesel engined with wheel-base 5195 ram. with aluminium superstructure and all steel body with 52 passenger seats as per drawing No. 200/423 complete with 7 wheels size 7 X 20 and 7 tyres size 9 x 20--12 ply. Bus will have 2 doors for passenger besides a driver's door and an emergency exit.
Price f.o.b. Bombay for
1 unit ... Rs. 71,039
Total ... Rs. 1,42,078
(Indian rupees one lac forty-two thousand seventy-eight only)
Chassis Nos. Engine Nos.
342 050 L 96 09951 312 978 L 96 10173 10787."
20. On the basis of the above facts, the High Court found that the order by the foreign buyer was one indivisible contract for sale and supply of complete buses and that there was nothing to suggest that there were two agreements, i.e., one for supply of chassis and the other for supply of bus bodies. In this context, the following observations of the Bombay High Court are quite relevant :
"What was sold by it was complete bus of which the bus body formed one of the components. The customer did not purchase the bus bodies nor the assessee sold the bus bodies. The customer intended to purchase complete bus for the agreed consideration and the assessee sold the same. This is evident from the order placed by the customer and the invoice issued by the assessee.
In that view of the matter, in our opinion, the Tribunal was right in holding that there was contravention of the condition of declaration in form 14 and hence the assessee was liable to pay purchase tax under Section 14 of the Act."
21. Thus, in the present case also, though specifications have been made regarding the nature of chassis, bus body, superstructure, etc. the foreign order really contemplated only sale and supply of buses and it was one indivisible contract for sale and supply of complete buses. Just because specifications have been given regarding chassis and bus body including the source of supply, it cannot be construed that the foreign order contemplated two constituents, namely, chassis and body. It is also relevant to note that form 14 of the Bombay Sales Tax Rules, 1959 contemplates free of tax in respect of goods purchased for resale in the course of inter-State trade or commerce or in the course of export out of the territory of India. Under the Central Act, for claim of exemption under Section 5(3), form H contemplates purchase of goods for the purpose of complying with the agreement or order of the foreign buyer or in relation to such export. Thus, the purchase contemplated in form H is also similar to the resale considered in form 14 of the Bombay Sales Tax Rules. Therefore, the decision of the Bombay High Court reported in [1995] 98 STC 330 (Tata Engineering and Locomotive Company Ltd. v, State of Maharashtra) is quite relevant to the present case.
22. Therefore, having regard to the facts discussed supra and in the light of the decision of the Bombay High Court reported in [1995] 98 STC 330 (Tata Engineering and Locomotive Company Ltd. v. State of Maharashtra), which is in consonance with the stand taken by us, we respectfully disagree with the views of the Karnataka High Court in the case of Azad Coach Builders Pvt. Limited v. State of Karnataka (S.T.R.P. Nos. 4 of 1997 and 5 of 1998 dated February 8, 2000) reported in [2001] 123 STC 473.
23. As regards alternative relief, we find that the letter dated October 14, 1971 of Tvl. Sundaram Industries Pvt. Ltd., addressed to the Government of Tamil Nadu, though indicated the general scenario of bus body builders in Tamil Nadu, vis-a-vis the provisions in other States, especially in Maharashtra, the specific request was to grant exemption in their case only, as could be seen from the request contained in the concluding paragraph of the letter, which reads as follows :
"We would, therefore, request that you may kindly be pleased to recommend our case strongly to the Revenue Department of the Tamil Nadu Government for exemption from the levy of Tamil Nadu sales tax on the exported bodies constructed by us in respect of foreign orders for supply of buses and other tyres of vehicles from India, in line with a similar exemption already obtaining in the State of Maharashtra."
The Government also granted exemption to Tvl. Sundaram Industries Pvt. Ltd. only, as could be seen from the Government order, which is reproduced below :
"GOVERNMENT OF TAMIL NADU ABSTRACT Tax--Tamil Nadu General Sales Tax Act, 1959--Bus bodies exported outside India--Exemption from tax by way of refund-- Orders--Issued.
----------------------------------------------------------------------
REVENUE DEPARTMENT
G.O. Ms. No. 115 Dated : 17-1-1972
Read again :
G.O. Ms. 2373, Revenue dated 30-8-71.
Read also :
From Sundaram Industries Pvt. Ltd., Madras Letter No. Nil dated 14-10-1971.
-----------------
ORDER :
The Government have examined the request of Sundaram Industries Private Limited, Madras, for grant of exemption from the levy of 15 per cent sales tax on the bodies built and supplied to the chassis manufacturers in India for onward export to foreign countries. The Government have decided to grant exemption by way of refund of tax. They direct that the tax paid under the Tamil Nadu General Sales Tax Act, 1959 on bus bodies built and supplied to chassis manufacturers in India for onward export to foreign countries be refunded subject to production of proof of export. The proof of export may be furnished before or at the time of final check of the accounts of the assessees for the year concerned. Any one of the following documents will be treated as proof of export :
(i) Certificate of exports out of India duly attested by the Customs Department as prescribed in public Notice No. 122/62 dated 15-9-1962 the Customs Department, as may be amended from time to time.
(ii) The shipping bill duly attested by the Customs by way of proof that bus bodies have been exported.
(iii) Invoices attested by the Customs mentioning G.R. 1. number of Reserve Bank of India.
(By Order of the Governor) B. VlJAYARAGHAVAN, Additional Secretary to Government.
To The Board of Revenue (CT), Madras-5.
Sundaram Industries Pvt. Ltd., 37, Mount Road, Madras-6.
Copy to Industries Department, Copy to Revenue CT III Department."
24. In fact, it is stated that in respect of additional sales tax also pertaining to bus bodies on chassis of manufacturers who exported buses, a separate exemption has been granted to Tvl. Sundaram Industries Pvt. Ltd., subsequently, following the earlier exemption in G.O. Ms. No. 115, Revenue, dated January 17, 1972. Therefore, it is quite clear from G.O. Ms. No. 115, dated January 17, 1972 that exemption in the form of refund of tax was granted only to Tvl. Sundaram Industries Pvt. Ltd., Madras, on bodies built and supplied to the chassis manufacturer in India for onward export to foreign countries. Any exemption has to be construed strictly and it cannot be extended to others, as contended. However, this exemption by way of refund of tax has nothing to do with the exemption introduced by Section 5(3) of the Central Act, in respect of penultimate sale or purchase. This G.O. Ms. No. 115, dated January 17, 1972 was not withdrawn specifically or impliedly by the Government of Tamil Nadu. Therefore, as far as Tvl. Sundaram Industries Ltd., are concerned, notwithstanding the fact that the exemption is available under Section 5(3) of the Central Act, they are eligible for exemption by way of refund of tax, as held by the Appellate Tribunal. However, this concession cannot be extended to other manufacturers, namely, Tvl. Anamallais Engineering and Tvl. L.G. Balakrishnan Brothers.
25. The decision reported in AIR 1983 SC 656 (Lakshman v. State of Madhya Pradesh) related to distinction made between owners of cattle belonging to Madhya Pradesh and owners of cattle belonging to other States in the context of levy of grazing rates. This decision has no relevance to the present case, inasmuch as no distinction has been made and the exemption by way of refund of tax was ordered on the basis of specific request from Tvl. Sundaram Industries Pvt. Ltd.
26. Similarly, the decision reported in AIR 1984 SC 1499 (Sengara Singh v. State of Punjab) related to reinstatement of dismissed members of Police Force. In that case, out of 1,100 dismissed agitators, 1,000 were reinstated and the rest were left to fend for themselves. Only in that context, it was stated that logically, the appellants must receive the same benefit which those reinstated received in the absence of any distinguishing feature in their cases. Thus, the principle evolved in disciplinary cases has no relevance to exemption granted in specific cases, in terms of the powers vested under the Sales Tax Act.
27. Similarly, in [1998] 110 STC 313 (TNTST) (Siemens Ltd. v. State of Tamil Nadu), certain offending words in the additional sales tax provisions were held ultra vires. Only in that context, it was held that the benefits enjoyed by persons who received favourable treatment, should be extended to aggrieved persons also.
28. Therefore, we hold that Tvl. Sundaram Industries Ltd. in T.C. (R) No. 2169 of 1997 are eligible to get exemption by way of refund of tax, as contemplated in G.O. Ms. No. 115, Revenue, dated January 17, 1972, in respect of the disputed turnover, though such exemption cannot be granted under Section 5(3) of the Central Act. Though the exemption contemplated in G.O. Ms, No. 115, dated January 17, 1972 direct that the tax paid under the local Act on the bodies built and supplied to manufacturers in India for onward export to foreign countries, has to be refunded, subject to production of proof of export, thereby, stipulating condition for payment of tax and thereafter claim refund, having regard to the fact that the Appellate Tribunal has taken note of this fact and in the circumstances of the case ordered relief, we do think that there is no need to order payment of tax and then claim refund, inasmuch as the assessment relates to the year 1987-88. Therefore, the relief granted by the Appellate Tribunal is approved for the reasons indicated by us supra. As no tax is payable by the assessee, naturally, no penalty under Section 12(5)(iii) of the local Act is attracted, as the related turnover was found to be eligible for exemption. Therefore, the order in deleting penalty also, is in order.
29. Incidentally, we notice that in the memorandum of revision, a dispute has been raised in respect of surcharge and additional surcharge deleted by the Appellate Tribunal on the purchases effected from places not notified in the relevant Act. Though this point was not raised during hearing, on perusing the records, we find that the Appellate Tribunal has categorically held that the purchase of raw rubber took place at Keeriparai, Perunjani and Kulasekaram and during that relevant period, the Tamil Nadu Sales Tax (Surcharge) Act, 1971 and Tamil Nadu Sales Tax (Additional Surcharge) Act were not in force in those places. Therefore, the levy of surcharge as well as additional surcharge is not in order. This finding of fact is right and therefore, there is no case to interfere with the order of the Appellate Tribunal in this regard also.
30. As regards T.C. (R) No. 1997 of 1997, we find that the claim of exemption under Section 5(3) of the Central Act is not admissible and G.O. Ms. No. 115, Revenue, dated January 17, 1972 is also not related to any bus body builders other than Tvl. Sundaram Industries Pvt. Ltd., as indicated already. We find no force in the plea that a part of the turnover has to be assessed under the Central Act, inasmuch as the delivery of the bus body built on chassis was effected at Pollachi and thereafter, it was left to the exporter to move the goods to Madras Port or to Bombay Port, as the case may be. The sale of bus body and the movement of goods was not inextricably connected. The sale of bus body and transport of the bus were not part of one transaction and the goods were delivered to the exporter at Pollachi and in fact, the exporter diverted the goods to Madras Port or Bombay Port, as decided by him and in fact, some of the buses were converted as domestic buses. Therefore, the authorities were right in holding that the entire transactions should be assessed to tax under the local Act. Therefore, the claim allowed by the Appellate Tribunal is not in order and in so far as tax on bus bodies' turnover is concerned, the order of the Appellate Tribunal, which is erroneous in law, is set aside, thereby, restoring the order of the Appellate Assistant Commissioner levying tax on a turnover of Rs. 79,79,925 at 15 per cent and Rs. 33,33,498 at 8 per cent.
31. As regards penalty, we find that the assessee reported a total and taxable turnover of Rs. 21,27,657.40 and Rs. 20,35,970.11 respectively. The total and taxable turnover was determined as Rs. 1,35,82,080 and Rs. 1,34,90,392 respectively. Further, a part of the claim of inter-State sales, was also disallowed. In short, the assessment made was a best judgment assessment falling under Section 12(2) of the local Act and in such circumstances, the levy of penalty under Section 12(5)(iii) of the local Act is not warranted. In view of the reasoning given by us, we uphold the deletion of Section 12(5)(iii) penalty by the Appellate Tribunal.
32. As regards T.C. (A) No. 1841 of 1997 the Joint Commissioner of Commercial Taxes (SMR) reviewed both orders under the local Act and the Central Act and thereafter brought to assessment the turnover relating to bus body and extra fittings under the local Act. While the bus body turnover was allowed exemption earlier under the Central Act, the turnover relating to extra fittings was held to be liable to tax under the local Act in the remand order of the Deputy Commissioner. Therefore, the suo motu revision made by the Joint Commissioner cannot be termed as without jurisdiction, as indicated in the memorandum of appeal. Further, as indicated earlier], the exemption claimed in respect of bus body could not be granted both in terms of Section 5(3) of the Central Act and G.O. Ms. No, 115, Revenue, dated January 17, 1972. Similarly, the tax levied on extra fittings and accessories to the tune of Rs. 34,870 at 15 per cent was also proper. In such circumstances, we find no case to interfere with the order of the Joint Commissioner.
33. In fine, the tax appeal case filed by the assessee in T.C. (A) No. 1841 of 1997 and tax revision case filed by the State in T.C. (R) No. 2169 of 1997 are dismissed and tax revision case filed by the State in T.C. (R) No. 1997 of 1997 is partly allowed, as indicated supra.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on the 6th day of June, 2000.