State Taxation Tribunal - Tamil Nadu
Rani Arts And Crafts vs State Of Tamil Nadu on 24 November, 1999
Equivalent citations: [2000]118STC506(TRIBUNAL)
JUDGMENT
L. Palamalai, Administrative Member
1. This tax revision case is against the order of the Sales Tax Appellate Tribunal (Additional Bench), Coimbatore, in C.T.A. No. 203 of 1982 dated June 13, 1983. The facts leading to the present revision are as follows :
The assessing authority found that the petitioner a dealer in wooden art crafts has purchased goods from artisans in bought vouchers and effected sales to exporters against "H" forms, apart from local and inter-State sales. Therefore with reference to the sales of exporters amounting to Rs. 2,28,690, he arrived at the relevant taxable purchases from unregistered dealers for levy of tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") as Rs. 2,07,371 at 4 per cent. Adding the local sales turnover of Rs. 6,150 the taxable turnover was arrived at Rs. 2,13,521. The assessee contended that the levy of tax under Section 7-A of the Act is not in order and if this turnover is excluded, the taxable minimum is below Rs. 50,000 and therefore there is no liability to tax under the Act. The assessing authority overruled the objections by stating that the despatches of the goods were to a place outside the State except as a direct of sale or purchase in the course of inter-State trade or commerce and therefore when sales have been effected to exporters by treating such sales as sales in the course of export, it has to be held that the purchase turnover is to be assessed to tax under Section 7-A(1)(c) of the Act. In the first appeal, the Appellate Assistant Commissioner found that wooden art crafts purchased from non-dealers and artisans were sold in the course of export against "H" forms to dealers outside the State for a turnover of Rs. 2,28,690. In such circumstances, a turnover of Rs. 2,07,371 brought to assessment under Section 7-A(l)(c) of the Act is in order. In the second appeal in C.T.A. No. 203 of 1982 dated June 13, 1983, the Appellate Tribunal following the ratio of the decision of the Madras High Court in Ponnu Saw Mills v. State of Tamil Nadu [1980] 45 STC 291 held that the turnover is assessable to tax under Section 7-A(1)(c) of the Act. In the review application also, the Appellate Tribunal found that there is no case to interfere in a review application and accordingly the petition was dismissed in C.T.R.A. No. 19 of 1983 dated November 28, 1983. Hence, the present revision.
2. Mr. N. Inbarajan, the learned counsel for the petitioner contended that the Appellate Tribunal relied on the decision reported in [1980] 45 STC 291 (Mad.) (Ponnu Saw Mills v. State of Tamil Nadu) which related to the assessment year prior to April 1, 1976. However, in the present case, the assessment relates to the year 1979-80 and therefore the liability to tax has to be construed having regard to the Section 5(3) of the C.S.T. Act, 1956 which came into effect from April 1, 1976. Further, a sale in the course of export is exempted under Article 286(1)(b) of the Constitution of India, Section 5(3) of the CST Act, 1956 excludes the last sale or purchase. Therefore levy of tax on the purchases effected by the petitioner would offend Article 286(1)(b) of the Constitution of India. Therefore, levy of tax under Section 7-A(l)(c) of the Act is erroneous in law. Alternatively, the sales to dealer in other States for a turnover of Rs. 2,28,690 has to be construed as inter-State sales under the CST Act.
3. Mr. K. Soundararajan, the learned Government Advocate stated that Section 5(3) of the CST Act contemplates exemption in respect of last sale or purchase in the course of export and evidently the purchases in bought notes from unregistered dealers effected by the petitioner cannot be construed as purchases for granting exemption under Section 5(3) of the CST Act. In such circumstances, the tax levied is in order.
4. We have considered the contentions carefully. Article 286 of the Constitution of India reads as follows :
"286(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place,--
(a) outside the State ; or
(b) in the course of the import of the goods into, or export of the goods out of, the territory of India."
Section 5 of the Central Sales Tax Act reads as follows :
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) A sale or purchase of goods 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.
(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 on in relation to such export."
The material portion of Section 7-A(l)(c) at the relevant time reads as follows :
"7-A. Levy of purchase tax.--(1) 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 Section 3, 4 or 5, as the case may be, and either,--
(a)and(b).............
(c) despatches 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 as aforesaid at the rate mentioned in Section 3, 4 or 5, as the case may be, whatever be the quantum of such turnover in a year."
5. In the case of East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529 (SC) it was contended that as the agreement entered into with the foreign purchasers was for sale of the Virginia tobacco, the purchase of the same locally by the assessees for performing the contract and their subsequent export to the foreign purchasers must all be held to form one integrated transaction of sale in the course of export. It was held by the Supreme Court that "a sale which actually occasions the export or import would fall within Article 286(1)(b), It is only the sale under which the export is made that is protected by Article 286(1)(b), and that a purchase which precedes such a sale does not fall within its purview though it is made for the purpose of, or with a view to, export. The impugned legislation must accordingly be held not to contravene Article 286(1)(b)."
6. In the case of Murarilal Sarawagi v. State of Andhra Pradesh reported in [1977] 39 STC 294 (SC) the appellants, who sold manganese ore to the M.M.T.C. for export to foreign buyers, contended that their sales of manganese ore to the M.M.T.C. were complete within the State of Andhra Pradesh and, therefore, the M.M.T.C. was the last purchaser within the State and the M.M.T.C. was liable to pay sales tax. However, the High Court came to the conclusion that the appellants were the last purchasers within the State inasmuch as the contract entered into by the appellants with the M.M.T.C. was integrally connected with the contract entered into by the M.M.T.C. with their foreign buyers and the appellants' contract of sale occasioned the export and was therefore exempt from tax. On further appeal, the Supreme Court held that the mere mention of f.o.b. price or f.o.b. delivery in the contract between the appellants and the M.M.T.C. which exported the goods to the foreign buyer under a separate contract with the foreign buyer, would not make the two contracts either integrated or the contract between the appellants and the M.M.T.C. an f.o.b. contract. It was categorically stated "there cannot be two last purchasers in the sale of the same goods within the same State. Similarly, there cannot be two exporters in respect of the same goods". Therefore, it was held that the contract between the appellants and the M.M.T.C. and the contract between the M.M.T.C. and the foreign buyers were different and, therefore, the last purchaser within the State was the M.M.T.C. Though this case related to matters arising prior to introduction of Section 5(3) of the CST Act, the point to be borne in mind is who is the last purchaser when sales are effected by a dealer to an actual exporter. It is the actual exporter who is the last purchaser of goods whether the transaction is considered either prior to or after introduction of Section 5(3) of the CST Act exempting the last purchase or sale in the course of export.
7. The Karnataka High Court in Mohammed Ishaq & Sons v. Commissioner of Commercial Taxes in Karnataka reported in [1992] 87 STC 36 considered a case where hides and skins taxable at the last purchase point in the State were purchase by the petitioner from local dealers and supplied by him to an exporter outside the State. The claim of the petitioner in that case was that for the purpose of supplying the goods to the exporter, the purchases have been effected and therefore the purchases made for the purpose of supplying the goods to exporter must be construed as the last sale preceding the act of export and therefore the benefit of Sub-section (3) of Section 5 of the Act must be given. In this connection, the Karnataka High Court observed as follows :
"The petitioner is not an exporter. He is only a supplier to the exporter. He supplied goods at the request of the exporter which he has clearly evidenced. He has also evidenced that such supply was to the exporter by showing the exporter's account for the relevant year with his foreign buyers in the statement, which we have referred to earlier. Under the Karnataka Sales Tax Act, the last sale by the assessee in favour of exporter outside the State is not exigible to tax. The point of levy, as noticed by us earlier, under the State Act is the last purchase made within the State by a dealer. Now that undisputedly is the petitioner. The petitioner not being the exporter, cannot claim that his purchase resulting in a sale in his favour is a purchase or sale which will be deemed to be in the course of export under Sub-section (3) of Section 5 of the Act, as he is not exporting the goods himself, but it is exigible under Sub-section (4) of Section 5 of the Karnataka Sales Tax Act. That view taken by the assessing authority and the Appellate Tribunal is correct and on the facts of the case, the question formulated does not fall to be answered."
8. Similarly in the case of Bhagawan Rice Mill & Oil Industries v. Additional Commissioner of Commercial Taxes [1999] 113 STC 102, the Karnataka High Court considered the case of the appellant who purchased groundnut from unregistered dealers in the State of Karnataka, and sold it to a party at Delhi, who in turn exported the same to Russia. It was held in that decision that the purchases made by the appellant in the State of Karnataka from unregistered dealers was not a preceding purchase. In this connection, the following observations of the Karnataka High Court are relevant :
"In the present case, the appellant purchased groundnut from the unregistered dealer in the State of Karnataka. He sold it to a party, i.e., XL International at Delhi, who, in turn, exported the same to Russia. Therefore, the sale made by the appellant to the party at Delhi and the purchase by the party at Delhi is a preceding sale or purchase as contemplated under Sub-section (3) of Section 5 of the Central Sales Tax Act, which is in tune with clause (b) of Article 286 of the Constitution of India. Therefore, these two transactions only form part of sale and purchase transaction during the course of export to a foreign country, but the purchase made by the appellant in the State of Karnataka from unregistered dealers is not a preceding purchase. Therefore, the appellant is not exempted from payment of sales tax."
9. The Supreme Court in the case of State of Karnataka v. B.M. Ashraf & Co. reported in [1997] 107 STC 571 has considered a case of a dealer for the assessment year 1978-79 relating to exemption under Section 5(3) of the CST Act. In that case, the assessee purchased fish oil from unregistered dealers within the State of Karnataka and sold the goods to one Kalbhavi, an exporter in the State, who exported the goods to foreign country. The exemption claimed by the assessee under Section 5(3) of the CST Act was allowed but the assessing authority came to the conclusion that the transaction of the assessee in having effected the purchase of fish oil from unregistered dealers would attract the levy of purchase tax under Section 6 of the Karnataka Sales Tax Act, 1956. The assessee failed in the first and second appeals. However, the High Court allowed the claim on the ground that as the sale of fish oil to the exporter took place within the State of Karnataka there is no liability to purchase tax under Section 6 of the Karnataka Sales Tax Act. On further appeal before the Supreme Court, it was held that on the facts and under circumstances of the cases, the conclusion reached by the High Court was not correct and that the purchases of fish oil from unregistered dealers are liable to purchase tax having regard to the fact that the relative sales are sales in the course of export falling under Section 5(3) and 5(1) of the CST Act. In this connection, the Supreme Court observed as follows :
"It is pertinent to note that whereas intra-State sale or inter-State sale would be a reason for purchase tax not being levied but sale in the course of export would not exclude the applicability of the levy of purchase tax under Section 6 of the Act. The sale by the respondent to Kalbhavi is the last sale preceding the sale occasioning the export of those goods out of the territory of India and is, therefore, deemed to be sale in the course of export as envisaged by Section 5(3) of the Central Sales Tax Act. The sale by Kalbhavi to the foreign purchaser was also a sale in the course of export falling under Section 5(1) of the Central Sales Tax Act. Inasmuch as the sale by the respondent to Kalbhavi was a sale in the course of its export, therefore, no tax was levied under Section 5 of the Act.
The High Court while holding that the purchase transactions by the respondent were of goods on which no tax was leviable under Section 5 of the Act and that by virtue of Section 5(3) of the Central Sales Tax Act read with Article 286 of the Constitution of India, the sale by the respondent to Kalbhavi was not taxable nevertheless came to the conclusion that the respondent had sold the fish oil to Kalbhavi within the State of Karnataka and, therefore, this would be regarded as a sale as 'sale in the State' under Section 6(i) of the Act and, therefore, exempt from levy of purchase tax."
10. The conclusion of the High Court that the sale to an exporter in the same State is a "sale in the State" was also negatived by the Supreme Court and it was held that such a sale was a sale in the course of export and ipso facto cannot be regarded as intra-State sale. Thus, in the present case also, the sale by the petitioner to an exporter outside the State which occasioned the export is exempted from tax under Section 5(3) of the CST Act. As far as the exporter is concerned, the sale by him is a sale in the course of export falling under Section 5(1) of the CST Act, Still the last purchaser in this transaction is the actual exporter and the last sale as contemplated in Section 5(3) of the CST Act was effected by the petitioner in this case. Therefore, the sale in the course of export is exempted from tax and this is a circumstance under which no tax is payable under Section 3, 4 or 5 of the Act. As rightly pointed out in the decision of the Supreme Court reported in [1997] 107 STC 571 (State of Karnataka v. B.M. Ashraf & Co.) only intra-State or inter-State sale would be a reason for purchase tax not being levied but sale in the course of export would not exclude the applicability of the levy of purchase tax under Section 7-A of the Act. Therefore, the conclusion reached by the lower authorities that the purchases of wooden art crafts effected from unregistered dealers by the petitioner which were sold in the course of export are to be held liable to tax under Section 7-A(l)(c) of the Act is quite in order. Thus, the provision of Section 7-A of the Act does not infringe Article 286(1)(b) of the Constitution of India inasmuch as the purchases from unregistered dealers by the petitioner are not to be construed as in the course of export falling under Section 5 of the CST Act read with Article 286(1)(b) of the Constitution of India. Thus, in the present case, the levy of tax is in order and no interference is called for in regard to the order of the Appellate Tribunal in the light of the observations made by us supra. In fine, the tax revision case is dismissed.
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 24th day of November, 1999.