State Taxation Tribunal - Tamil Nadu
East Bay Fisheries And Anr. vs State Of Tamil Nadu on 17 November, 1998
Equivalent citations: [2000]120STC99(TRIBUNAL)
JUDGMENT
V. Rengasamy, J. Vice-Chairman
1. These tax revision cases have been filed against the orders of the Appellate Tribunal (Second Additional Bench, Chennai) in T.A. Nos. 820 of 1985, 926 of 1985, 3090, 3091 of 1984 and 1187 of 1984. All these tax revision cases arise on the common question of law as to the shortage in the quantity of prawns intended for export. Eventhough there are certain other points considered by the lower Appellate Tribunal while dismissing the above appeals particularly the sale of chemicals to the value of Rs. 87,569 concerned in T.C.R. No. 330 of 1997 and sale of a van by the assessee in T.C.R. No. 363 of 1997 for a sum of Rs. 2,60,000 and these amounts have been included in the turnover for assessment and the lower Appellate Tribunal has held that these amounts are taxable, in the memorandum of the revision the assessee has not raised any point in respect of these assessments and the learned Senior Counsel Mr. C. Natara-jan, also did not argue anything about the levy of tax on those turnovers. His argument is only on the question of tax for the shortage in shipping the prawns. Therefore, we are not interfering with the orders of the Appellate Tribunal in respect of its finding for the assessment on the sale of chemicals and van.
2. As there is a common question arising in all these revisions they were heard together and common order is passed.
3. In order to make the facts more clear and for proper understanding of the case, the quantity of prawns purchased by the assessees and the quantity exported by them has to be referred to in detail.
4. All these petitioners in these revisions are sea-food exporters. The petitioner in T.C.R. No. 329 of 1997 purchased 1,88,546 kgs. of prawns to the value of Rs. 1,29,93,675 during the assessment year 1983-84 and he exported only 1,60,390 kgs. and the closing account showed the stock of 14,936 kgs. Therefore, there was shortage of 13,219 kgs. of prawns which was neither exported nor found in the stock book. Similarly, in T.C.R. No. 330 of 1997 the assessee had purchased 2,61,808 kgs. and he had shipped only 1,62,997 kgs. The closing stock showed 27,984 kgs. only. Therefore, there was shortage of 70,827 kgs. which was neither exported nor found in the accounts. In T.C.R. Nos. 363 of 1997 and 364 of 1997 the assessee had purchased 69,148.450 kgs. in 1980-81 and exported 28,820 kgs., 3,678.450 kgs. of prawn is said to be the shortage in that year and the same assessee purchased 7,03,287.850 kgs. in 1981-82 and shipped only 6,37,880 kgs. making a shortage of 70,159.350 kgs. In T.C.R. No. 59 of 1997 in the assessment year 1982-83 the assessee purchased 1,18,349.200 kgs. of prawns and exported 1,05,479.250 kgs. leaving the unexplained shortage of 12,869.950 kgs.
5. Under Section 5(3) of the Central Sales Tax Act, 1956 the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods within the territory of India shall be deemed to be in the course of such exports if such last sale or purchases took place for the purposes of complying with the agreement or order or in relation to such export, is not taxable. It is not in dispute that these petitioners/asses sees are exporters and their purchases were last purchases and therefore it should be deemed to have been in the course of export, entitling for exemption of sales tax. In view of the provisions of Section 5(3) of the Central Sales Tax Act, the assessing officer has exempted from the liability of the tax, to the quantity exported by the assessees. But the dispute is only with regard to the quantity unexported. As mentioned above even in the unexported quantity as a portion was shown in the stock, it was exempted in the assessment order as the assessee is entitled to export at any time later. But, further shortage is found by the assessing authority as this quantity is neither exported nor found in the stock. The shortage is as follows :
Year Shortage In T.C.R. No. 329 of 1997 1983-84 13,219 kgs.In T.C.R. No. 330 of 1997
1983-84 70,827 kgs.In T.C.R. No. 363 of 1997
1980-81 3,678.450 kgs.In T.C.R. No. 364 of 1997
1981-82 70,159.350 kgs.In T.C.R. No. 59 of 1997
1982-83 12,869.950 kgs.
The assessing officer has levied purchase tax for the above shortage under the Tamil Nadu General Sales Tax Act and this is the disputed turnover in these revisions. The contention of the assessees in all these revisions is that the shortage mentioned above is due to the removal of the inedible portion of the sea-foods such as head, tail, shell, etc., and also due to the keeping of the processed prawns in deep freezer till the time of export and as the removal of inedible portion is unavoidable wastage in the course of export, there was shortage to the extent of the above quantity, which is to be treated as part of the exported quantity and therefore the assessment on the shortage is illegal.
6. The learned Senior Counsel Mr. C. Natarajan, appearing for these assessees contended that the assessing officer has not found anywhere that the unshipped quantity has been locally sold or utilised for any other purposes and the contention of the assessees that the shortages are due to the wastage of the inedible portion, has not been rebutted by any counter argument, but all along the findings of the appellate authorities also is to the effect that there is no formula in the statute to give relief on such wastages and thereby the assessees are bound to pay the tax for the said shortage which was not exported.
7. The learned Senior Counsel Mr. C. Natarajan, has cited a series of decisions in which, courts including the apex Court have accepted the exemptions even for the wastage in the course of the sale or export. The learned Senior Counsel referred to Sterling Foods v. State of Karnataka reported in [1986] 63 STC 239 (SC) which also relates to the export of prawns and in that decision while applying Section 5(3} of the Central Sales Tax Act, 1956, the apex Court has held that though the purchase of raw shrimps, prawns and lobsters for the purpose of fulfilling existing contracts for export and the exporter processes the sea-food by cutting heads, tails, peeling deveining, cleaning and freezing before export, the part remained after the processing is the same in its identity for export entitled for exemption. In this case there is no such dispute because the assessing officer has accepted the identity of the goods after the processing and has allowed the exemption in respect of exported quantity. As the levy of tax is only on the unexported quantity the question is whether the alleged wastage also is covered by Section 5(3) of the Central Sales Tax Act to claim exemption.
8. State of Punjab v. Seth Ganpat Ram Cotton Ginning and Pressing Factory reported in [1989] 74 STC 1 (SC) is a decision on the processing of the cotton and the wastage by ginning. The assessee purchased unginned cotton and after ginning it, it was sold as ginned cotton to registered dealers. The assessee was entitled to claim exemption on the entire purchase price of the cotton as no part of the cotton purchased by him after ginning was retained by him. But there was difference in the weightage in the cotton purchased and sold after ginning and the difference was cotton seeds removed in the processing. The apex Court held that the assessee was entitled to claim exemption of the entire purchase price of the cotton, sold by him to the registered dealers and the retention of the cotton seeds which gave the difference in the weight could make no difference to claim the deduction. In G.M. Patel v. State of Karnataka reported in [1987] 65 STC 56 (Kar) ; (1984) 11 STL 30 (Kar), it is held that if the assessee, a cotton dealer, is able to prove that he had sold everything in the form of bales and cotton seeds, he cannot be taxed merely on the ground that there was a difference in the weighment between the purchase and sale and when the petitioner has explained the difference in the weighments attributing to the process of ginning or dryage due to climatic variations, the utility of the goods as contemplated could be accepted for granting exemption, without comparing the weight of the goods purchased and sold. The Bombay High Court in Commissioner of Sales Tax, Maharashtra State, Bombay v. East Asiatic Commercial Co. reported in [1985] 59 STC 10 also took the view that when the wastage is unavoidable, the same also is to be added for giving deduction. In the Bombay case a dealer in castor oil purchased the same for resale or for export on furnishing a certificate in form No. 16. In the course of handling the oil, a small percentage of oil remained at the bottom of the containers and was lost. Further some more quantity also was lost on account of spillage while being poured or transferred from one container to another. Visualising those circumstances, it was held that the assessee could not be said to have failed to carry out the terms of the certificate in not reselling or exporting the small quantity which was thus lost and as such loss was inevitable, the tax was not leviable on such shortage. There is a direct decision on this point by the Bench of the Madras High Court in State of Tamil Nadu v, Tata Oil Mills Co. Ltd. reported in [1994] 94 STC 218. In that case also the assessee was the exporter of the prawns and for the shortage found between the quantity purchased and exported, the assessee contended that there was wastage during the course of cleaning and packing for export. The Tribunal accepted the contention of the assessee that the wastage was not assessable. The Bench of the High Court observed :
"The opinion of the Tribunal that while cleaning, cutting and freezing as also packing, some marginal loss was bound to occur is both logical and reasonable. The court cannot ignore the fact that such loss is bound to occur while packing a commodity like prawns after cleaning, etc. Considering the total turnover of the assessee for the years 1977-78 and 1978-79 the loss of Rs. 1,23,951 and Rs. 1,23,775 respectively is only marginal and the Tribunal rightly granted the benefit to the assessee in respect of those additions."
This decision gives direct answer to the dispute in this case. As the export of prawns can only of the edible portion and inedible portion like the head, tail, legs covering shell cannot be exported. But as the raw prawns have to be purchased as such with the inedible portions the wasted portions also shall be deemed to be in the course of the export, though actually not exported. But the Tribunal below had relied upon the another decision of the Bench of the Madras High Court in AL. Murugan Chettiar v. State of Tamil Nadu reported in [1983] 53 STC 227 which may not be applicable to this case because in that case the assessee did not maintain the accounts for the purchase of the cotton for levying the purchase tax and while estimating the purchase value from the quantity of the ginned cotton, the wastage during the manufacturing process was taken into account to find out the total purchase value. The assessee therein contended that the dryage and loss could not be accounted to work out the value of the purchase. In that circumstance, the Bench of the Madras High Court has held that the loss and dryage also is part of the purchase value. But from the catena of decisions referred to above, the correct view is that the goods purchased for export is entitled to exemption of purchase tax, not only for the quantity exported but also to the inevitable wastage sustained during the course of the process for export.
9. The next question for consideration is whether the shortage mentioned by the assessee could be the real shortage with reference to the quantity purchased by the assessee. In T.C.R. No. 329 of 1997 the loss is only 13.219 kgs. which is only 7 per cent in the total purchase. In T.C.R. Nos. 363 and 364 of 1997 as the loss is 3,678 and 70.159 kgs., the wastage is only 5.3 per cent and 2.4 per cent. In T.C.R. No. 59 of 1997 the shortage of 12.870 kgs. works out at 10.8 per cent. We feel that this percentage cannot be said to be on the higher side and there is every possibility for the loss of this quantity and therefore the levy of tax in T.C.R. Nos. 329 of 1997, 363 of 1997, 364 of 1997 and 59 of 1997 is not proper and has to be set aside.
10. But in T.C.R. No. 330 of 1997 we hesitate to accept that there was wastage of 70.827 kgs. in the total quantity of 2,61,808 kgs. purchased by the assessee, The assessee had shipped only 1,62,997 kgs. and the accounts revealed the closing stock of 27,984 kgs. Therefore the shortage is 70.827 kgs. This quantity works out at 27 per cent. The wastage due to the processing may be slightly varying but such variance cannot be in disproportionate. When in all other matters the wastage is found to be around 10 per cent and below, in T.C.R. No. 330 of 1997 the wastage is said to be 27 per cent. We feel that this has to be proved by the assessing officer, as we are unable to accept that l/4th quantity of the total stock became the wastage. Therefore, in T.C.R. No, 330 of 1997 we are unable to accept the contention of the petitioners/assessee and as the actual loss as estimated by the assessing officer taking into consideration of the data available with the assessee, we propose to remand this matter to the assessing authority.
11. In fine in T.C.R. Nos. 329 of 1997, 363 of 1997 364 of 1997 and 59 of 1997 the orders of the appellate authority is set aside in so far as it relates to the shortage in the weight of the prawns intended for export and the assessees are entitled to exemption under Section 5(3) of the Central Sales Tax Act, 1956 for the deficit quantity also. In other aspects the order of the Appellate Tribunal is confirmed. In T.C.R. No. 330 of 1997 the order of the Appellate Tribunal is set aside in respect of the deficiency intended for export quantity and the matter is remanded back to the assessing officer to find out the actual probable wastage as ascertained from the materials gathered from the assessee. The assessee is entitled to the exemption of that quantity only and the balance will attract the purchase tax. The tax revision cases are disposed of in the above manner.
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 17th day of November, 1998.