Madhya Pradesh High Court
Steel Authority Of India vs Commissioner Of Sales Tax on 25 July, 1988
Equivalent citations: [1988]71STC388(MP)
JUDGMENT
G.G. Sohani, Ag. C.J.
1. By this reference under Section 44 of the M. P. General Sales Tax Act, 1958 (hereinafter referred to as "the Act") the Board of Revenue has referred the following questions of law to this Court for its opinion:
(1) Whether, under the facts and circumstances of the case, the sales amounting to Rs. 34.54 lakhs were sales in the course of export out of India ?
(2) Whether the above sales were sales in the course of export under the second limb of Section 5(1) of the Central Sales Tax Act ?
(3) Whether, from the facts on record and found by the Tribunal, the Tribunal was justified to draw an adverse inference that the goods did not cross the custom barrier before the documents were negotiated and payment received from the bank ?
(4) Whether, under the facts and circumstances, the above sales were outside the State of M. P. and not in the course of inter-State trade and commerce ?
(5) Whether the Tribunal was justified in not affording opportunity to the applicant for producing correct D form in relation to sale of Rs. 59,646 made to Government Department, which was not afforded by the lower authority ?
(6) Whether the material purchased for the construction work can be liable to tax ?
2. The material facts giving rise to this reference briefly are as follows. The assessee is engaged in the manufacture and sale of steel. While framing assessment of the assessee under the Act for the assessment year 1962-63, the assessing authority rejected the claim of the assessee that sales amounting to Rs. 34.54 lakhs were not inter-State sales but had taken place in the course of export. Aggrieved by that order passed by the assessing authority, the assessee preferred an appeal which was dismissed. On further appeal before the Board of Revenue, the order passed by the assessing authority in that behalf was upheld by the Board of Revenue. Aggrieved by the order passed by the Board of Revenue, the assessee sought reference and it is at the instance of the assessee that the Board of Revenue has referred the aforesaid questions of law to this Court for its opinion.
3. As regards question No. (5), learned counsel for the assessee conceded that no opportunity was sought by the assessee to produce correct forms as found by the Board. In view of this fact, our answer to question No. (5) is in the affirmative and against the assessee.
4. Now, as regards questions Nos. (1) to (3) referred by the Board, learned counsel for the parties agreed that these questions overlap each other and do not bring out the real issue between the parties. With the consent of the parties, therefore, questions Nos. (1) to (3) were resettled and a composite question was reframed by us as under:
Whether, on the facts and in the circumstances of the case, the Board of Revenue was justified in holding that sales amounting to Rs. 34.54 lakhs were not covered by the second part of Sub-section (1) of Section 5 of the Central Sales Tax Act and hence could not be held to be sales in the course of export ?
5. Before we proceed to answer the question reframed by us, it would be useful to refer to the provisions of Sub-section (1) of Section 5 of the Central Sales Tax Act. That provision is as follows:
Section 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.
As held by this Court in Hindustan Steel Ltd. v. State of M.P. [1982] 50 STC 287, the second part of Sub-section (1) of Section 5 of the Central Sales Tax Act requires that two conditions should be fulfilled before a sale can qualify for exemption. The first condition is that the sale should be effected by transfer of documents of title to the goods. The second condition is that the sales should have taken place after the goods have crossed the customs frontiers of India. Therefore, the Board of Revenue was required to address itself to the question as to whether the aforesaid two conditions were or were not satisfied in the instant case before giving a finding that the sales in question could not be held to be sales in the course of export. In the instant case, the Board has not addressed itself to this aspect of the matter but has instead referred to its decision given in the case of the assessee arising out of its assessment for the subsequent year. The Board was required to give finding on the basis of the material produced in the instant case. Our answer to the question reframed by us is, therefore, that without giving a finding on the questions as to whether the sales amounting to Rs. 34.54 lakhs were effected by transfer of documents of title to the goods and whether the sales in question had taken place after the goods had crossed the customs frontiers of India, the Board of Revenue was not justified in holding that the sales amounting to Rs. 34.54 lakhs were not covered by the second part of Sub-section (1) of Section 5 of the Central Sales Tax Act and could not be held to be sales in the course of export.
6. As regards question No. (4), learned counsel for the parties agreed that that question would only arise after the Board has found in the light of our aforesaid observations that the sales in question could not be held to be sales in the course of export. As the Board has yet to give its finding in that behalf, at this stage, we decline to answer question No. (4).
7. Question No. (6) framed by the Board does not bring out the real issue between the parties. We, therefore, reframe that question as under:
Whether, on the facts and in the circumstances of the case, the Board was justified in holding that purchase tax on the material purchased for construction work was not wrongly imposed ?
Now the finding of the Board with regard to the aforesaid question is as follows:
According to Section 9 of the Act it is for the appellant to prove that they are exempt from payment of purchase tax under Section 7 or 8(1) of the Act in regard to the purchases made by them. The appellant did not prove to the satisfaction of the assessing authority and the appellate authority that the purchase of raw material and stores were made only from the registered dealers. The instructions regarding purchase procedure of the plant authority made available to the Deputy Commissioner (pages 165-187) does not clearly show that the purchases are restricted only to the dealers registered under the Act. With a view to verify the correctness of the submission of the appellant that it restricted its purchase only to the registered dealers, the Deputy Commissioner had called upon the assessee to file the statement of purchases for a representative month. A statement of purchases filed by the appellant for the month of June, 1982 (pages 189-201) (Deputy Commissioner's appeal case) shows that quite a few purchases have been made from parties whose sales tax registration number has not been mentioned in column 5 of the statement. Under these circumstances, the Revenue was justified in taking recourse to the best judgment provision for the limited purpose of estimating the purchases made from unregistered dealers. The appellate authority estimated the purchase from unregistered dealers at Rs. 10 lakhs (5 lakhs towards raw material and stores; 2 lakhs towards maintenance and repair purchases; 3 lakhs towards purchase of construction material). Having regard to the facts and circumstances of the case, this estimate cannot be viewed as excessive or capricious. We see no reason to interfere with the orders of the Revenue on this account.
Learned counsel for the assessee was unable to assail the aforesaid finding by the Board. Therefore, our answer to question No. (6), as reframed by us, is in the affirmative and against the assessee.
8. Reference answered accordingly. In the circumstances of the case, parties shall bear their own costs of this reference.