1987 (3) TMI 481 - SC - VAT and Sales Tax

Whether any tax is payable on sales of dressed hides purchased by the applicant against form H but he held that the respondent-assessee shall be liable to tax under section 3-AAAA if it purchased dressed hides and skins against form III-A and sold the same in the course of export? Held that - If photostat copy of form H under the Central Sales Tax Act is furnished to the vendor it will be accepted by the competent authority and the vendor will not be held liable for payment of sales tax/purchase tax in respect of such transactions subject to the rider that the respondent will be held liable in case the purchases made by him do not satisfy the conditions and tests prescribed by sub-section (3) of section 5 of the Central Sales Tax Act and are not made in the course of export within the meaning of the said provision. So far as the past transactions are concerned the respondent will not be liable provided he satisfies the aforesaid tests and the transactions of last sales made to him are in the course of export within the deeming clause of sub-section (3) of section 5 of the Act.

Summary

Issues:
1. Interpretation of sales tax laws regarding transactions in the course of export.
2. Applicability of Central Sales Tax Act provisions.
3. Constitutional restrictions on levying sales tax on export transactions.
4. Requirement of appropriate forms for tax compliance in export transactions.

Analysis:

The judgment addressed the interpretation of sales tax laws concerning transactions in the course of export. The case involved an appeal by the Commissioner of Sales Tax, U.P., against a decision of the Sales Tax Tribunal regarding the liability of an assessee engaged in the export of dressed hides. The Tribunal had ruled that the assessee was not liable to pay purchase tax under section 3-AAAA of the Act for purchases made for export, irrespective of the form used for the transaction. The High Court upheld this decision, emphasizing the exemption of export transactions under the Central Sales Tax Act.

The Supreme Court, through Justice Thakkar, clarified that transactions falling within the scope of section 5(3) of the Central Sales Tax Act, related to the last sale or purchase preceding the export of goods, are not subject to sales tax by any State. The Court highlighted the constitutional restriction under article 286(1)(a) regarding the taxation of sales in the course of export. Referring to Consolidated Coffee Ltd. v. Coffee Board, Bangalore, the Court affirmed that if the last sale was made after an export agreement or order was accepted, and for compliance with such agreement, it cannot be lawfully taxed under the Sales Tax Act.

Regarding the use of appropriate forms for tax compliance in export transactions, the Court noted the absence of a specific form under the U.P. Sales Tax Act for such transactions. Despite the use of an incorrect form (form III-A), the Court emphasized that the state lacked the authority to levy tax on export transactions due to constitutional restrictions. It suggested the creation of a suitable form by the tax authorities and proposed the use of form H under the Central Sales Tax Act as an interim measure.

In conclusion, the Supreme Court dismissed the appeal, upholding the High Court's decision and emphasizing the non-liability of the assessee for sales tax on export transactions. The Court directed the assessee to provide a copy of form H for future transactions and clarified the conditions under which the assessee would be held liable for tax. The judgment highlighted the importance of adhering to legal provisions and constitutional restrictions in taxing export transactions, ensuring compliance with relevant laws and forms to avoid unnecessary tax burdens.