2003 (4) TMI 532 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the petitioner's sale amounting to Rs. 1,47,19,885 is a sale in the course of export and eligible for deduction under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 read with section 5(1) of the Central Sales Tax Act, 1956.
2. Whether there is sufficient ground for the imposition of penalty.

Issue-wise Detailed Analysis:

1. Eligibility of Sale as Export:
The petitioner, a Government of India undertaking, claimed that the sales amounting to Rs. 1,47,19,885 were in the course of export under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner argued that the contracts between the State Trading Corporation (STC), the petitioner, and the foreign buyer (Yugoslavia Railways) resulted in the movement of goods from India to Yugoslavia. The petitioner contended that the Board erred in not considering this aspect and wrongly relied on the Supreme Court decision in Mod. Serajuddin v. State of Orissa, which was distinguishable from the present case.

The respondents argued that the contracts were supply-ensuring contracts, and the sale to STC was a pre-export sale, not occasioning the export. The main contract between STC and Yugoslavia Railways, not the petitioner's contract, occasioned the export. The Tribunal held that the main contract dated October 23, 1970, between STC and Yugoslavia Railways, occasioned the export, and the subsequent contracts were for the realization of this main contract. The Tribunal concluded that the petitioner's sale to STC did not qualify as a sale in the course of export, as the export was inextricably linked to the main contract.

2. Imposition of Penalty:
The penalty was initially imposed for non-submission of timely returns. The Commercial Tax Officer imposed a penalty of Rs. 500, which was later enhanced to Rs. 22,500. The Assistant Commissioner reduced it to Rs. 10,000, considering the petitioner's financial difficulties. The Tribunal observed that the penalty decision lacked rationale and was taken casually. Given the mitigating circumstances, the Tribunal modified the penalty amount to Rs. 1,000, considering it just.

Conclusion:
The Tribunal upheld the decision that the petitioner's sale was not in the course of export and was taxable. The penalty imposition was affirmed but reduced to Rs. 1,000. Both points were decided against the petitioner, and the application failed, subject to the penalty modification.