2006 (11) TMI 587 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the purchases of sandalwood billets, roots, etc., for export orders of sandalwood chips are deemed to be in the course of export u/s 5(3) of the CST Act.
2. Whether the petitioner is entitled to exemption from sales tax under section 5(3) of the CST Act.

Summary:

Issue 1: Applicability of Section 5(3) of the CST Act

The primary issue is whether the purchases of sandalwood billets, roots, etc., by the petitioner for fulfilling export orders of sandalwood chips can be deemed to be in the course of export for the purpose of section 5(3) of the CST Act. The petitioner participated in forest auctions and claimed exemption from sales tax under section 5(3) of the CST Act, arguing that the terms of the tender cannot override the laws if the transaction falls under section 5(3). The respondents contended that the goods purchased from the Forest Department are different from the goods mentioned in the export orders and that the goods were not exported in the same form, thus exemption under section 5(3) is not available.

Issue 2: Entitlement to Exemption from Sales Tax

The court examined various precedents, including the apex court's rulings in State of Andhra Pradesh v. Modern Proteins Ltd., Ganesh Trading Co. v. State of Haryana, and Sterling Foods v. State of Karnataka, among others. The court noted that the goods purchased by the petitioner (sandalwood billets, roots, etc.) had to be converted into flakes, powder, etc., weighing below 50 grams to make them exportable. This conversion resulted in a change in the commercial status of the goods from non-exportable to exportable, thus they ceased to be "such goods" which were purchased from the Forest Department. Therefore, the court held that the exports made by the petitioner are not of the goods which were purchased from the Forest Department, and the claim for exemption under section 5(3) of the CST Act fails.

Conclusion:

The writ petitions were dismissed, and the court did not accept the decision of the Madras High Court as a precedent on the issue of the identity of the purchased and exported goods. The petitioner was not entitled to exemption from sales tax under section 5(3) of the CST Act.

No costs were awarded.