2006 (4) TMI 486 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the Tribunal erred in disallowing deductions under Section 5(2)(a)(vii) of the Punjab General Sales Tax Act and Rule 29(v) thereunder.
2. Applicability of the Supreme Court judgment in Mod. Serajuddin v. State of Orissa [1975] 36 STC 136.
3. Interpretation and applicability of Rule 29(v) of the Punjab General Sales Tax Rules, 1949.
4. Whether the High Court can directly answer the question of law without directing the Tribunal to make a reference.

Detailed Analysis:

1. Disallowing Deductions under Section 5(2)(a)(vii) and Rule 29(v):
The petitioner, a registered dealer, sought exemption for turnover related to the sale of goods to the State Trading Corporation of India (STC) for export. The authorities disallowed the exemption, stating that the sale to STC was not an export sale but a completed transaction of inter-State trade. The Tribunal upheld this view, noting that the export was occasioned by a contract between STC and the foreign buyer, not by the sale between the petitioner and STC. The Tribunal concluded that there were two distinct sales: one between the petitioner and STC, and another between STC and the foreign buyer.

2. Applicability of the Supreme Court Judgment in Mod. Serajuddin v. State of Orissa:
The authorities relied on the Supreme Court judgment in Mod. Serajuddin v. State of Orissa [1975] 36 STC 136, which held that for a sale to be considered in the course of export, it must occasion the export or be effected by a transfer of documents after crossing the customs frontier. The petitioner argued that this judgment was not applicable due to the specific provisions of Rule 29(v) of the Punjab General Sales Tax Rules, 1949.

3. Interpretation and Applicability of Rule 29(v):
The petitioner cited the judgment in State of Haryana v. Liberty Footwear Company [2006] 145 STC 532, which interpreted Rule 29(v) as providing more liberal tax exemptions than Section 5(1) of the Central Sales Tax Act, 1956. Rule 29(v) allows deductions from gross turnover for goods exported out of India, whether by one transaction or a series of transactions. The Division Bench in Liberty Footwear's case noted that Rule 29(v) is an independent and self-contained rule, granting substantial relief to dealers who can prove export of goods, even through intermediaries or consecutive sales.

4. High Court's Authority to Answer the Question of Law Directly:
The High Court considered whether it should direct the Tribunal to make a reference or answer the question directly. Citing the Division Bench judgment in Malik Iron & Steel Rolling Mills v. State of Haryana [2002] 126 STC 220, the court noted that directing the Tribunal to make a reference would result in unnecessary loss of time and money. The court emphasized the principle of "updating construction," which allows for interpreting statutes in a way that keeps them current with changes in law, social conditions, and other relevant factors.

Conclusion:
The High Court found that the authorities below had wrongly applied the Supreme Court judgment in Mod. Serajuddin's case and that the view taken by the authorities was erroneous and not in conformity with law. The court, therefore, answered the question raised by the assessee in his favor and against the Revenue, avoiding unnecessary procedural delays by directly addressing the legal question.

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