2011 (6) TMI 711 - HC - VAT and Sales Tax

Whether, on the facts and in the circumstances of the case, the Tribunal committed an error of law in disallowing the exemption claimed by the petitioner on high sea sales effected by the petitioners by transfer of document of title to the goods? Whether, on the facts and in the circumstances of the case, the Tribunal committed an error of law in confirming the levy of penalty under section 12(3) of the Tamil Nadu General Sales Tax Act, when in fact, the turnover was available in the books of accounts of the petitioners? Held that - The mere failure on the part of the assessee to produce the endorsed bill of lading or that the buyer s name figured in the bill of entry along with the assessee s name, would not, in any manner, go against the claim of the assessee herein. The learned counsel appearing for the assessee submitted that the originals of the documents are already available with the assessee, which clearly prove the High Sea sales effected. In the background of the decisions of this court and that of the apex court and in the face of the documents produced before the authorities concerned, we feel, the proper course herein would be to set aside the order of the Tribunal and remand the matter back to the assessing authority for a fresh consideration of the materials produced by the assessee in support of its claim for high sea sales. Consequently, the order of the Tribunal stands set aside.

Issues Involved:

1. Disallowance of exemption claimed on high sea sales.
2. Confirmation of penalty under section 12(3) of the Tamil Nadu General Sales Tax Act.

Detailed Analysis:

1. Disallowance of Exemption Claimed on High Sea Sales:

The core issue revolves around whether the Sales Tax Appellate Tribunal erred in disallowing the exemption claimed by the petitioner on high sea sales. The petitioner, a dealer in vegetable oil, claimed exemption under section 5(2) of the Central Sales Tax Act, 1956, for high sea sales conducted by transferring the document of title to the goods. The Revenue contested this claim, asserting that the documents supporting the claim were fabricated since the goods were delivered from storage tanks under the custody of Nahar International Ltd., Chennai, after crossing customs frontiers. The Tribunal upheld the assessment, emphasizing that the goods were cleared from a private warehouse, which did not qualify as a customs area under the Customs Act. Thus, the Tribunal concluded that the sales did not occur in the course of import.

The petitioner argued that sufficient contemporaneous documents were provided to substantiate the high sea sales, including sale confirmations, sales invoices, and proof of customs duty payment by the purchasers. The Tribunal's rejection was based on the absence of an endorsed bill of lading, which the petitioner contended was not the sole proof required to establish high sea sales. The petitioner relied on the precedent set in Deputy Commissioner of Commercial Taxes, Madurai Division, Madurai v. A.R.S. Thirumeninatha Nadar Firm, Tuticorin, which held that transfer of documents could be effected by handing them over and that an endorsement was not the only way to prove the transfer of title.

The court observed that the genuineness of the documents was not questioned by the Revenue, and the Tribunal should have considered the contemporaneous materials. The court directed the assessing officer to reassess the claim, taking into account the original documents provided by the petitioner, to determine if the sales were indeed high sea sales.

2. Confirmation of Penalty under Section 12(3) of the Tamil Nadu General Sales Tax Act:

The second issue pertains to the confirmation of the penalty levied under section 12(3)(b) of the Tamil Nadu General Sales Tax Act, 1959. The assessing authority imposed the penalty on the grounds that the petitioner failed to produce customs records for clearing the goods by the ultimate buyers and did not provide clear evidence of high sea sales. The appellate authorities upheld the penalty, citing the absence of vital documents such as the agreement with the foreign seller, the sales invoice from the foreign seller, and proof of customs duty payment by the high sea sales purchaser.

The petitioner contended that the penalty was unjustified as the turnover was available in the books of accounts, and the necessary documents were provided during the appellate proceedings. The court noted that the petitioner had produced voluminous documents supporting their claim and that the assessing officer should reassess the penalty after considering these documents. The court emphasized that if the contemporaneous documents substantiate the high sea sales, the penalty should not be levied merely due to the absence of an endorsed bill of lading.

Conclusion:

The court set aside the order of the Tribunal and remanded the case to the assessing officer for a fresh assessment. The assessing officer was directed to consider the original documents provided by the petitioner to verify the high sea sales claim. The court reiterated that the absence of an endorsed bill of lading should not be the sole reason to disallow the exemption if sufficient evidence supports the claim. The petitioner was instructed to cooperate with the assessing officer by providing all necessary documents to substantiate their contentions. The tax case appeal was disposed of without costs.

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