2011 (2) TMI 1248 - HC - VAT and Sales Tax

Whether Central Sales Tax can be levied on the sales made by the petitioner from SEZ unit which is deemed to be a territory outside the territory of India u/s 53 (1) of SEZ Act, to DTA in view of Article 286 of the Constitution of India Held that - SEZ Act, 2005 has taken into consideration and has provided for amendment of the various taxing statutes, or modified them, for fulfilling the object and purpose of the Act. Section 7 provides for exemption from tax, duties or cess on any goods or services exported out of or imported into or produce from DTA by unit in SEZ or a developer subject to terms and conditions as may be prescribed and be exempt from the payment of tax, duties or cess under all enactment specified in the First Schedule. Section 27 of the SEZ Act, 2005 applies Income Tax Act with certain modifications in relation to developers and interpreneurs carried out authorised operations in SEZ and modifications are specified in Second Schedule. Section 57 amends the enactment specified in the Third Schedule, which are amended by SEZ Act, 2005. The Central Sales Tax is not included in any of these Schedules. Whether in view the various duties, namely, basic custom duties, under Customs Act, 1962, counter-veiling duties, additional duties, anti dumping duties, safeguard duties levied under the Customs Tariff Act, 1935 on the importer of the goods of domestic tariff area from the units situate in SEZ, the sale in question is purely a sale in the course of import; since these duties are leviable only on the import of the goods from outside the customs territory of India Held that - no substance in the contention that the sales from SEZ unit to unit in DTA shall be deemed to be imports. No such presumption can be drawn from Section 5 (2) of the Central Sales Tax Act or any of the provisions of the SEZ Act of 2005, deeming provision is not to be inferred in law. It has to be either provided by legislation validly elected and competent to declare such deeming provision with its consequences. There can be no inference drawn from deeming provisions from the provisions of any Act. The deeming provision also cannot be inferred from the analogy drawn from different Acts, writ petition is dismissed

Summary

Issues Involved:
1. Levy of Central Sales Tax on sales from SEZ to DTA.
2. Interpretation of SEZ as a territory outside India.
3. Applicability of various duties on sales from SEZ to DTA.
4. Validity of notifications and circulars issued by the State Government.
5. Rejection of account books by the assessing authority.

Issue-wise Detailed Analysis:

1. Levy of Central Sales Tax on Sales from SEZ to DTA:
The petitioner challenged the imposition of Central Sales Tax (CST) on sales made from the SEZ to the DTA, arguing that such sales should be considered as imports and thus exempt from CST under Article 286 of the Constitution and Section 5(2) of the CST Act. The court, however, held that the SEZ Act does not provide any exemption from CST for sales from SEZ to DTA. The court noted that the SEZ Act, 2005, while providing certain exemptions, does not include CST in its schedules for exemptions. Therefore, the imposition of CST on sales from SEZ to DTA is valid.

2. Interpretation of SEZ as a Territory Outside India:
The petitioner argued that SEZ should be deemed as a territory outside India for the purposes of customs and CST, thus treating sales from SEZ to DTA as imports. The court rejected this argument, stating that the deeming provision under Section 53(1) of the SEZ Act is limited to customs purposes and does not extend to CST. The court emphasized that legal fictions should not be extended beyond their intended purpose.

3. Applicability of Various Duties on Sales from SEZ to DTA:
The petitioner contended that sales from SEZ to DTA should be treated as imports, subject to various duties like customs duty, countervailing duty, etc., and thus exempt from CST. The court clarified that while goods moved from SEZ to DTA are subject to customs duties, this does not automatically exempt them from CST. The court reiterated that the SEZ Act does not provide for such an exemption and that CST is applicable as per the CST Act.

4. Validity of Notifications and Circulars Issued by the State Government:
The petitioner challenged the validity of the notification dated 17.01.2007 and the subsequent circulars, which withdrew the CST exemption on sales from SEZ to DTA. The court upheld the validity of these notifications and circulars, stating that they were issued within the jurisdiction of the State Government. The court found no legal infirmity in the withdrawal of the CST exemption through these notifications.

5. Rejection of Account Books by the Assessing Authority:
The assessing authority rejected the account books of the petitioner and imposed a tax liability based on the turnover. The court held that since the account books were rejected, the petitioner should have pursued the statutory appeal process rather than filing a writ petition. The court emphasized that the appellate authority is the appropriate forum to address issues related to the rejection of account books and the assessment order.

Conclusion:
The court dismissed the writ petition, upholding the imposition of CST on sales from SEZ to DTA, validating the State Government's notifications and circulars, and directing the petitioner to seek remedy through the statutory appeal process for issues related to the rejection of account books.