2013 (10) TMI 1116 - HC - VAT and Sales Tax

Exemption under section 5(3) of the CST Act - sale of bus bodies - penultimate sale - export of goods - nexus - Held that - If the penultimate sale effected in favour of the exporter is inextricably connected with the export of goods outside the territory of India - communication between the foreign buyer and the exporter reveals that the foreign buyer wanted the bus bodies to be manufactured by the assessee under the specifications stipulated by the foreign buyer. The bus bodies constructed and manufactured by the assessee could not be of any use in the local market, but were specifically manufactured to suit the specifications and requirements of the foreign buyer. In the purchase order placed on the assessee by the exporter, it is specifically indicated that the bus bodies have to be manufactured in accordance with the specifications provided by the foreign buyer, failure to do so might result in cancellation of the export order. The assessee in this case has succeeded in showing that the sale of bus bodies have occasioned the export of goods. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the same goods theory has no application, assessee is entitled to exemption under section 5(3) of the CST Act - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of commodities under Sales Tax Appellate Tribunal order
2. Entitlement to exemption under Section 5(3) of the Central Sales Tax Act
3. Justification of penalty under Section 12(3)(b) of the TNGST Act

Analysis:
1. The assessee challenged the Sales Tax Appellate Tribunal's decision regarding rough granite blocks and polished granite slabs being considered as two different commodities. The Tribunal rejected the assessee's claim for exemption under Section 5(3) of the Central Sales Tax Act based on this distinction. However, the Supreme Court precedent in the case of State of Karnataka Vs. Azad Coach Builders Pvt. Ltd. clarified that an inseverable link between local sales and export sales justifies exemption under Section 5(3). The Court held that if there is an integral connection between the local sale and the export, the assessee is entitled to exemption. The Court applied this precedent to the case at hand, ruling that the assessee should be granted exemption under Section 5(3) of the CST Act.

2. The Court considered the argument raised by the Revenue regarding the absence of evidence on a prior export agreement for polished granite. However, since this point was not raised before the Sales Tax Appellate Tribunal, the Court rejected the Revenue's plea in the present Tax Case Revision. The Court relied on the decision in the State of Karnataka Vs. Azad Coach Builders Pvt. Ltd. case to set aside the Tribunal's order, allowing the Tax Case (Revision) and overturning the Tribunal's decision. The Court emphasized that no costs were to be awarded in this matter.

3. In conclusion, the High Court of Madras, in the judgment delivered by Chitra Venkataraman, J., addressed the issues of commodity interpretation, entitlement to exemption under Section 5(3) of the CST Act, and the justification of penalties under Section 12(3)(b) of the TNGST Act. The Court applied relevant Supreme Court precedents to rule in favor of the assessee, setting aside the Sales Tax Appellate Tribunal's order and allowing the Tax Case (Revision) without costs.