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2014 (8) TMI 860 - HC - VAT and Sales TaxExemption from sales tax / VAT - penultimate sales - sale occasioning the export - Petitioner sold and supplied Submarine Navy Batteries to M/s. Crown, who in turn exported the same to the Algerian Navy - 2004 ARE -1 was prepared by the Petitioner showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee - Held that - The petitioner contended that its case was covered by the judgment of the Supreme Court in the case of Consolidated Coffee (1980 (4) TMI 278 - SUPREME COURT OF INDIA). - the sale of the Submarine Navy Batteries by the Petitioner to M/s Crown was the last sale preceding the sale occasioning the export as contemplated under section 5(3) and the same took place after, and for the purpose of complying with the purchase order dated 25th May 2004, placed by the Algerian Navy on M/s Crown. In view thereof, the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on 14th September 2004 were deemed to be in the course of export as contemplated under section 5(3) of the CST Act and therefore, could not be taxed as a local sale under the provisions of the BST Act. Section 5 was amended by the Central Sales Tax (Amendment Bill, 1976) by inserting sub-section (3) therein to provide that the last sale or purchase of any goods preceding the sale or purchase occasioning export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export. 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. The clauses in the purchase order / agreement dated 5th March, 2004 between the Petitioner and M/s Crown also indicate that the Submarine Navy Batteries were for the purposes of export to the Algerian Navy. Furthermore, the ARE-1 showed the Petitioner as the seller, M/s Crown as the buyer and the Algerian Navy as the consignee. These facts are undisputed. In this view of the matter, it can hardly be argued that there was no inextricable link between the local sale by the Petitioner to M/s Crown and the export of those very goods thereafter to the Algerian Navy. There was an inextricable link between the local sale by the Petitioner to M/s Crown, and the export of those very goods thereafter to the Algerian Navy. - Decided in favour of assessee.
Issues Involved:
1. Maintainability of the Writ Petition due to non-exhaustion of alternate remedies. 2. Interpretation of Section 5(3) of the Central Sales Tax Act, 1956 (CST Act). 3. Taxability of the sale of Submarine Navy Batteries under the Bombay Sales Tax Act, 1959 (BST Act). Issue-wise Detailed Analysis: 1. Maintainability of the Writ Petition: The Respondents raised a preliminary objection regarding the maintainability of the Writ Petition, arguing that the Petitioner had not exhausted the alternate remedy of filing a Reference Application under Section 61 of the BST Act. The Court rejected this argument, stating that the issue at hand questioned the very jurisdiction of the taxing authority under the BST Act to levy sales tax on the sale of Submarine Navy Batteries. The Court noted that the availability of an alternate remedy does not bar the entertainment of a writ petition, especially when the question raised is a fundamental one going to the root of the matter. The Court exercised its discretion to entertain the Writ Petition on merits, given the undisputed facts and the fundamental legal question involved. 2. Interpretation of Section 5(3) of the CST Act: The core issue was whether the sale of Submarine Navy Batteries by the Petitioner to M/s Crown fell within the purview of Section 5(3) of the CST Act, deeming it a penultimate sale in the course of export. The Petitioner argued that the sale was exempt from sales tax under the BST Act, as it was for the purpose of complying with an export order placed by the Algerian Navy on M/s Crown. The Respondents contended that the sale did not qualify under Section 5(3) because the purchase order from M/s Crown to the Petitioner preceded the export order from the Algerian Navy. The Court analyzed the provisions of Section 5(3) and concluded that the sale by the Petitioner to M/s Crown was indeed the "last sale preceding the sale occasioning the export" and took place after and for the purpose of complying with the export order. The Court relied on the Supreme Court's judgment in Consolidated Coffee Ltd. v. Coffee Board, which clarified that the word "sale" in Section 5(3) refers to a completed sale and not an agreement to sell. 3. Taxability under the BST Act: The Court examined whether the sale of Submarine Navy Batteries by the Petitioner to M/s Crown could be taxed as a local sale under the BST Act. It was found that the sale was inextricably linked with the export of the goods to the Algerian Navy, as evidenced by the purchase orders and other documents. The Court held that the sale was in the course of export and covered by Section 5(3) of the CST Act, making it exempt from local sales tax under the BST Act. The Court also addressed the judgments cited by the Respondents, including Azad Coach Builders Pvt. Ltd. and Saraf Trading Corporation, and distinguished them on the facts, affirming that the inextricable link between the local sale and export was established in the present case. Conclusion: The Court concluded that the order of revision dated 25th May 2011 and the MSTT's order dated 22nd November 2012 could not be sustained. The Writ Petition was granted, and the impugned orders were set aside. The sale of Submarine Navy Batteries by the Petitioner to M/s Crown was deemed to be in the course of export and exempt from sales tax under the BST Act.
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