2015 (1) TMI 545 - HC - VAT and Sales Tax

Denial of exemption under Section 5(2) of the Central Sales Tax Act, 1956 - Rejection on the ground that transaction is an inter-state sale falling under Section 3(a)-Validity of the assessment orders dated 20.1.2010 and 18.5.2010 passed by the Commercial Tax Officer - Agreement between assessee and Radha Industries, for which assessee was acting only as agent for Radha - whether there was a sale of goods by the petitioner, or whether it constituted a commission transaction as stated by them; and in the computer print out of the petitioners trading account, for the year 2005-06, the purchase was shown as purchase trading (high seas), and the relevant sale was shown as sales trading (high seas) - petitioners claim for exemption, on the ground that the said sale was effected by a transfer of documents of title to the goods before the goods had crossed the customs frontiers of India falling under Section 5(2) of the Act, the Commercial Tax Officer held that the goods must be treated as having crossed the customs frontiers of India, when the bill of entry was made and the goods were assessed to customs duty; the sale, effected by the petitioner, could not be said to be sales in the course of import or high sea sales in as much as the goods had crossed the customs frontiers; the second high sea sale agreement had not come into operation when the sale took place; there was no case for claiming that the transfer of documents was effected by virtue of the said agreement itself. Does the territorial assessing authority, before whom the dealer files his returns under the CST Act, have jurisdiction to pass an assessment order in the absence of authorisation from the Deputy Commissioner - Held that - Section 9(2) of the CST Act provides that the authorities empowered to assess, reassess, collect and enforce payment of tax under the general sales tax law of the appropriate State, shall assess, re-assess, collect and enforce payment of tax under the CST Act as if the tax payable by such a dealer under the CST Act is a tax payable under the general sales tax law of the State. The said section further provides that, for this purpose, the authorities under the general sales tax law of the State may exercise all or any of the powers they have under the general sales tax law of the State and the provisions of such law, including provisions relating to returns etc, shall apply accordingly. The last limb of Section 9(2) of the CST Act, viz. and the provisions of such law........ shall apply accordingly , mean that the provisions of the State Act are applicable for the purpose of assessment, re-assessment, collection and enforcement of payment of tax including penalty payable under the CST Act. The words, in the last part of section 9(2) viz. shall apply accordingly , relate clearly to the words and for this purpose with the result that the provisions of the State Act shall apply only for the purpose of assessment, reassessment, collection and enforcement. The entire authority of the State machinery is for this purpose meaning thereby the purpose of assessing, re-assessing, collecting and enforcing payment of tax including any penalty payable under the Central Act; and they, meaning the State agencies, may exercise powers under the general sales tax law of the State. The APGST Act, 1957 was repealed by Section 80(1) of the VAT Act. However, in view of the proviso thereto, such repeal did not effect the previous operation of the APGST Act or any right, title, obligation or liability already acquired, accrued or incurred thereunder; and, subject thereto, anything done or any action taken (including any appointment, notification etc.) in the exercise of any power conferred by or under the APGST Act must be deemed to have been done or taken in the exercise of the powers conferred by or under the VAT Act, as if the VAT Act was in force on the date on which such thing was done or action was taken. While the assessing authority, as prescribed in GO Ms.No.728 dated 14.07.1970, continues to be the Commercial Tax Officer of the circle even after the VAT Act came into force, the power of assessment under the VAT Act is conferred not on the assessing authority, but on the prescribed authority. It is only the authority, prescribed under Rule 59, who can make assessment under the VAT Act and not the assessing authority under Section 2(4) thereof or in G.O.Ms.No.728 dated 14.07.1970. Unlike the VAT Act, which confers power of assessment on the prescribed authority, the AP Rules confer power of assessment on the assessing authority which, in terms of GO Ms.No.728 dated 14.07.1970 issued in the exercise of the powers conferred under Section 2(1)(b) of the APGST Act, is the Commercial Tax Officer of the concerned circle. As neither Section 2(4) of VAT Act, nor the Commissioner under Section 3-A thereof, have specified who an assessing authority is, the assessing authority under G.O.Ms. No.728 dated 14.07.1970 continues to remain the assessing authority even after the VAT Act came info force in view of the proviso to Section 80 thereof. Contention, urged on behalf of the petitioner, that the Commercial Tax Officer of the circle, before whom the petitioner files his monthly returns, lacks jurisdiction to pass the impugned assessment orders does not merit acceptance - Suffice it to make it clear that the Commercial Tax Officer of the Circle, before whom a dealer files his CST returns, is empowered to assess him to tax under the CST Act. Does filing of a bill of entry by the petitioner, and their being assessed to customs duty, make the sale to Radha Industries an inter-state sale? - Held that - goods would not be thought to have been imported if they were carried through the territorial waters of the Indian coast by a ship which did not put them into an Indian port. Importation of goods does not take place as soon as the ship carrying them enters the marginal seas, perhaps only to leave them again for navigational purposes as it moves towards the port of discharge. Entry into the port, with the intention of being landed, constitutes importation. (Shri Ramlinga Mills Pvt. Ltd. v. Assistant Collector of Customs 1982 (3) TMI 68 - HIGH COURT OF KERALA AT ERNAKULAM . If the goods are brought into their port of destination for the purpose of being there discharged, the act of importation is complete. On the other hand, the act of importation is not complete if a ship enter some port of call with goods on board which is not the destined port of discharge of those goods. Unless the goods, brought into the country for the purpose of use, enjoyment, consumption, sale or distribution, are incorporated in and get mixed up with the totality of the property in the country, they cannot be said to have been imported. The law declared by the Division Bench, in Minerals and Metals Trading Corporation of India Ltd. 1998 (3) TMI 644 - ANDHRA PRADESH HIGH COURT , is that when the goods are assessed to duty by the Customs Authorities, after the bill of entry is filed, the importation is completed even if duty is not paid, and the goods remain within the customs station; it is only after the Bill of Entry is filed, and the import duty is assessed, can the goods cross the limits of the Customs Station; transfer of documents of title before clearance of goods by the Customs authorities, but after assessment of goods, would not amount to a sale in the course of import irrespective of whether duty is paid or not; on assessment to customs duty, after the Bill of Entry is filed, the goods get mingled with the general mass of goods and merchandise in the country; and physical movement of goods out of the customs station, and the time at which the duty is paid, would not be relevant. - The questions, whether the name on the bill of entry is relevant or not, and whether or not the name of the importer alone will be recorded in the Bill of Entry even if transfer by title deeds is effected before filing the bill of entry and assessment of duty under Section 28 of the Customs Act, did not arise for consideration in Minerals and Metals Trading Corporation. The observations of the Division bench in this regard are not preceded by an analysis of the relevant provisions of the Customs Act nor is it supported by any reason. These observations are, therefore, not a declaration of law binding on a co-ordinate bench. The assessing authority is, therefore, justified in holding that sale of goods by the petitioner to Radha Industries is not a sale in the course of import, but an inter-state sale liable to tax under the CST Act. Did the sale in favour of Radha Industries, Lucknow occasion movement of goods into the country? - Held that - The petitioners case before the assessing authority was that the documents of title to the goods were transferred on high seas i.e., during the movement of goods from the country of export to India. It is for the first time before this Court, in proceedings under Article 226 of the Constitution of India, has this plea, of the sale of goods to M/s. Radha Industries having occasioned the import of goods, been taken placing reliance on certain clauses of the agreements. This Court would not, in proceedings under Article 226 of the Constitution of India, either re-appreciate the evidence on record or don the robes of the assessing authority to examine disputed questions of fact or interpret the clauses of the agreements. As this contention is not a pure question of law and, at best, is a mixed question of facts and law, this Court would be loathe to undertake such an exercise. Even otherwise, the submission that the sale to Radha Industries occasioned the import of goods is belied by the fact that it is the name of the petitioner which is reflected in the Bill of Entry as the importer of the goods, and not Radha Industries. The submission of Sri S. Ravi, Learned Senior Counsel, that the sale of goods to Radha Industries had occasioned the import necessitates rejection. Is the procedure prescribed for duty free shops applicable to the present case? - Held that - Duty free shops are, in law, taken as being located beyond the customs frontiers and, consequently, the sale of goods at the duty free shops is in the course of import. Reliance placed by the petitioner on Hotel Ashoka (Indian Tour. Dev. Cor. Ltd) 2012 (2) TMI 62 - Supreme Court of India , to contend that the goods sold to Radha Industries is in the course of import, is therefore of no avail. Is the petitioner entitled to be granted time to submit C Forms - Held that - Rule 12(7) enables the assessing authority, on sufficient cause being shown, to grant further time for production of C forms. Such an opportunity can be granted even after an assessment order is passed, provided sufficient cause is shown. On production of the prescribed C-Forms, the petitioner would be entitled to pay concessional rate of tax. As the petitioner can furnish C-Forms, in terms of the proviso to Rule 12(7) of the CST (R&T) Rules, even after the assessment order is passed, we see no reason to deny them an opportunity to produce the C-Forms, and avail the benefit of concessional rate of tax. Impugned assessment orders do not necessitate interference, and the challenge thereto by the petitioner is rejected. The petitioner is, however, granted three months time from today to produce the prescribed C- Forms. While the assessing authority has expressed his doubts regarding the very existence of some of the dealers outside the State, it is not necessary for us to delve on this aspect any further, as it is only if such dealers are in existence would the petitioner be able to procure C-Forms from them, and furnish it to the assessing authority. While the prescribed concessional rate of tax, payable by the petitioner on the inter-state sale of goods, shall be paid by them forthwith, the respondents shall not take coercive steps for recovery of the balance tax for a period of three months from today. In case the petitioner produces C-Forms within the aforesaid three month period, they shall be extended the benefit of concessional rate of tax to the extent for which C-Forms are produced. It is made clear that, in case the petitioner fails to submit the C-Forms within three months from today, it is open to the respondents thereafter to proceed and recover the balance tax due from them in accordance with law. - Decided against the assessee. However,assessee granted three months period to produce the prescribed C-forms to avail benefit of concessional rate of tax.

Summary

Issues Involved:
1. Jurisdiction of the Territorial Assessing Authority
2. Judicial Review of an Assessment Order
3. Nature of the Sale: Inter-State Sale vs. Sale in the Course of Import
4. Filing of Bill of Entry and Assessment to Customs Duty
5. Applicability of Duty-Free Shops Procedure
6. Opportunity to Submit C Forms

Detailed Analysis:

I. Jurisdiction of the Territorial Assessing Authority:
The petitioner argued that the assessment order was invalid due to the lack of authorization from the Deputy Commissioner as required under the A.P. Value Added Tax Act and Rules. The court held that the Commercial Tax Officer, before whom the dealer files his CST returns, is empowered to make assessments under the CST Act without needing additional authorization from the Deputy Commissioner. This is in line with Rule 14-A of the Central Sales Tax (Andhra Pradesh) Rules, 1957, which allows the assessing authority to determine turnover and assess tax if returns are incorrect or incomplete.

II. Judicial Review of an Assessment Order:
The court emphasized that judicial review under Article 226 of the Constitution is limited to correcting errors of jurisdiction or manifest errors apparent on the face of the record. The court does not act as an appellate body to re-weigh evidence or review findings of fact. The court found that the assessing authority's conclusion-that the transactions were inter-state sales and not high-sea sales-was based on adequate evidence and did not warrant interference.

III. Nature of the Sale: Inter-State Sale vs. Sale in the Course of Import:
The petitioner contended that the sale to Radha Industries was a high-sea sale and thus a sale in the course of import. The court noted that the assessing authority had considered the relevant documents and found that the sale occurred after the goods had crossed the customs frontiers of India. The court held that the sale to Radha Industries was an inter-state sale, as the goods were assessed to customs duty in the petitioner's name, and the bill of entry listed the petitioner as the importer. The court also rejected the petitioner's new argument that the sale occasioned the import, as it was not raised before the assessing authority.

IV. Filing of Bill of Entry and Assessment to Customs Duty:
The court examined the implications of filing a bill of entry and being assessed to customs duty. It held that the importation process is complete once the bill of entry is filed and customs duty is assessed. The court rejected the petitioner's argument that they acted merely as an agent, as the bill of entry listed them as the importer, and they were assessed to customs duty. The court also clarified that the observations in "Minerals and Metals Trading Corporation of India Ltd." regarding the irrelevance of the name on the bill of entry do not constitute a binding precedent.

V. Applicability of Duty-Free Shops Procedure:
The petitioner cited the Supreme Court's decision in "Hotel Ashoka (Indian Tour. Dev. Cor. Ltd.)" to argue that their case was similar to sales at duty-free shops, which are considered sales in the course of import. The court distinguished the present case, noting that duty-free shops are legally considered beyond the customs frontiers of India, whereas the petitioner's goods had crossed the customs frontiers and were assessed to customs duty.

VI. Opportunity to Submit C Forms:
The petitioner requested an opportunity to submit C Forms if the sales were considered inter-state sales. The court, citing "Sahney Steel & Press Works Ltd. v. Commercial Tax Officer," granted the petitioner three months to produce C Forms. If the petitioner fails to do so within this period, the respondents are allowed to proceed with the recovery of the balance tax.

Conclusion:
The court upheld the assessment orders, confirming that the sales were inter-state sales liable to tax under the CST Act. However, the petitioner was granted three months to submit C Forms to avail the benefit of concessional tax rates. The court dismissed the writ petitions but allowed the petitioner an opportunity to comply with the tax requirements.