2016 (9) TMI 827 - HC - VAT and Sales Tax

Demand of tax with interest - imposition of penalty under Section 45(6) of the Act - documents in support of the claim for exemption from demand of tax - GVAT - Penultimate sale - drums - packing material - export consignment - local sales - benefit of tax exemption on penultimate sale - Held that - the penultimate sale before export of the goods shall also be deemed to be in course of such export provided the conditions contained in sub-section 3 of Section 5 are satisfied. For applicability of sub-section 3 of Section 5, the seller has to fulfill the requirements of sub-section 4, failing which the provisions of sub-section 3 would not apply. The requirements are thus prescribed to ensure the compliance requirements under sub-section 3 and further to ensure that the competent authority can verify the claim of the assessee of being a penultimate seller of the goods in course of export sale. To satisfy the requirements of sub-section 4 of Section 5, a necessary declaration as prescribed under the Rules would have to be made. This would include declaration containing specified details. These details provided in items no.3 to 6 to the Schedule contain various information such as name of airport, seaport or land customs station through which the goods have been exported, name of airlines, ship etc. or other means of transport through which the export has taken place and such other relevant details. All these requirements would relate to actual export of goods sold by the assessee to the exporter. Only through such declarations would it be possible for the Assessing Authority to verify the claim of a dealer that the goods supplied were for the purpose of export and were actually exported by the purchaser-exporter. Mere declaration or assertion by the assessee would not be sufficient. Only upon satisfying such requirements contained in sub-section 4 of Section 5, the assessee would be covered by the deeming fiction provided under sub-section 3 of Section 5 and can claim the benefit of the export sale. When the revisional authority noticed discrepancies in the different documents supplied by the assessee, he was within his rights to deny the benefit of tax exemption to such extent. The penalty is discretionary and can be levied upto 1 times the difference between the amount paid and tax assessed. Their is no attempt on part of the assessee to avoid payment of legitimate taxes - no penalty levied. Demand of tax and interest upheld. Imposition of penalty withheld - petition disposed off - decided partly in favor of respondent.

Summary

Issues:
Challenge to Tribunal's judgment on tax exemption for sales to exporters and penalty imposition.

Analysis:
1. The State Government filed petitions challenging the Tribunal's judgment on tax exemption for sales to exporters. The respondent, a drum manufacturer, supplied drums to companies for export and local sales. The revisional authority raised additional tax demands and penalties for alleged discrepancies in documents produced by the assessee.

2. The Tribunal allowed the revision petitions, stating that sales to exporters cannot be identified bill to bill basis due to the ongoing supply process. The Tribunal also ruled that penalty cannot be imposed for the first time at the revisional stage. The State Government contended that the Tribunal erred in treating the requirements as procedural or technical, and the revisional orders on tax demand with interest should not have been interfered with.

3. Section 5 of the Central Sales Tax Act was discussed, emphasizing sub-sections 3 and 4. Sub-section 3 deems the last sale before export as part of the export sale, subject to compliance conditions. Sub-section 4 requires a declaration from the seller to the prescribed authority to verify the export claim. The Tribunal's error was highlighted in treating these requirements as procedural.

4. The Certificate in Form H under Rule 12 of the Central Sales Act provides specific details for the declaration, crucial for verifying actual export of goods. The Tribunal's decision was deemed erroneous as the Assessing Authority must be able to verify the export claim based on the prescribed requirements.

5. The Court agreed that if the benefit of Section 5(3) is denied, the sales should be taxed as local sales, not inter-state sales. The revisional authority incorrectly taxed the sales as inter-state without proof of export, leading to a directive for the Assessing Officer to revise the sales tax demand accordingly.

6. Two decisions were referenced, emphasizing the importance of meeting the requirements of sub-section 4 of Section 5 for claiming exemptions. The penalty imposition was discussed, highlighting the discretionary nature of penalties and the lack of evidence of tax avoidance by the assessee. The Tribunal's decision on penalty imposition was upheld, keeping the question of levying penalties in revisional proceedings open.