2017 (12) TMI 264 - HC - VAT and Sales Tax

Exemption from CST - disallowance of export sales - demand on the ground that on the ground that the petitioner did not produce documents to show that he had realised the proceeds of the export sale in foreign currency, in India - Held that - there is no provision under the Act or Rules which mandates that the petitioner should produce a document showing realisation of export proceeds as a condition for claiming the exemption that is available for transactions which are in the nature of sale transaction in the course of export. The exemption under the CST Act is available to an assessee if he demonstrates that the sale transaction occasioned a movement of the goods from within the country to a place outside the country. The documents produced by the petitioner clearly indicate that the goods, which were the subject matter of the sale transaction with a foreign buyer, had left the shores of India for a foreign destination as shown in the documents. In the absence of anything to suggest that the goods did not cross the customs frontiers of India, the respondents cannot take a stand that the transaction in question was not an export sale transaction for the purposes of exempting the transaction from the levy of CST under the CST Act - Petition allowed - decided in favor of petitioner.

Summary

Issues:
Assessment under the Central Sales Tax Act for the assessment years 2013-2014 and 2014-2015 challenged based on export sales and non-realization of export proceeds.

Analysis:

Assessment under CST Act for 2014-2015:
The petitioner, engaged in inter-state and export sale of electric and electronic goods, faced assessment under the CST Act for the year 2014-2015. Initially, assessments granted exemptions for export sales and applied concessional tax rates for interstate sales, except for transactions lacking necessary C-Forms. Subsequently, a notice was issued for re-opening the assessment due to alleged failure in providing documents proving export sales. Despite the petitioner's submission of necessary documents, a revised notice was issued, this time focusing on the non-realization of export proceeds in foreign currency. The assessment was reopened, disallowing export sales. The petitioner challenged the assessment orders (Ext.P7) in W.P.(C). No.19614/2017.

Counter-affidavits and Legal Standpoint:
Counter-affidavits supported the assessment orders, emphasizing the petitioner's failure to demonstrate the receipt of export proceeds in India. Rule 47(ii) of the KVAT Rules was cited to argue that without proof of export proceeds receipt in India, a dealer cannot claim input tax refund. The necessity of documents showing realization of export proceeds in foreign currency was highlighted to avail tax concessions or exemptions for export sales.

Court's Decision and Reasoning:
After hearing all parties, the court analyzed the impugned orders and found the demand for differential tax solely based on the absence of documents proving realization of export proceeds in foreign currency. The court noted that there is no legal mandate requiring such proof for claiming exemptions under the CST Act for export transactions. The court emphasized that the exemption is available if the goods have moved from within the country to outside. Documents indicated the goods left India for a foreign destination, and without evidence suggesting otherwise, the transaction should be considered an export sale exempt from CST. The court rejected the notion that non-receipt of sale consideration automatically converts an export sale into a local sale, stating that taxing authorities cannot levy tax on unrecouped turnover. Consequently, the court deemed the reasoning of the respondents unsustainable, quashed the impugned orders, and granted relief to the petitioner in W.P.(C). No.19614/2017.

This detailed analysis of the judgment from the Kerala High Court showcases the legal intricacies involved in challenging assessments under the CST Act, emphasizing the importance of proper documentation and legal interpretation in tax matters related to export sales and realization of proceeds.