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2020 (8) TMI 686 - HC - VAT and Sales TaxPenultimate sale - leather garments - Exemption under Section 5(3) of the Central Sales Tax Act, 1956 - purchase of raw hides and skins - exemption denied on the ground that the goods in question exported viz., leather garments were not the same goods as the goods purchased, viz., Raw Hides and Skins and therefore, the Assessee was not entitled to exemption under Section 5(3) of the Act - HELD THAT - There are no details of entire chain of transactions established by the Assessee at all. Neither the details of export orders are available, nor the purchases of Raw Hides made by the Assessee directly linked to such export orders after being converted into Leather Garments is established - there are no discussion in any of the orders of authorities below passed by them and placed. The mere claim of the Assessee that the Assessing Authority had initially allowed such exemption under Section 5 (3) of the Act upon due scrutiny of the transactions is not acceptable, because the finding of facts with regard to inextricable link between the sale or purchase claimed to be exempted under Section 5(3) of the Act and the export has to be established by the Assessee by leading evidence. Since such findings are not available, it cannot be held that the Assessee is entitled to such exemption under Section 5(3) of the Act, nor the order of the learned Tribunal or the Assessing Authority, allowing such exemption without the facts being fully and properly examined with due scrutiny by the Assessing Authority, can be sustained. The matter deserves to be remanded back to the learned Assessing Officer for passing fresh orders after giving an opportunity of hearing to the Assessee and allowing him to lead requisite evidence to establish such inextricable link between the sale or purchase of the raw hides and skins in question and the export of leather garments or Dressed Hides and Skins by the Assessee - Petition allowed by way of remand.
Issues Involved:
1. Whether the raw hides and skins and tanned hides and skins are two different commodities or one and the same. 2. Whether the commodity, when called by different names, can be taxed again under the TNGST Act, 1959, if it had already been exempted from tax under Section 5(3) of the CST Act, 1956. 3. Whether the assessee is entitled to exemption under Section 5(3) of the CST Act, 1956, for the purchase of raw hides and skins used in the manufacture of leather garments that were subsequently exported. 4. Whether the writ petitions are maintainable given the delay and latches in filing them. Detailed Analysis: Issue 1: Different Commodities or Same The court examined whether raw hides and skins and tanned hides and skins are considered different commodities. The Tribunal had relied on various judgments and section 14(iii) of the CST Act, 1956, which includes "hides and skins whether in a raw or dressed state." The Tribunal concluded that dressed hides and skins are not different commodities from raw hides and skins. The court noted that the process of tanning amounts to manufacturing, but this does not necessarily mean that different goods emerge. The essential condition is whether the dealers complied with the export orders for hides and skins. Issue 2: Taxation of Commodities with Different Names The Tribunal observed that once the commodity is exempted under Section 5(3) of the CST Act, 1956, it cannot be taxed again under the TNGST Act, 1959, even if it is called by different names. The court noted that the Tribunal had relied on judgments that supported the view that dressed hides and skins are included in the term "hides and skins" and hence should be treated as one commodity for taxation purposes. Issue 3: Entitlement to Exemption under Section 5(3) The court examined whether the assessee was entitled to exemption under Section 5(3) of the CST Act, 1956, for the purchase of raw hides and skins used in the manufacture of leather garments that were subsequently exported. The Tribunal had allowed the exemption, but the court noted that the inextricable link between the purchase of raw hides and skins and the export of leather garments was not established. The court referenced the Constitution Bench decision in the case of State of Karnataka vs. Azad Coach Builders, which emphasized the need for an inextricable link between the local sale or purchase and the export of goods. The court found that the details of export orders, purchases of raw hides and skins, and names of local sellers were not discussed in the orders passed by the authorities below. Issue 4: Maintainability of Writ Petitions The respondents raised a preliminary objection regarding the maintainability of the writ petitions due to delay and latches. They argued that the State had a remedy by filing a Tax Revision Case before the Special Tribunal, which was not availed at the appropriate time. However, the court overruled this objection, considering the important questions of law involved in the case. Conclusion: The court allowed the writ petitions filed by the State, setting aside the orders passed by the authorities below. The matter was remanded back to the Assessing Officer to pass fresh assessment orders after giving an opportunity of hearing to the assessee and allowing them to lead requisite evidence to establish the inextricable link between the purchase of raw hides and skins and the export of leather garments. The court emphasized that unless the facts are established with evidence, the assessee would not be entitled to exemption under Section 5(3) of the CST Act, 1956. The court directed the Assessing Officer to pass fresh assessment orders within six months. No costs were awarded.
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