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2024 (6) TMI 368 - HC - VAT and Sales TaxSale or not - shipment of goods to Rotterdam, Netherlands, against firm purchase orders of foreign buyers - time gap exceeding 100 days between the end of transit and date of lifting by the foreign buyer - inclusion of value of Stock transfer of finished goods - not addressing the issue of apportionment methodology adopting a proper trade cycle as per Rule 132 (1) of the KVAT Rules - not allowing the concessional rate of 4%, in accordance with notification No. FD 300 CSL 2005 dated 24.10.2005 - levy of penalty. Whether, on the facts and in the circumstances of the case, the Honourable Karnataka Appellate Tribunal was right in law in holding that shipment of goods to Rotterdam, Netherlands, against firm purchase orders of foreign buyers is not a sale in the course of export under Section 5 (1) of the CST Act if there is a time gap exceeding 100 days between the end of transit and date of lifting by the foreign buyer? - HELD THAT - The Tribunal has not recorded any finding with regard to the allegations of the authorities that the stock transfer is treated as sale in the course of export to claim benefit of Section 5 of the CST Act. The finding of fact recorded by the Tribunal is not challenged by the State. On examination of the scope of Section 5 (1) of the CST Act, we are of the view that the export from India to foreign destination and the sale of such exported goods is not in dispute. The State has not even contended that the goods exported outside India against a firm orders has been supplied other than to the importers to consider it as a local sale - It is settled position of law that while interpreting the physical statute, it is not permissible for the Court to either read in or read out any words into the statute. The provisions of fiscal statute has to be read in a plain context. When Section 5 (1) of the CST Act even does not suggest any timeline or not to consider the sale as export after expiry of a particular period, the Tribunal committed an error in prescribing 100 days. The 100 days fixed to convert sale in the course of export as stock transfer is without jurisdiction - the question is ansewered in the negative, in favour of the dealer and against the Revenue. Whether, on the facts and in the circumstance of the case, the Honourable Karnataka Appellate Tribunal was right in law in considering the value of stock transfer of finished goods, manufactured out of non-local inputs, in computing the non-deductible input tax as per Rule 131 of the KVAT Rules read with Section 17 of the KVAT Act? - HELD THAT - To the extent the goods purchased outside the State cannot form part of the formula under Rule 131 of the KVAT Rules 2005. The orders impugned have not considered the above specific contention of the dealer. The prescribed authority, appellate authority and the Tribunal are bound to record a finding on the issues raised and also being the fact finding authorities. In the absence of any finding of fact recorded by all the three authorities, we are of the view that matter requires to be reconsidered to address the specific issue as raised by the dealer in its reply dated 11.08.2008. Without answering the question of law, we deem it appropriate to remit the said issue for fresh consideration to the prescribed authority after granting an opportunity to the dealer. Whether, on the facts and in the circumstances of the case, the Honourable Karnataka Appellate Tribunal was right in law in not addressing the issue of apportionment methodology adopting a proper trade cycle as per Rule 132 (1) of the KVAT Rules, thereby impliedly approving the action of the lower authorities? - HELD THAT -Section 17 r/w Rule 132 and the circular dated 26.06.2006 clearly mandates that the Commissioner has to be moved by the dealer or the departmental officer concerned to specify the special formula. The language used u/sec. 17 of the Act is the Commissioner to approve special method, which according to us if a proposal or a request is made by the dealer, such special method can be approved. Section 17 does not mandate specifying special method by the Commissioner suo moto, in the absence of any request by the dealer - In the present case, before the prescribed authority and the First Appellate Court, the appellant was agitating the issue relating to rate of tax whether at 12.5% or 4%. The prescription of special method was for the first time raised before the First Appellate authority. Considering the scheme of Section 17 r/w Rule 131 and 132 of the Rules, we are of the view that the request for specifying special method by the Commissioner ought to have been made during the year itself i.e. before March 2006 in the present case. After expiry of the relevant year the dealer is not right in seeking specification of special method of trade cycle before the Tribunal that to after expiry of 3 years of tax period. In our view the dealer is not entitled to seek from Commissioner to specify special method invoking Section 17 r/w Rule 131 and 132 of the Rules after lapse of relevant year - the contention of the dealer that the Tribunal has failed to adjudicate the issue is not sustainable - the aforesaid question answered in favour of the revenue and against the dealer. Whether, on the facts and in the circumstances of the case, the Honourable Karnataka Appellate Tribunal was right in law in not allowing the concessional rate of 4%, in accordance with notification No. FD 300 CSL 2005 dated 24.10.2005, on the sale of used Quallis car for the month of May 2006? - HELD THAT - The dealer is entitled for benefit of notification dated 24.10.2005 and the rate of tax on sale of Qualis vehicle is 4%. However applicability of 4% is subject to conditions at (i) and (ii). As all the authorities proceeded to reject the claim of the dealer holding notification dated 24.10.2005 is not applicable, no finding has been recorded on compliance of the conditions. As submitted by the dealer, the sale of the Qualis vehicle was during the month of May 2006. The said submission is not disputed. Hence, only to the limited extent to verify the compliance of conditions of the notification dated 24.10.2005, the issue is remitted to the prescribed authority for fresh consideration. The scope of remand is only to the extent to verify compliance of conditions - the above question of law answered in favour of the dealer. Whether, on the facts and in the circumstances of the case, the Honourable Karnataka Appellate Tribunal was right in law in not quashing the levy of penalty? - HELD THAT - Penalty provided u/sec. 72 (2) of the KVAT Act is 10% of the amount of tax under or over stated. If the tax liability is to be re-determined as per the findings given by the appellate authorities and this Court, as a consequence, the penalty also to be recomputed. On perusal of Section 72 (2) of the KVAT Act and the finding recorded by the Tribunal, we find no error in the finding recorded by the Tribunal. We answer the above question in favour of the Revenue and against the dealer. Petition allowed in part.
Issues Involved:
1. Classification of shipment of goods as a sale in the course of export u/s 5(1) of the CST Act. 2. Computation of non-deductible input tax under Rule 131 of the KVAT Rules. 3. Apportionment methodology under Rule 132(1) of the KVAT Rules. 4. Applicability of concessional rate of 4% on the sale of a used Qualis car. 5. Legality of the levy of penalty u/s 72(2) of the KVAT Act. Summary: 1. Classification of Shipment of Goods as a Sale in the Course of Export: The dealer exported goods to Rotterdam, Netherlands, and stored them in its godown before selling them to foreign buyers. The Tribunal held that if there is a time gap exceeding 100 days between the end of transit and the date of lifting by the foreign buyer, it is not a sale in the course of export u/s 5(1) of the CST Act. The High Court, however, found that the Tribunal erred in prescribing a 100-day limit, as Section 5(1) does not specify any time limit. The Court held that the transactions constituted a sale in the course of export as the goods were exported against firm orders and the sale occasioned such export. 2. Computation of Non-Deductible Input Tax: The dealer argued that goods manufactured without using local inputs should be excluded from the formula under Rule 131. The authorities did not address this contention. The High Court remitted the issue to the prescribed authority for fresh consideration, directing them to address the specific contention raised by the dealer. 3. Apportionment Methodology: The dealer contended that the trade cycle for partial rebating should be considered from December to December instead of April to March. The High Court held that Rule 132 mandates the true apportionment for the sixth and final months of the year, which is defined as commencing on the first day of April. The dealer's request for a different trade cycle was found to be contrary to the scheme of the Act. The Court answered this question in favor of the Revenue. 4. Concessional Rate on Sale of Used Qualis Car: The dealer claimed a concessional rate of 4% on the sale of a used Qualis car based on Notification No. FD 300 CSL 2005 dated 24.10.2005. The authorities denied this benefit, interpreting the notification to apply only to dealers engaged in the purchase and sale of used cars. The High Court found that the pre-amended notification applied to all dealers u/s 4(1) on the sale of used cars and remitted the issue to the prescribed authority to verify compliance with the conditions of the notification. 5. Legality of Levy of Penalty: The Tribunal directed the recomputation of penalty u/s 72(2) of the KVAT Act based on the re-determined tax liability. The High Court upheld this direction, stating that the penalty must be recomputed proportionately with the revised tax liability. The Court answered this question in favor of the Revenue. Conclusion: The High Court answered questions of law No. 1 and 4 in favor of the dealer and against the State, remitted the second question for fresh consideration, and answered questions No. 3 and 5 in favor of the State. Consequently, STRP No. 1001/2013 was dismissed, and STRP No. 202/2011 was partly allowed. No order as to costs.
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