2009 (7) TMI 1181 - HC - VAT and Sales Tax

Levy of Central sales tax on the alleged export of cotton yarn - Held that - The date of invoice of the petitioner should be the relevant date to find out whether the penultimate sale occurred either prior to or after the date of the export order. In the case on hand, the export order was admittedly on December 26, 1987, the invoice prior to which the sales came to be effected by the petitioner was on November 14, 1988, which was long after the date of export order and consequently on this ground as well the petitioner is bound to succeed. Thus the impugned order of assessment of the first respondent dated April 8, 1991 and the order of the Appellate Assistant Commissioner dated November 5, 1992, as well as that of the Tribunal dated January 9, 1998, are hereby set aside. The writ petition stands allowed.

Issues Involved:
1. Levy of Central Sales Tax on alleged export of cotton yarn.
2. Applicability of Notification under Section 8(5) of the Central Sales Tax Act.
3. Applicability of Section 5(3) of the Central Sales Tax Act.
4. Date relevance for determining penultimate sale under Section 5(3).

Issue-wise Detailed Analysis:

1. Levy of Central Sales Tax on alleged export of cotton yarn:
The assessee challenged the levy of Central Sales Tax on the alleged export of cotton yarn amounting to Rs. 1,50,32,547.21 for the assessment year 1988-89. The revised taxable turnover was determined at Rs. 1,05,11,878, with a tax of Rs. 2,10,238. The petitioner's appeal was rejected by the Additional Appellate Commissioner and the Tribunal, leading to this writ petition.

2. Applicability of Notification under Section 8(5) of the Central Sales Tax Act:
The petitioner relied on a Notification dated July 27, 1970, issued under Section 8(5) of the Central Sales Tax Act, which exempted tax on sales of cotton yarn to registered exporters. The court held that this notification remained in force and provided that the petitioner had effected inter-State sales to a registered exporter, the export obligation was fulfilled, and proof of such export was satisfactorily established.

3. Applicability of Section 5(3) of the Central Sales Tax Act:
The petitioner argued that the sale and supply effected were subsequent to the foreign buyer's order, thus qualifying for exemption under Section 5(3). The court agreed, stating that once Section 5(3) is applicable, the liability to tax under Section 6 and the rate of tax under Section 8 would not apply. The court noted that Section 5(3) was intended to prevent tax imposition on penultimate sales in export transactions, thereby avoiding an increase in export prices.

4. Date relevance for determining penultimate sale under Section 5(3):
The court examined whether the date of the invoice or the purchase order was relevant for applying Section 5(3). The petitioner's invoice was dated November 14, 1988, which was after the export order dated December 26, 1987. The court, referencing the Supreme Court decision in Consolidated Coffee Ltd. v. Coffee Board, Bangalore, held that the date of the invoice should be considered to determine the penultimate sale. Since the petitioner's sale occurred after the export order, the petitioner was entitled to the benefits under Section 5(3).

Conclusion:
The court concluded that the petitioner was entitled to the relief under the Notification dated July 27, 1970, and the benefits of Section 5(3). Consequently, the impugned order of assessment dated April 8, 1991, and the orders of the Appellate Assistant Commissioner and the Tribunal were set aside. The writ petition was allowed, and no costs were imposed.

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