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TMI Blog2010 (1) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... section 36(2)(c) Explanation (1) of the BST Act, decision in favour of the assessee and against the Revenue - Sale Tax Reference No. 9 of 2002 - - - Dated:- 21-1-2010 - V.C. Daga, R.M. Savant, JJ. P.C. Joshi for the Applicant V.A. Sonpal, 'A' Panel Counsel for the Respondent JUDGMENT V.C. Daga, J 1. Heard Mr. Joshi, learned counsel for the applicant and Mr. Sonpal, learned counsel for the respondent. 2. This reference under section 51 of the Bombay Sales Tax Act, 1959 ( BST Act for short) is made by the Sales Tax Appellate Tribunal to seek decision of this Court on the following substantial questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the transactions were not sales in the course of export within the ambit of section 5 of the Central Sales Tax Act, 1956? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the penalty levied under section 36(2)(c) Explanation (1) of the Bombay Sales Tax Act, 1959? The Facts: 3. The applicant is a dealer registered under the BST Act. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken us through the provision of section 5 of the CST Act, which reads as under: 5. Remission of duty on goods found deficient in quantity.- (1) The Central Government may, by rules made under this section, provide for remission of duty of excise leviable on any excisable goods which due to any natural cause are found to be deficient in quantity. (2) Any rules made under sub-section (1) may, having regard to the nature of the excisable goods or of processing or of curing thereof, the period of their storage or transit and other relevant considerations, fix the limit or limits of percentage beyond which no such remission shall be allowed: Provided that different limit or limits of percentage may be fixed for different varieties of the same excisable goods or for different areas or for different seasons. Mr. Joshi urged that the Tribunal has committed error in treating the subject sale transactions as 'local sales' and not 'sales in the course of export'. He further submits that the delivery of goods had taken place at Airport for being exported out of India. There was no possibility of goods coming back to India since goods were sold to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t business, whether manufactured or otherwise. It also defines the term export turnover . Explanation (aa) under the said section 80HHC stipulates that the export out of India will not include a transaction by way of sale or otherwise in a shop etc., which does not involve clearance at any Customs Stations as defined in the Custom Act, 1962. In order to bring home his contention, he submits that the sale in the case in hand was not a sale in the shop. He submits that this Court in the case of Abdulgafar A. Nadiadwala (supra), after considering the meaning of the words goods and merchandise and the text of the provisions of section 80HHC and the Explanation thereunder, held that the export proceeds were synonymous to the expression sale proceeds and, therefore, the amount received by the assessee as consideration in the transaction in question was export proceeds and, therefore, was eligible to the deduction provided under section 80HHC. 13. According to Mr.Joshi, this Court, in the course of its judgment at page 503 of the Report has referred to the provisions of the BST Act and Customs Act for the purpose of determining the meaning of the term goods . That at page 509 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the findings of fact on record by the First Appellate Authority on two occasions, this Court should decide the Reference on the basis of the said findings of fact not disputed by the respondent. 16. Mr. Joshi reverting back to the judgment of this Court in the case of Abdulgafar A. Nadiadwala (supra), submits that this Court has observed, on the basis of the view taken by the Allahabad High Court, that if it is to be treated as export out of India the transaction should involve clearance at customs station. If the goods were required to be cleared by the customs, either by the purchaser or the seller, it would be considered as export out of India, for the purpose of eligibility of deduction under section 80HHC. The aforesaid judgment of this Court in the case of Abdulgafar A. Nadiadwala having been affirmed by the Supreme Court in the case of C.I.T. v. B.Suresh (supra), which also considered the S.L.P. filed by the Union of India against the judgment of this Court, this Court is bound by the said judgment. 17. Mr. Joshi submits that factual scenario in the case in hand is the same and that the cases decided in relation to the interpretation of section 80HHC vis-a-vis th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... batore v. Jawahar Mills Ltd, 2001 (132) ELT 3 (SC). In that case the Apex court relied upon the decision under Income Tax and Sales Tax while interpreting the rule under the central excise Act. 21. On the above premise, Mr.Joshi prayed that all the transactions of the applicant to foreign going foreign tourists against the payment in US Dollars or other foreign currency should be treated as transactions of exports, especially, when the goods selected by the foreign going foreign tourists moved from the shop in Colaba to the International Airport and were personally handed over to the tourists concerned while they were checking-in at the counter in departure lounge as such subject sales are squarely covered by the first limb of section 5(1) of the CST Act, 1956. He, thus, submits that the Reference needs to be answered in favour of the applicant. Per contra: 22. Per contra, Mr. Sonpal, learned counsel for the respondent- State submits that the transaction in question can at the most be said to be sale for export and not sale in the course of export. That the sale has taken place in India under a reasonable belief that the purchaser will take it out of country. Taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from one person to another for consideration. Essential element is transfer of property. Rules for transfer of property are contained in Chapter III of the Sale of Goods Act, 1930. As per sub-section (3) of section 20 unless contrary intention appears, the rules contained in section 20 to 24 are applicable for asserting the intention of the parties as to the time at which the property in goods is to pass to the buyer. Admittedly, in the present case, according to Mr. Sonpal, there is no contract to the contrary to indicate when the goods would pass to the buyer as such, according to section 20 read with section 19(3), where there is an unconditional contract for sale in respect of specific goods, the property in goods passes to the buyer when the contract is made, if the goods are in a deliverable state and it is immaterial whether the time of payment of the price or the time of delivery of the goods or both are postponed. Admittedly, the goods were in a deliverable state and the payment was made before delivery of goods as such unequivocal conclusion can be drawn that the sale was complete in a shop. In other words, the sale having been completed prior to export, the sale is exigi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o termini as those between which the goods are intended to move or between which they are intended to be transported, and not a mere movement of goods out of the country without any intention of their being landed in specie in some foreign port. 32. The principal decision of the Apex Court on interpretation of Section 5(1) of the CST Act are Ben Gorm Nilgiri Plantations Co., Coonoor v. Sales Tax Officer, Special Circle, Ernakulam (1964) 7 SCR 706, Coffee Board, Bangalore v. Joint Commercial Tax Officer, Madras, (1970) 3 SCR 147; the recent decision in Binani Bros. (P.) Ltd. v. Union of India, (1974) 2 SCR 619 and Mod, Serajuddin v. State of Orissa, AIR 1975 SC 1564. 33. In the Ben Gorm Nilgiri Plantations case (supra) the appellants were sellers of tea and their purchasers were local agents of foreign buyers. The sales were by public auction. The Apex Court held that a transaction of sale which is a preliminary to export of the commodity sold could be regarded as a sale for export, but not necessarily be regarded as one in the course of export, unless the sale occasions export. On facts, the Apex Court found that the sales by the appellants were intended to be complete wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the territory of India within the meaning of Article 286(1)(b) of the Constitution. In this case the contracts were directly between the respondents and their foreign buyers. Therefore, the Court held that the sales which occasioned the export in each case fell within the scope of the exemption under Article 286(1) of the Constitution. 37. In K.G.Khosla and Co Pvt Ltd v. Dy. Commissioner of Commercial Taxes, 1966 17 STC 473, it was established that there was no possibility of diversion of the goods by the assessee for any other purpose as such it was held that sale took place in the course of import of goods under section 5(2) of the CST Act and exempted from tax. 38. In the case of Ferro Alloys Corporation Ltd. v. Union of India, (1999) 112 STC 570, the Apex Court while reversing the judgment of the High Court held that the sales were not in the course of export. In that case, the price of the goods was in US cents, the destination was a foreign port, Richco was required to arrange a certificate pertaining to the discharge of the charge chrome at the discharging port, the final settlement of the price was to be based on the weight determined either at the port of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the CST Act in the peculiar facts and circumstances of the case in hand. 43. The relevant part of section 80HHC of the Income Tax Act is reproduced hereinbelow: 80HHC. Deduction in respect of profits retained for export business.- (1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise Provided ....... ........ ......... (1A) to (4C) ....... ......... ......... Explanation:-- For the purposes of this section,-- (a)...... ....... ....... (aa) export out of India shall not include any transaction by way of sale or otherwise in a shop, emporium or any other establishment situate in India, not involving clearance at any customs station as defined in the Customs Act, 1962 (52 of 1962); (b) to (e) ..... ....... ..... 44. Reading of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n export out of India. In that context, it was held that the goods were required to be cleared from the customs station either by the purchaser or the seller. In that view of the matter, it was held that the goods were exported out of India. 46. With the above foundation, if we turn to the provision of section 5(1) of the CST Act, one would find a little difference between the concept of sale in the course of export and the export out of India . As held by the Apex Court in Ben Gorm Nilgiri Plantations case (supra), the goods sold in India may be regarded as sale for export but it is not necessary to regard it as sale in the course of export unless the sale occasions export. In that case the Apex Court found sale by the appellant therein was incomplete without export and as such it could not be said that the sale had occasioned export. The sales were for export and not in the course of export. 47. If one turn to the facts of the present case, it is a sale on the shop counter. The moment goods were segregated for sale and the amount of sale consideration was paid in the shop, the sale was complete. The delivery of the goods was to be given just before the Customs ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, the first question is answered in affirmative i.e. in favour of the Revenue. 52. As far as second question relating to penalty under section 36(2)(c) of the BST Act is concerned, none of the authorities under the Act have recorded detailed reasons for levying penalty under the said section 36(2) (c). If one turns to the text of section 36(2)(c), the common thread which needs to be established by the Revenue is that the assessee has concealed the particulars of any transactions or knowingly furnished inaccurate particulars of any transaction as such liable to tax. In the instant case, it cannot be said that the assessee has concealed any particulars of any transaction or knowingly furnished inaccurate particulars of transaction. The assessee is relying on the interpretation of the provisions which involved complexity of principles of interpretation. This Court, while deciding first issue, was required to go into detail of the constitutional provisions followed by various judgments of the Apex Court as well as of this Court. It was purely a question of law which was required to be answered by this Court or rather required to be considered by the authorities under the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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