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TMI Blog2005 (7) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to the petitioner, all the confirmation orders were received by them on September 30, 1994. It is their further case that purchases were for export and hence, exempt from sales tax, as provided under section 5(3) of the Central Sales Tax Act, 1956. They had obtained export orders prior to the confirmation of the auction and hence, not liable to pay sales tax. In terms of the conditions of sale, the petitioner had deposited amount representing 5 per cent of the total sale amount as earnest money deposit. In terms of sale conditions, purchasers are required to pay the entire sale consideration along with administrative charges within 50 days from the date of receipt of the confirmation orders and delivery has to be taken within 75 days. However, the respondents were insisting on the payment of sales tax also along with the amounts to be paid by the petitioner. By letter dated November 26, 1994, the petitioner had informed the respondent about the export orders and that hence, they were not liable to pay the tax. In spite of several representations and requests, according to the petitioners, the respondents were refusing to accept the said legal position and continued to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as perfectly justified. 6. Mr. K.S. Natarajan, learned counsel appearing for the petitioner, contended that from the beginning, the respondents refused to consider that the petitioner having purchased the consignment pursuant to export orders, was not liable to pay sales tax as exempted under section 5 of the Central Sales Tax Act. Though the petitioner was prepared to pay all the dues/instalments as and when they became due other than sales tax, they were prevented by the respondents from discharging the said obligation by insisting that the petitioner should pay sales tax also. The respondents were not prepared to accept any payment without including the sales tax. Therefore, the respondents cannot be heard to say that the petitioner had defaulted. As regards the liability to pay tax or not, the provisions of the Act as well as circulars issued thereon and also the judgments of this Court were very clear. But yet, the respondents went on blindly insisting on payment of tax. In short, according to the learned counsel, in terms of the provisions of the Act and the circulars, all that was required to claim exemption was that the export order or the export agreement must be one p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in insisting payment of tax? (iv) Whether there was any default on the part of the petitioner to comply with the conditions of sale and whether the petitioner was liable to pay demurrage charges and penal interest? 9.. Point Nos. (i) and (iii): It is true that condition No. 25 of the sale notice requires that the petitioner should pay in one lumpsum, sales tax and surcharge on sales tax at the time of confirmation of the sales. However, as provided under section 5(3) of the Central Sales Tax Act, there is no liability to pay tax if the purchase is intended to be exported pursuant to any agreement or order with a foreign buyer. This position is reinforced by many circulars issued by the Commercial Taxes Department. It would be appropriate to refer to some of the letters/orders issued by the Government in the said context. 10.. In a letter to the Chief Conservator of Forests in the case of the petitioner-company itself, the Commissioner of Commercial Taxes, by letter dated April 2, 1986, had clarified that sandalwood purchased in the form of logs, when cut into sizes either to satisfy the statutory requirements or to conform to export orders, the characteristics of the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the said objection cannot be countenanced. (ii) The contention that since the purchaser had accepted the terms and conditions of sale and had participated in the auction, he was liable to pay tax, cannot also be accepted in view of the specific statutory entitlement under section 5(3). The contract cannot stand in the way of a statutory benefit/right. 14.. After holding so, the division Bench took serious note of the impugned problem arising every year and specifically observed that the Government should solve the issue by incorporating the required clauses in the sale notice itself and the Forest Department should approach the Sales Tax Department for concrete guidelines as to whether and under what circumstances the purchasers of sandalwood are entitled to the benefits of section 5(3) and that in the absence of specific conditions in the sale notice, the purchaser cannot be blamed. 15.. The judgment of the division Bench, therefore, has concluded the issue in favour of the petitioner, namely, that if the purchasers had a pre-existing agreement for export, that would be sufficient to claim the benefit of section 5(3) and there was no liability to pay tax. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that such a stand is taken by the respondents only in their counter-affidavits before this Court and not in any of the many letters/replies sent by the respondents. Apart from the fact that the said assertion by the petitioner is not disputed by the respondents by referring to any letter calling upon the petitioner to produce the copy of the export agreement, I have also perused letters from the respondents filed in the typed set and I find that in none of the letters, the petitioners have been called upon to produce any agreement, vide letters dated December 7, 1994, December 16, 1994, April 7, 1995, July 5, 1995, February 8, 1996 and March 11, 1996. It is only in the letter dated July 5, 1995, which is a reply to a notice from the learned counsel for the petitioner, it is stated that the successful bidders can produce all documentation before the assessing officers and then get refund. This is possible only after the tax is paid. The petitioner had not been called upon to produce the export orders to avail the benefit of section 5(3). On the contrary, in all the letters, the stand of the respondents had been consistent that as per the sale conditions, there was no connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment without tax. It is not a proper defence to state that the petitioner could have paid instalments minus the tax amount. The fact remains that the department was not entertaining requests made repeatedly for payment of the dues without the tax amount and it would be a pedantic approach to say that the petitioner should have at least paid the instalments. Such payment was not possible when payment of tax was made a pre-condition even for the first instalment. Repeated letters have been sent by the petitioners requesting to be absolved of the tax liability, which were consistently declined by the respondents and the petitioner was consistently directed to pay the tax first and seek for refund later. Therefore, I am unable to find any intentional or deliberate default on the part of the petitioner. 20.. The liability to pay demurrage under condition No.11 of the sale agreement arose for consideration in Sree Mahalakshmi Flour Mills v. State of Tamil Nadu (W.P. No. 17292 of 1993 dated June 15, 2001). Jayasimha Babu, J., while interpreting the said clause, held that the question of liability to pay demurrage would arise only after the buyer had become the full owner of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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