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TMI Blog2015 (7) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... for 'Cation' or 'Anion' resin, then the exemption cannot be denied on the ground of the description of the commodity not matching that mentioned in the PO. The Court finds that the general cursory approach of the authorities and the VATO, in particular, is unhelpful when the High Court is called upon to examine the correctness of their orders. They must reflect application of mind to the materials on record. Consequently, even in respect of the transactions of inter-state sales, the Court finds that the impugned order of the AT and the corresponding orders of the VATO and the OHA require to be set aside and the matters remanded to the VATO for a fresh determination - Matter remanded back. - ST.APPL. 3/2015 & CM No. 345/2015 - - - Dated:- 15-7-2015 - HON BLE DR. JUSTICE S. MURALIDHAR HON'BLE MR. JUSTICE VIBHU BAKHRU For the Petitioner : Mr. M.P. Devnath, Mr. Abhishek Anand and Mr. Bhuvnesh Satija, Advocates. For the Respondent : Mr. Sanjay Ghose with Mr. Rhishabh Jaitley, Advocates. ORDER Dr. S. Muralidhar, J. 1. These appeals are directed against the common Order No. ATVAT/2014/3015-3020 dated 21st August/1st September 2014 passed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant claimed to have sold the goods, which were purchased for sale in the course of inter-state trade and commerce in transit against E-1/C Forms during the aforementioned tax periods [amounting to ₹ 2,24,99,200 for the months of April, June, August, September, December, January and March 2006-07and ₹ 54733784/- for the months April, May, June, July, August, September 2007-08]. According to the VATO the said sales did not satisfy the conditions prescribed. The claim for exemption was rejected on the ground that the description of the goods as mentioned on the purchase bills and the corresponding sales bills was different. Accordingly, tax @4% was levied on all the said transactions and penalty for tax deficiency was also imposed under Section 9 (2) of the CST Act read with Section 33 of the DVAT Act, 2004. (b) High sea sales : The Appellant had in its returns filed for the tax periods August, September, October, November, December 2006 and January and February 2007 claimed High Seas Sales of goods amounting to ₹ 31,03,833 and for the periods April, May, July and September 2007-08, amounting to ₹ 80,37,000, which were stated to have been imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orting goods... There is no privity of contract between the parties in regard to the element/aspect of import. 8. Consequently, the OHA held that these sales did not qualify for exemption as sales in the course of imports. 9. As regard the inter-state sales for which exemption was claimed under Section 6 (2) of the CST Act, the OHA held that the explanation offered by the Appellant was not convincing. According to the OHA: The transactions against E-I/C Forms involve diversion of movement of goods from original destination to some other/different destination by the purchasing dealer by way of endorsement on transportation documents while the goods are in transit. In such a situation, there is absolutely no question of change in the description of goods/items should remain the same, simply the title and destination or goods would change. Keen perusal of sales and purchase invoices shows significant difference in the description of items. It is not understandable as to how the description of the items can change when item is the same only the point of delivery/destination has got changed consequent upon endorsement on the GR regarding change in respect of point of deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the OHA and contended that they were sales in the course of import. (iii) In none of the default assessment orders or the orders of the OHA and the AT is there a discussion of the voluminous documents placed on record by the Appellant. There is no indication of the particular documents with reference to which the conclusions, viz., that they do not answer the exact description of the commodity for which order was placed or have been diverted to a different destination, have been drawn. Even as regards sales in the course of imports, only one transaction with MUL has been discussed and then again the correct legal principles have not been applied. (iv) Reference was made to sample invoices under each category to illustrate the factual errors in the impugned orders of the VATO, the OHA and the AT. Reliance was placed, inter alia, on the decisions in K.G. Khosla Co. (P) Ltd. v. Dy. Commr. of Commercial Taxes (1966) 3 SCR 352 and ABB Ltd v. The Commissioner (2012) 55 VST 1 (Del). (v) The cases ought to be remanded to the VATO for a fresh determination in accordance with law. 15. In reply it was submitted by Mr. Sanjay Ghose, learned counsel for the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AT was the Appellant had initially claimed the said transactions to be high seas sales but later changed its stand, without revising its returns, and claimed them to be sale in the course of import. It is seen that in the objections filed before the OHA in para 15 it was specifically stated that the Appellant had all along been submitting that it had effected sales in the course of import of goods into India and the same were not liable to tax under Section 5 of the CST Act. In the appeal filed before the AT, it was stated in para 18, inter alia, as under: Earlier the company was of the bonafide belief that the transaction was a sale on high sea but later it was advised that the transaction was a sale in the course of import of the goods into India. 18. The Appellant appears to have corrected its stand at an early stage in the proceedings. Allowing it to do so was not going to cause any prejudice to the Respondent particularly since in the circumstances it was a plausible contention. Consequently, the Court rejects the above objection of the Respondent. 19. The legal position as regards sales in the course of imports, with reference to Section 5 (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court at page 711 of the report (page 759 of [1964] 15 STC 753) laid down the test thus: A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the seller to export, there must be an obligation to export, and there must be actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the DMRC for supply, installation, testing and commissioning of traction electrification, power supply, power distribution and SCADA systems for a section of the Delhi Metro Project. In pursuance of that contract certain equipments were imported and certain others were brought in from a manufacturing unit located outside Delhi. The assessee sought exemption from VAT and Central Sales Tax as they contended that these were sales effected in the course of import. It was held: The common thread of reasoning which runs through all the decisions is that to determine whether the sale was in the course of import, the Court has to see whether the movement of goods through was integrally connected with the contract for their supply. Questions such passing of title, or whether the end user has a privity of contract with the supplier, or where the consideration flows from, are not determinative or decisive of the issue. Section 5 does not prescribe any condition that before a sale could be said to have occasioned import, it is necessary that the sale should have preceded the import. 24. The Appellant has with these appeals enclosed sample invoices for transactions relatable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort thereof produced by the Appellant. This exercise ought to have been undertaken at the level of the VATO at least. Consequently, the Court finds that the impugned order of the AT and the corresponding orders of the VATO and the OHA pertaining to the claims for exemption with reference to Section 5 (2) CST Act for the AYs in question require to be set aside and the matters remanded to the VATO for a fresh determination. Inter-state sales 27. The Court next examines the issue pertaining to inter-state sales with reference to Section 6 (2) of the CST Act. The burden here is on the Appellant which is claiming exemption to show that the sale of goods has occasioned the movement of goods from one State to another. There should have been a movement of the goods from one state to another as a result of a prior contract of sale. 28. In Hyderabad Engineering Industries v. State of AP (2011) 4 SCC 705, in the context of inter-state sales as defined under Section 3 (a) of the APGST Act, it was explained as under: For a sale to be in the course of inter-State trade or commerce under Section 3(a), the two conditions must be fulfilled. There must be sale of goods. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the purchase of goods by E-1/C-Forms was a case of sale of RO water purification systems in the course of inter-state transaction under Section 6 (2) of the CST Act. The OHA repeated the above reasons and so did the AT. It is significant that none of the above orders refer to any particular transaction. 31. A set of sample documents have been enclosed with the appeals in respect of the transactions of inter-state sale. One of them pertains to the PO placed on the Appellant by Ramgarh Chini Mills on 27th August 2006 for supply of a water treatment plant. Two of the components were 'cation resin' and 'anion resin'. In turn the Appellant appears to have placed a PO on Auchtel Products Ltd. ( APL ). It is stated that the said two components have been described in the PO by their brand names, viz., Auchtel Duolite A-113 and Auchtel Duolite C-20 respectively. It was contended by Mr. Devnath that the Appellant had placed sufficient material before the VATO to substantiate the above plea and yet the VATO proceeded on the basis that the description of the commodities did not match. He further pointed out that Annexure-1 mentions the Job Order No. PXD-597 which is al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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