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TMI Blog2016 (5) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods were in the Special Economic Zone. The moment the goods got removed from out of the shelter into a Domestic Tariff Area, Section 15 of the Tamil Nadu Special Economic Zones Act and Section 30 of the Central enactment came into play. As a consequence, the anti dumping duty became payable. The purchaser paid the same or the fact that the sale had taken place prior to the clearance of the goods, is of no consequence, since the point of first import was when the goods came to India from China. Assuming that the clearance of goods by the buyer of the petitioner, which happened at the gate of the Special Economic Zone is also equivalent to an import, it could be taken only to be a second incidence of import. Anti dumping duty was leviable on the first incidence of import. This is why the expression "leviable" appearing in Section 15 of the State enactment and Section 30 of the Central Special Economic Zones Act is of significance. Therefore, the anti dumping duty actually became leviable from the time of export from China into India, but was not actually collected due to the protective cover given by the Special Economic Zones Act. The moment the goods went out of this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t:- What was cleared by the ultimate purchaser, namely Huawei India from the unit of the petitioner in the Special Economic Zone was the finished product manufactured by the petitioner. In chronology, this was the second clearance, assuming that it is a clearance. There was actually a first clearance of the imported goods. This first clearance was made by the petitioner, when they imported the components from Huawei Technologies Co. Ltd., China. This clearance was allowed to be made without payment of duty because of the location of the petitioner in a Special Economic Zone. Therefore, the petitioner is not entitled for refund of tax inadvertently paid on CVD component. - Decided partly in favour of petitioner - Tax Case Revision No. 35 of 2014 - - - Dated:- 18-4-2016 - V. Ramasubramanian And T. Mathivanan, JJ. For the Petitioner : Mr. C. Natarajan, Senior Counsel for Mrs.Hema Murali Krishnan For the Respondent : Dr. Anita Sumanth, Special Govt.Pleader (Taxes) ORDER V. Ramasubramanian, J This Tax Case Revision is filed by the Assesee under Section 60 of the Tamil Nadu VAT Act, 2006. On 4.8.2014, the Tax Case Revision was admitted on the following substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the CST Act, 1956. 6. The sale and supply of goods between the petitioner and Huawei India were on an ex-works basis in terms of a Supply Agreement dated 31.3.2010. Under Clause 3.2.2 of the Supply Agreement, the petitioner is obliged to sell and deliver the goods at the SEZ facility gate in Chennai. Thereafter, it is the obligation of the purchaser to clear the goods from the SEZ, upon payment of all applicable Duties and Taxes. As a matter of fact, the purchaser, namely Huawei India, filed Bills of Entry for Home Consumption and cleared the goods from the SEZ, by paying applicable Customs Duty, in their capacity as importer-buyer. 7. On 16.12.2010, the Ministry of Finance, Government of India issued a Notification No.125/2010-Customs, imposing Anti-Dumping Duty at the rate of 266% on the import of certain transmission equipments and sub-assemblies and components, when imported from China. The said notification was given retrospective effect from 8.12.2009, on account of the fact that a provisional levy had already been made earlier. 8. However, as the unit of the petitioner was located in the Special Economic Zone, the imported goods were not subjected to Anti-Dum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial questions of law were framed as arising for consideration, at the time when the above revision was admitted by a Bench of this Court. The first substantial question of law is as to whether the Anti-Dumping Duty levied on the imported components and paid by a company which purchased the finished products from the petitioner herein would form part of the sale price of the goods manufactured and sold by the petitioner to such buyer under the provisions of TNVAT Act, 2006. The second question relates to the validity of penalty levied upon the petitioner. The third question relates to the tax paid by the petitioner on the CVD component, and the question of its refund. Therefore if the first question is decided, the other two questions will automatically fall in line. QUESTION-(i) 16. The first question as to whether the Anti-Dumping Duty paid on the imported components, would form part of the sale price of the goods manufactured and sold by the petitioner, for the purpose of TNVAT Act, 2006, has assumed significance, due to two facts namely (a) that the petitioner is located in a Special Economic Zone, which enjoys exemption under Section 26 of the SEZ Act, 2005 and (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods unloaded in a customs area shall remain in the custody of a person as approved by the Commissioner of Customs, until they are cleared for home consumption or are warehoused or are transshipped in accordance with Chapter VIII. The expression customs area is defined in Section 2(11) to mean the area of a Customs Station and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities. Again an expression customs station is defined in Section 2(13) to mean any customs port customs airport or land customs station. 21. Therefore, it is the contention of Mr.C.Natarajan, learned senior counsel for the petitioner (i) that the company which purchased the manufactured finished goods from the petitioner is identified as the importer (ii) that the act of importation of those goods into India happened after the sale of the goods by the petitioner to such person and (iii) that therefore, it was such purchaser who paid the Anti-Dumping Duty under Section 9A of the Customs Tariff Act, 1975. Hence his contention is that the Anti-Dumping Duty paid by the purchaser from the petitioner, who is deemed to be an importer due to the loca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or stored, unless excise duty had been paid by the holder of D2 license. On the basis of the amended provisions, the sales tax authorities again sought to include the excise duty paid directly by the buyers, in the manufacturer's turnover. The challenge made by the manufacturer was rejected by the High Court and when the matter was taken to the Supreme Court, the correctness of the decision rendered earlier by the two member Bench was doubted. Therefore, the matter was referred to a Larger Bench. The Larger Bench held that as per the amended Rules, the payment of excise duty was a condition precedent for the removal of liquor from the distillery and that the payment by the purchaser was on account of the manufacturer. The Court held that the cost of the liquor at the hands of the buyer, was what was charged by the manufacturer under its bill, together with the excise duty. The consideration for the sale was actually the total amount and not what was merely reflected in the bill. Therefore, the Court held that though the excise duty was paid by the buyer, it was part of the consideration for the sale and hence, includible in the turnover of the manufacturer. 25. In Mohan Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not liable to pay even the basic customs duty and countervailing duty, in view of the provisions of the Special Economic Zones Act, 2005. Therefore, it is his contention that the sale and supply of goods made by the revision petitioner on an ex-works basis to a company who was obliged to clear the goods upon payment of all applicable duties and taxes, stand on a different footing than the case of the assessees involved in the above three cases before the Supreme Court. 28. In order to test the correctness of the above contention, it is necessary to take a look at Sections 26 and 30 of the Special Economic Zones Act, 2005, which is a Central enactment and Sections 12 and 15 of the Tamil Nadu Special Economic Zones Act, 2005. Section 26(1) of the Central enactment and Section 12(1) of the State enactment grants exemption to every Developer and Entrepreneur located in a Special Economic Zone, from payment of any duty of customs as well as excise. But, Section 30 of the Central enactment and Section 15 of the State enactment deal with the question as to what happens when goods are removed from a Special Economic Zone to the Domestic Tariff Area. 29. Section 30 of the Central ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic Tariff Area and hence, the reasoning given by the Supreme Court in Madras Rubber Factory that the liability to pay cess got attached to the rubber, would apply equally to the case on hand. 32. As a matter of fact, the liability to pay anti dumping duty arises due to the import. The revision petitioner herein is exempt from payment of the same, solely on account of the fact that they are located in a Special Economic Zone and that therefore, they are protected by Section 26(1) of the Central enactment and Section 12(1) of the State enactment. It is the appellant who enjoys the exemption by virtue of the statutory scheme and it is the very same appellant who suffers the automatic withdrawal of exemption, the moment the goods are removed from the Special Economic Zone to the Domestic Tariff Area. Therefore, the primary liability for payment of anti dumping duty actually falls upon the appellant, the moment the goods are removed from the Special Economic Zone to the Domestic Tariff Area. The Supply Agreement that the appellant had with their purchaser, in whatever clever manner they are worded, merely shifted the burden of payment of anti dumping duty to the buyer. To put it dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderstood in the context of the amended Andhra Pradesh Distillery Rules. 35. But, we are of the considered view that the decision in Gujarat Export Corporation cannot be applied to the case on hand. In the light of the definition of the expression turnover , which was considered by the Supreme Court in Mohan Breweries, the decision of the Bombay High Court in Gujarat Export Corporation would have no application to the case on hand. Moreover, the distinction between statutory liability, which is merely passed on to someone as a contractual liability, was not noted by the Bombay High Court in the said decision. Therefore, we do not think that Gujarat Export Corporation can go to the rescue of the petitioner. Decisions throwing light upon the time of happening of taxable event 36. In State Trading Corporation v. State of Tamil Nadu [(2003) 129 STC 294], a Bench of this Court was concerned with a case where the imported goods which were assessed to duty were sold by transferring the documents of title, even when the goods were in the customs warehouse located within the customs station. The duty was paid by the buyer who cleared the goods under Section 47 of the Customs Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court held that lot coolie charges paid on a percentage basis by the customers to the different assessees, could not form part of the turnover. This was on the ground that what could be legitimately brought to tax under the Madras General Sales Tax Act, 1959 was only the aggregation of the consideration for the transfer of property in the goods and that service charges cannot be equated to the consideration for the transfer of property. The phrase any sums charged for anything done by the dealer in respect of the goods appearing in Sub-clause (ii) of Explanation (2) to Section 2(r) was held by this Court to relate only to something done by the dealer in respect of the goods at the time of or before its delivery, which involves transfer of property. 40. Similarly, in Cauvery Sugars and Chemicals Ltd. v. Commercial Tax Officer [(1972) 29 STC 1 (Mad.)], this Court held that the cess paid on sugarcane brought into a local area specified in a notification cannot be treated as part of the turnover. But, to come to such a conclusion, the Court found on facts that as per the Madras Sugar Factories Control Act, cess did not and was not intended to form part of the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a territory outside the territory of India, cannot be extended beyond its purpose. The phrase used in Section 9-A of the Customs Tariff Act is where any article is exported .... to India . 45. Therefore, the fact remains that the petitioner, though located in a Special Economic Zone, is nevertheless in India, to whom a company from China has exported goods. But, the petitioner enjoyed exemption from payment of anti dumping duty only because of being located in a Special Economic Zone. This exemption was available just like a shelter so long as the goods were in the Special Economic Zone. The moment the goods got removed from out of the shelter into a Domestic Tariff Area, Section 15 of the Tamil Nadu Special Economic Zones Act and Section 30 of the Central enactment came into play. As a consequence, the anti dumping duty became payable. 46. The fact that the purchaser paid the same or the fact that the sale had taken place prior to the clearance of the goods, is of no consequence, since the point of first import was when the goods came to India from China. Assuming that the clearance of goods by the buyer of the petitioner, which happened at the gate of the Special Econom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either by altering the description, or name, or composition of the article, which is subject to such anti-dumping duty. The Central Government also has the power under Sub-section (2) of Section 9-A to impose an anti-dumping duty on the basis of a provisional estimate of the value and margin, even during the pendency of the determination in accordance with the other Sub-sections of Section 9-A. Once it is established that there is (i) dumping, (ii) injury, and (iii) causal link between dumping and injury, anti dumping duty is levied. The margin of dumping is the difference between the normal value, namely the price in the domestic market of the foreign exporter and the export price at which the goods are exported to India. Therefore, once anti dumping duty is levied, the same becomes part of the sale price, as otherwise the sale price of the product imported into India will be different from the sale price of the product domestically manufactured. Hence, the first question of law is answered against the petitioner/assessee and in favour of the revenue. QUESTION-(ii) 49. The second question of law raised in this revision petition is whether on the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) the language of the Section, and (iii) the nature of penalty. 54. Insofar as the present case is concerned, the proceedings arose under the Tamil Nadu VAT Act, 2006. Penalty is leviable under Section 27(3), if certain conditions are satisfied. They are (i) the assessing authority should be satisfied, (ii) that the escape from the assessment was due to wilful non disclosure of assessable turnover by the dealer. Sub-section (4) of Section 27 also deals with penalty, in relation to the reversal of input tax credit under Section 27(2). The penalty under Sub-section (4) is on a graded scale, with the rate of penalty for second and subsequent detections, higher than the rate in the case of first detection. 55. A look at the orders of assessment would show that to begin with, there was a doubt as to whether anti dumping duty itself was payable or not. Even before this doubt could be cleared, the petitioner themselves sought a clarification from the Assessing Officer vide letter dated 06.9.2010. Much before this clarification was issued, the company which purchased the finished product from the revision petitioner paid the anti dumping duty. Thereafter, the Assessing Officer issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his order that the point was raised for the first time. Therefore, the first Appellate Authority rejected the claim. 61. Before the Tribunal, the assessee claimed that customs duty and countervailing duty were paid by them inadvertently. Since these are payable only by the buyer at the time of clearance of the goods, the wrongful payment of the same by the assessee should not be taken advantage of by the Department to take the customs duty as part of the turnover for the levy of Value Added Tax. 62. But, the Tribunal rejected the same on the same ground as the contention relating to anti dumping duty was rejected. Hence, the third question of law. 63. But, as we have pointed out earlier, the petitioner was the actual importer of the original components. But, since the petitioner was located in a Special Economic Zone, they enjoyed the protective cover provided the statutory scheme of the Special Economic Zones Act, 2005. The moment the petitioner removed the goods from the Special Economic Zone to the Domestic Tariff Area, the protective cover was withdrawn. 64. What was cleared by the ultimate purchaser, namely Huawei India from the unit of the petitioner in the Sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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