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TMI Blog2004 (4) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 5 of Notification No. 56/98-Cus./No. 22/99-Cus. stood fulfilled. Thus, we hold that the goods in question, sold by CPFL to JPFL during the period of dispute are to be treated as chargeable to tax for the purpose of the entries at Sr. Nos. 12 and 5 under Notification Nos. 56/98-Cus. and 22/99-Cus. respectively. Consequently, the provisos to the said entries are not applicable to the subject goods and the goods are eligible for the benefit of 'Nil' rate of duty in terms of the said entries. The demand of SAD raised in the impugned order is, therefore, unsustainable. Consequently, the confiscation of the goods and imposition of penalties on CPFL and JPFL are also liable to be set aside. In the result, we set aside the impugned order and allow these appeals. - S/Shri V.K. Agrawal, Member (T) and P.G. Chacko, Member (J) [Order per : P.G. Chacko, Member (J)]. - These appeals are against an order of the Commissioner of Customs (Import), Mumbai, the operative part whereof reads as under :- "Accordingly, I order as : (i) I deny the benefit of notification nos. 56/98, dated 1-8-98 and 22/99, dated 28-2-99 and confirm the SAD totally amounting to Rs. 4,88,04,606/- (Rs. Four Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment of Dadra Nagar Haveli under Section 12 of the Dadra and Nagar Haveli Sales Tax Regulations, 1978 (hereinafter referred to as 'DNHST Regulations' or 'the Regulations') w.e.f. 17th June, 1998. CPFL and JPFL are sister concerns. During the period of dispute, one Shri B.R. Gupta was Director (Imports) of JPFL as well as Authorised Signatory for CPFL. He used to pursue the Purchase Orders placed on FUJI by JPFL for import of Jumbo Rolls of photographic films and papers. He used to advise the foreign supplier as to what quantities of Jumbo Rolls, covered by JPFL's Purchase Orders, should be separately consigned to JPFL and CPFL. As per his oral advice, FUJI used to issue separate Proforma Invoices to the two companies. Insofar as the imports made by CPFL were concerned, they used to open Letters of Credit in favour of FUJI and, on the basis thereof, FUJI used to send the goods and negotiate Bills of Lading, Insurance documents, Invoices, etc. through bankers. CPFL used to obtain these documents from the Bank by making payment for the goods on the basis of the shipping documents of FUJI. Thereafter CPFL used to file Bills of Entry at Nhava Sheva (Mumbai) for customs clearance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormat given above, that any sale of the goods would not be effected from a place located in an area where no tax was chargeable on sale or purchase of goods. It was also undertaken that, if the goods were disposed of in any manner in contravention of the conditions specified in the Notification, the SAD of customs leviable on the goods but for the exemption provided under the Notification would be paid. Later on, the department started investigations into what appeared to them to be evasion of SAD on the goods. Records were scrutinized, statements of officials of the two companies were recorded, documents produced by the company officials during the course of investigations were examined, and the relevant notifications were interpreted in the light of budgetary clarifications issued by Governmental authorities and certain decisions of the Supreme Court. On the basis of the results of all these, the department concluded that the goods imported in the name of CPFL during the aforesaid period of dispute were not eligible for exemption from SAD and that, by wilful misstatement, misdeclaration and suppression of facts, CPFL had evaded payment of SAD of Rs. 4,88,40,606/- on the said good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by CPFL; that CPFL had no infrastructure or technical expertise to convert the Jumbo Rolls into finished products; that a part of the goods for which purchase orders were placed on FUJI by JPFL was supplied to CPFL by FUJI as per instructions of JPFL; that CPFL merely acted as a conduit for supply of jumbo rolls by FUJI to JPFL; that the imports made in the name of CPFL as per instructions of JPFL were strictly governed by the agreements between JPFL and FUJI; that the agreements prohibited the supply of jumbo rolls by FUJI to any party other than JPFL and, therefore, CPFL, in making imports of jumbo rolls from FUJI, were only acting as an agent of JPFL; and that, since JPFL had to pay SAD on jumbo rolls directly imported by them, they imported the same indirectly through CPFL with the sole intention to evade payment of SAD. Ld. Commissioner, thus, examined the nature of transactions between JPFL, FUJI and CPFL, and invoked the principle of "lifting of corporate veil" to come to the conclusion that the real importer of the goods was JPFL. Since, in terms of the agreements between JPFL and FUJI, all imports of jumbo rolls had to be converted into finished products of film and paper, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 7(3), which defines "taxable turnover" and provides for certain deductions from gross sales turnover to determine the taxable turnover. As per Regulation No. 7(3)(II)(a)(iv), deduction is admissible in respect of goods sold to a registered dealer and used by him within Dadra Nagar Haveli as raw material for the manufacture of taxable goods for sale within Dadra Nagar Haveli. Such goods are also 'taxable goods', as non-inclusion of any taxable goods in 'taxable turnover' does not take away the taxable character of the goods, Counsel has argued. In this connection, ld. Counsel has referred to the assessment order issued to CPFL by the Asstt. Commissioner of Sales Tax, Silvassa. This assessment is for the period 17-6-98 to 31-3-99. This shows a gross turnover of Rs. 71,66,90,470/- and a deduction therefrom, of Rs. 71,51,00,100/-. Accordingly, the taxable turnover shown in the assessment order is Rs. 15,90,370/- and the tax payable thereon is Rs. 1,11,326/-. The assessment order proceeds to say thus: "The dealer's claim that he is not liable to pay any sales tax on the sale of his goods duly supported with the forms ST-XI, amounting to Rs. 71,29,06,663/- is also allowed. The dealer' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there was no valid sale of jumbo rolls by FUJI to CPFL and consequently no valid sale of the goods by CPFL to JPFL and the transaction was not within the meaning of 'sale as such' under the Notifications. 6.Both sides have also argued on limitation and other subsidiary issues. 7.We have carefully considered the records, submissions and case law. The goods in question are the jumbo rolls of photographic film and paper imported from FUJI (Japan) by CPFL and sold by the latter to JPFL during the period 18-9-1998 to 30-6-99. CPFL had not paid Special Additional Duty of Customs leviable under Section 3A of the Customs Tariff Act at the time of clearance of the imported goods. They had claimed benefit of 'Nil' rate of SAD under Notifications 56/98-Cus., dated 1-8-98 and 22/99-Cus., dated 28-2-99 vide entries at Serial Nos. 12 and 5 in the Tables annexed to the respective Notifications. This claim has been rejected by the learned Commissioner of Customs, who has accordingly confirmed the demand of SAD against CPFL. He has held that the subject goods did not attract the above entries under the Notifications. This view of his is based on two findings viz. (i) the sale of imported jumbo ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period of dispute. We have perused these two agreements, one titled as AGREEMENT and the other as MEMORANDUM, both dated 1-7-98. Article 2 of the AGREEMENT provided that "FUJI shall sell the Bulk Rolls to JINDAL and JINDAL shall purchase the same......." Article 8 provided that 'JINDAL shall convert all Bulk Rolls supplied to it hereunder into the products.........' Under Article 9, FUJI granted to JPFL the exclusive right to sell the products in India. That the products had to be sold under FUJI'S trademarks only was stipulated under Article 1. The MEMORANDUM provided for sale, by FUJI to JPFL, of semi-processed jumbo rolls on a non-exclusive basis and for processing of the goods into finished products and sale of the finished products in India by JPFL under their own brand-name. It appears from the two agreements that, though the exclusive right to sell the finished products in India was given to JPFL, no monopoly was given to them in the matter of purchasing Bulk Rolls from FUJI. This would only mean that a third party like CPFL could also purchase Bulk Rolls from FUJI. Therefore, nothing contained in the agreements between JPFL and FUJI can be held out to be prohibitory for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L's sales office (Branch Office) were working in the same premises at Dadra (Silvassa). Shri B.R. Gupta was the Director (Imports) of JPFL and authorised signatory for CPFL. Shri Sanjeev Kumar Agarwal was Director of CPFL and Sr. Manager in JPFL. Shri S.K. Mittal was General Manager (Accounts) in JPFL. He was looking after Sales Tax matters of CPFL also. Ld. Commissioner has considered these factors in determining the nature of transaction between CPFL and JPFL. In our view, neither the fact that CPFL's sales office and JPFL's factory were situate in the same premises nor that the same person was in charge of some administrative functions in the two companies has any impact on the essential character of 'sale' reflected in the transaction between CPFL and JPFL and conclusively established by the assessment orders passed by the assessing authority under Regulation 20 of the DNH Sales Tax Regulations. We have perused one such assessment order dated 1-11-99 passed by the Asstt. Commissioner of Sales Tax, Silvassa for the period 17-6-98 to 31-3-99. The assessee, of course, is CPFL qua dealer. We note that a major part of this period is comprised in the period of dispute in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, local tax or any other charges for the time being leviable on a like article on its sale or purchase in India: Provided that until such rate is specified by the Central Government, the special additional duty shall be levied and collected at the rate of eight per cent. of the value of the article imported into India. Explanation - In the sub-section, the expression "maximum sale tax, local tax or any other charges for the time being leviable on a like article on its sale or purchase in India" means the maximum sales tax, local tax, other charges for the time being in force, which shall be leviable on a like article, if sold or purchased in India or if a like article is not so sold or purchased which shall be leviable on the class of description of articles to which the imported article belongs. (Emphasis supplied) Either of the two Notifications reads as below :- "In exercise of the powers conferred by sub-section (1) of Section 3A of the Customs Tariff Act, 1975 (51 of 1975), the Central Government having regard to the maximum sales tax, local tax or any other charges for the time being leviable on the like goods in their sale or purchase in India, hereby specifies the rates of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a dealer registered under the Central Sales Tax Act, 1956. Regulation 7(1) prescribes the rates of sales tax in respect of (a) goods specified in the First Schedule, (b) goods specified in the Third Schedule and (c) any other goods, not being goods specified in the Second Schedule. Regulation 7(3) defines the expression "taxable turnover". According to this definition, taxable turnover during any period shall not include the turnover, during that period, of sales (not being the sales of goods which are specified by the Administrator under Regulation 8 as goods taxable at a particular point of sale), to a registered dealer, of taxable goods of the class or classes specified in the certificate of registration of such dealer, as being intended for use by him within Dadra Nagar Haveli as raw material for manufacture of taxable goods for sale within Dadra Nagar Haveli. The first proviso to Regulation 7(3) stipulates that the above deduction shall not be allowed unless the dealer, who sells the goods, furnishes in the prescribed manner a declaration duly filled up and signed by the registered dealer, to whom the goods are sold, in such form and containing such particulars as may be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of G.H. Shaikh v. CCE, Pune [2003 (154) E.L.T. 540], cited by ld. Counsel, is also relevant to this context. Dealing with the entry at Sr. No. 5 of Notification 22/99-Cus., the Tribunal held thus: "It is common that exemptions have been given under the Sales Tax Act in respect of certain transactions and such exemptions for specified cases would not make the place, "an area where no duty is chargeable on sale and purchase of goods." 12.Following the above judicial authorities, we hold that the goods in question, sold by CPFL to JPFL during the period of dispute are to be treated as chargeable to tax for the purpose of the entries at Sr. Nos. 12 and 5 under Notification Nos. 56/98-Cus. and 22/99-Cus. respectively. Consequently, the provisos to the said entries are not applicable to the subject goods and the goods are eligible for the benefit of 'Nil' rate of duty in terms of the said entries. The demand of SAD raised in the impugned order is, therefore, unsustainable. Consequently, the confiscation of the goods and imposition of penalties on CPFL and JPFL are also liable to be set aside. 13.In the result, we set aside the impugned order and allow these appeals. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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