Export-oriented exemption cancellation upheld for failure to meet export thresholds and for collecting sales tax from customers.
An Export Oriented Unit exemption certificate was liable to cancellation where the prescribed export condition was not met, because the record showed no exports in one year and only 1.68% in another, far below the required threshold. The authorities were therefore justified in treating the statutory conditions as breached and cancelling the certificate. The evidence also supported a finding that the dealer collected Punjab sales tax and Central sales tax in sale invoices rather than merely charging handling fees, as the books and vouchers showed separate tax postings and no adequate explanation was given. On those facts, the concurrent findings were sustained and the appeals failed.
Issues: (i) Whether the exemption certificate granted to the assessee as an Export Oriented Unit was liable to be cancelled for non-fulfilment of the prescribed export requirement and violation of the exemption rules; (ii) Whether the assessee had actually charged only handling charges from its customers or had collected sales tax in the sale invoices and retained it.
Issue (i): Whether the exemption certificate granted to the assessee as an Export Oriented Unit was liable to be cancelled for non-fulfilment of the prescribed export requirement and violation of the exemption rules.
Analysis: The definition of Export Oriented Unit required export of at least twenty-five per cent of the products outside India with the prescribed value addition. The record showed that the assessee exported nothing in one assessment year and only 1.68% in another. On those facts, the assessee did not satisfy the basic eligibility condition for the exemption. Rule 8(1)(vi) permitted cancellation where the statutory conditions were violated, and the authorities found a clear breach of the exemption regime.
Conclusion: The cancellation of the exemption certificate on this ground was justified and is upheld against the assessee.
Issue (ii): Whether the assessee had actually charged only handling charges from its customers or had collected sales tax in the sale invoices and retained it.
Analysis: The sale vouchers, books of account and related entries showed separate posting of Punjab sales tax and Central sales tax. The authorities found no supporting mention of handling charges in the invoices or books, and the assessee failed to explain the relevant entries satisfactorily. The evidence supported the finding that sales tax had been collected from customers and not deposited in the Government treasury, attracting the consequences of the statutory violations.
Conclusion: The finding that the assessee had collected sales tax, and not merely handling charges, is sustained against the assessee.
Final Conclusion: No illegality or perversity was shown in the concurrent findings of the authorities below, and the questions of law were answered against the assessee, resulting in dismissal of both appeals.
Ratio Decidendi: An exemption certificate may be cancelled where the dealer fails to satisfy the statutory conditions for export-oriented status and is found to have collected tax from customers in breach of the exemption regime.
TaxTMI 
AI Drafter ✕
TaxTMI 
