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Issues: (i) Whether the transaction was a sale in the course of import so as to attract exemption under Section 5(2) of the Central Sales Tax Act, 1956. (ii) Whether penalty under Section 67 of the Kerala Value Added Tax Act, 2003 was sustainable on the facts of the case.
Issue (i): Whether the transaction was a sale in the course of import so as to attract exemption under Section 5(2) of the Central Sales Tax Act, 1956.
Analysis: The purchase order issued by the Kerala customer required procurement only from the foreign supplier in Germany and prohibited supply from stock in India. The petitioner placed the corresponding order on the German supplier, and the supplier's confirmation and invoice referred to the Indian customer. These documents showed a direct and inextricable link between the local purchase order, the import, and the ultimate sale. Filing of the Bill of Entry did not break the chain where the contractual and transactional nexus remained intact. The earlier decision in the petitioner's own case, as well as other similar decisions, supported the same legal position.
Conclusion: The transaction was held to be a sale in the course of import, and the exemption under Section 5(2) of the Central Sales Tax Act, 1956 applied.
Issue (ii): Whether penalty under Section 67 of the Kerala Value Added Tax Act, 2003 was sustainable on the facts of the case.
Analysis: The transaction had been disclosed in the return, with exemption being claimed on a bona fide basis. There was no suppression of turnover or concealment of the transaction. In these circumstances, penalty could not be justified merely because the department disputed the exemption claim. The completed assessment also accepted the exempt character of the transaction.
Conclusion: The penalty was held to be unsustainable.
Final Conclusion: The impugned penalty order was set aside and relief was granted to the assessee on the basis that the import-linked sale was exempt and penalty was not warranted on the disclosed facts.
Ratio Decidendi: Where the contractual documents establish an inextricable nexus between the customer order, the import, and the ultimate sale, the transaction qualifies as a sale in the course of import, and a disclosed claim made on a bona fide basis cannot support penalty absent suppression.
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