TaxTMI 
TaxTMI 
2017 (6) TMI 1091
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (3) of the Central Sales Tax Act [the 'CST Act' in short] to get exemption from payment of tax ? Could it be regarded as an 'interstate sale' and if exemption sought for could be given in terms of Section 8 (6) of the CST Act or whether it is a 'local sale' as contended by the Department ? Can the appellant, who participated in the bid without demur as to the tender conditions, seek for any relief to get absolved from the tax liability under the Kerala Value Added Tax Act [the 'KVAT Act' in short] without challenging the provisions contained in the Tender at appropriate time or even later ? Will the 'Same Goods Theory' as explained by the Apex Court in State of Karnataka Vs. Azad Coach Builders Private Limited and another [(2010) 9 SCC 524] will help the appellant in any manner to cross the hurdle ?. These are the main points to be considered in this appeal preferred by the appellant/assessee. 2. The appellant is the proprietrix of an establishment run in the Madras Export Processing Zone, Thambaram, Chennai; engaged in the manufacture of essential oils, natural extracts and products of sandal wood, who is also stated as an 'exporter ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gly that Ext. P18 representation was filed, which was considered and rejected by the competent authority as per Ext.P19, holding that the bidder was not eligible for tax exemption in terms of Section 6 (7) (b) of the KVAT Act, it being a 'local sale'. In view of the turn of events, W.P.(C) No. 9096 of 2015 was sought to be withdrawn, without prejudice to the right to challenge the relevant proceedings including Ext. P19. The Writ Petition was accordingly dismissed as withdrawn, vide Ext. P20 judgment dated 27.05.2015. 6. The appellant approached this Court again by filing W.P. (C) No. 21530 of 2015 with the following prayers : " (i) a declaration that sale effected to a unit in Special Economic Zone established under the Special Economic Zone Act, 2005 by any dealer in the domestic tariff area is an export sale and no Value Added Tax can be levied or collected by the respondents in respect of such sale. (ii) a writ of Certiorari or any other writ, order or direction, quashing Exhibits P9, P10, P14, P16 and P19 in so far as it demand sale tax on the sale of sandalwood to the petitioner treating the transaction between the petitioner and respondents 2 to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion, is incorporated in the KVAT Act as well, by way of Section 13 (1) stipulating that every sale in the course of export shall be a 'zero rate sale'. It is pointed out that the appellant has no business place in the State of Kerala and that 'sandalwood' was purchased only to meet the export obligation under Exts. P2, P3 and P4 purchase orders issued prior to the date of sale. There is a further contention, as averred in paragraph 6 of the Writ Appeal, that the respondents were specifically informed before and after the 'e-auction' that the goods purchased were intended to be taken to a Special Economic Zone [though no material has been produced before this Court to substantiate the same]. By virtue of Section 6 (7) (b) of the KVAT Act, it is contended that a sale to Special Economic Zone is exempted from tax liability. 10. According to the learned Special Government Pleader, there is absolutely no merit of bonafides in the contention now put forth before this Court and that the issue is squarely covered against the appellant as per the ruling rendered by another Division Bench of this Court under similar circumstances involving sale of sandalwood in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of India. [(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.] (4) The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority. (5) Notwithstanding anything contained in subsection (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposes of its international flight, such purchase shall be deemed to take place in course of the export of goods out of the territory of India. Explanation:- For the purpose of this subsection, "designated Indian carrier" means any carrier which the Central Government may, by notificatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cal enactment. This Court finds it difficult to agree to the said proposition for various reasons as discussed below. 13. Coming to the Scheme of the Special Economic Zones Act, 'exemption' is dealt with under two heads i.e Section 7 as well as Section 50. Section 7 reads as follows : "7. Exemption from taxes, duties or cess.- Any goods or services exported out of, or imported into, or procured from the Domestic Tariff Area by.- (i) a Unit in a Special Economic Zone; or (ii) a Developer, shall, subject to such terms, conditions and limitations, as may be prescribed, be exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule." The above provision clearly stipulates that exemption from taxes, duties or cess on any goods imported into or exported out of the Special Economic Zone, to a unit in a Special Economic Zone, shall be subject to such terms and conditions as may be prescribed in respect of the tax due or cess under all enactments specified under the first schedule. Since the enactments specified in the first schedule are Central enactments, it deals with the powers of the Central Gov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he entrepreneur; (b) delegating the powers conferred upon any person or authority under any State Act to the Development Commissioner in relation to the Developer or the entrepreneur." 16. There is a vital distinction between the terminology used under Sections 7 and 50; in so far as the obligation under Section 7 is 'mandatory', by virtue of the usage of the expression 'shall' [of course, subject to terms, conditions and limitation as may be prescribed]; whereas the exemption under Section 50 dealing with the State Government is 'directory', as the expression used is "may". No notification is stated as issued under Section 50 of the Act, nor any such notification is brought to the notice of this Court so as to claim the benefit under Section 50 of the Act. As it stands so, though it is stipulated under Section 53 of the Act that a Special Economic Zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purpose of undertaking the authorized operation and further that, though the Act is to have overriding effect by virtue of Section 51 of the very same enactment, it does not promote the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....extricably linked with the agreement or order occasioning that export. The expression 'in relation to' are words of comprehensiveness, which might both have a direct significance as well as an indirect significance, depending on the context in which it is used and they are not words of restrictive content and ought not be so construed. Therefore, the test to be applied is, whether there is an in-severable link between the local sale or purchase on export and if it is clear that the local sale or purchase between the parties is inextricably linked with the export of the goods, then a claim under Section 5(3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application. 28. The facts of this case clearly reveal that the transaction between the assessee and the exporter is inextricably connected with the export of the goods to Sri Lanka. The communication between the foreign buyer and the exporter reveals that the foreign buyer wanted the bus bodies to be manufactured by the assessee under the specifications stipulated by the foreign buyer. The bus bodies constructed and manufactured by the assessee could not be of any use i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter detailed discussion of the facts and relevant provisions of law and the precedents, the position was answered against the assessee, declaring it in favour of the Revenue. It virtually stands against the case mooted by the appellant herein as well. Though there is a case for the appellant that the liability to pay tax stands totally 'excluded', by virtue of the provisions of the SEZ Act, read in the light of Article 286 of the Constitution of India, and hence that it is not a question of 'exemption'; the position could not be substantiated by the appellant to the satisfaction of this Court. 19. Even otherwise, Section 5 (3) of the CST Act will not come to the rescue of the petitioner. Sub section (4) of Section 5 clearly says that the provision under sub-section (3) shall not apply to any sale or purchase of any goods; unless the Dealer selling the goods furnishes to the prescribed authority, in the prescribed manner, a declaration duly filled and signed by the Exporter to whom the goods are sold [in the prescribed form]. The appellant does not have a case that the appellant Exporter had duly filled in and signed any declaration and handed it over to the Deale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Orissa to West Bengal] was an integral part of sale and hence it was an 'interstate sale'. The correctness of the said decision was doubted, which was referred to a Larger Bench as per order dated 07.08.2007 in Civil Appeal No. 2421 of 2006 and connected cases, holding that the view expressed in (2007) 6 SCALE 284 [cited supra] required reconsideration. Later, the matter was considered by Larger Bench along with such other matters, when it was brought to the notice of the Court that the parties did not want to contest the matter and that the assessee wanted to participate in the proceedings, to have the assessment finalized. In the light of the said submissions, the appeals were disposed of without answering the reference; leaving it open to be answered in appropriate cases. 22. Referring to the various judicial pronouncements till date, the Apex Court in Commissioner of Commercial Taxes, Hyderabad Vs. Desai Beedi Company [(2015) 2 VST 242 (SC) - 3 member Bench] held that in order to constitute an 'interstate sale' the movement of goods should be occasioned by the sale and that the same must be inextricably connected with the sale. The assessee in the said case w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Karnataka). The terms of the notification were quite specific; making it obligatory to satisfy the tax under the State enactment. The entire transaction took place and were completed in the State of Tamil Nadu and accordingly interference was declined and the demand raised by the State was upheld, accepting their case that it was a 'local sale'. 24. The next question in the said context is with regard to the terms of the Tender, place of sale and time of completion of sale. Admittedly, the sale was notified as per Ext. P5 notification, subject to the tender conditions/general conditions and Ext. P6 special conditions, which clearly indicated that the sale was to be effected at the godown of the Forest Department, Marayoor in Kerala. Only those who chose to abide by the conditions could participate in the auction and it was accordingly that the appellant also participated in the Tender, accepting all the conditions stipulated in this regard. In an auction sale, the sale is complete when it is confirmed 'on the fall of the hammer' as held by the Constitution Bench of the Apex Court in Kil Kotagiri Tea and Coffee Estates Company Vs. State of Kerala [STC - 1965 - 16 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taxes shall be payable as per the prevailing tariff [wherever applicable at the time of delivery] before taking delivery of the materials. Under Clause 14 (a) (iii), the mode of payment of balance amount was stipulated as either through e-treasury, Government of Kerala or Demand Draft (DD) drawn in favour of Range Officer, Marayoor payable at State Bank of Travancore, Munnar or by way of cash in Sub Treasury, Devikulam. It was further made clear under Clause 14 (a) (v) that the prevalent rate of KVAT (at present 14.5%) would be applicable to all successful bidders irrespective of destination of transportation of materials and purpose. Under Clause 14 (c), it has been categorically stated that the successful bidder will be able to remove all the bid Sandalwood only after he had remitted all the required payments as per the conditions of 'e-auction'. Under Clause 14 (d), the successful bidder is allowed to remove the logs without paying any ground rent within 40 days and a grace period of further four months is given, subject to payment of ground rent under four different slabs. Under Clause 15 (e) it is mentioned that if the successful bidder fails to remove the lot even aft....