TaxTMI 
TaxTMI 
2022 (12) TMI 560
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....from 01.06.2006 to 31.03.2010. Questions of law framed by this Court: 2. While entertaining the revision petition, this Court vide Order dated 28th November, 2017 framed the following questions of law: "A) Whether in view of production of 'H' Forms and export documents including Bill of Lading in respect of claim under Section 5(3) and 5(4) of the CST Act, it is lawful and proper for the First Appellate Authority to remand the matter to the Assessing Authority for fresh assessment? B) Whether in absence of appeal or cross objection by the State and in view of Circular dated 20.04.2015 of the Commissioner of Commercial Taxes, Odisha the learned Tribunal is justified to render findings for reconsideration on the issue of imposition of penalty under Section 12(3)(g) of the CST(O) Rules, 1957?" Facts of the case: 3. Tax Audit being undertaken, on the basis of Audit Visit Report submitted under Rule 10 of the Central Sales Tax (Odisha) Rules, 1957 (for brevity referred to as "CST(O) Rules"), Assessment was framed under Rule 12(3) vide Order dated 27.02.2013 raising a demand to the tune of Rs.29,91,752/- (tax of Rs.9,97,250.73 + penalty of Rs.19,94,501.46) b....
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.... 'sale or purchase in course of export'. In this case, the sale between the Indian Exporters and the foreign buyers, being the direct and immediate cause of export was the 'sale in course of export'. The sale between M/s. General Traders, Berhampur and the Indian Exporters was a sale preceding the sale that caused export or a sale for the purpose of complying an order for export or for facilitating export. That was a sale for export. All such preceding sales in a chain of sales are sales for export. *** So, the sales falling under Section 5(1) and 5(3) are now sales in course of export. This is subject to compliance of other conditions like furnishing of declaration in Form H and documents evidencing export as per contract. Against the above sales, the dealer although submitted H Form but failed to produce the agreement copies or sale contracts or purchase order of the foreign buyer, copies of agreement made between the Indian Exporter and foreign buyer. Since the dealer failed to comply the conditions of Section 5(3) of the CST Act, the export sale to the tune of Rs.30288489.50 is disallowed and treated as inter-State sale and taxed in appropriate rate o....
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....rchase order of the foreign buyer/sale contract/agreement copies could be produced and in the second case no H form could be produced. *** Moreover, against the export sale of Rs.3,02,88,489.50 the dealer could not produce purchase order of the foreign buyer/sale contgract/agreement copies for which the said amount was not allowed as exempted sale as contemplated under Section 5(3) of the CST Act, though H forms have been submitted. In such type of transaction, we would like to say that the learned STO is to see as to whether the goods involved in the transactions referred to above have really moved out of the territory of India after thorough verification of the connected documents to be produced at the time of assessment afresh. In case the dealer is able to convince the learned STO that there was actually export of materials and the goods have crossed the border of Indian territory then, the exemption as contemplated under Section 5(3) of the CST Act to be allowed as deduction while arriving at the NTO of the dealer appellant for the calculation of its final tax liability." 3.5. Since much stress was laid by all the fact-finding authorities on the production of copy ....
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....inter-State sale in order to avail benefit of concessional rate of tax in terms of Section 8 of the said Act. Having applied his mind and finding that there was no contumacious conduct on the part of the petitioner in non-production of aforesaid documents, the Appellate Authority had correctly deleted the penalty as imposed by the Assessing Authority under Rule 12(3)(g) of the CST (O) Rules. The learned Senior Counsel submitted that non-furnishing ofdeclaration forms does not attract imposition of penalty. He would further submit that the Commissioner of Commercial Taxes, Odisha, issued a Circular bearing No.42-III(I)38/09/CT, dated 20^th April, 2015, by referring to Gujarat Ambuja Cement Ltd. and Anr. Vrs. Assessing Authority-cum-Assistant Excise and Taxation Commissioner and Ors., (2000) 118 STC 315 (HP); Fosroc Chemicals (India) Pvt. Ltd. Vrs. The State of Karnataka, (2015) 79 VST 25 (Karn); M/s. Lalbaba Roller Flour Mills, Nayabazar, Cuttack Vrs. State of Odisha, S.A. No.87(C) of 2012-13, disposed of vide Order dated 3rd April, 2014 of the Odisha Sales Tax Tribunal and Gajalaxmi Iron Works, Industrial Estate, Kalunga, Rourkela Vrs. State of Odisha, S.A. No.53 of 2011-12, ....
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....Section 42(5) of the Odisha Value Added Tax Act, 2004, in the cases of National Aluminium Company Ltd. Vrs. Deputy Commissioner of Commercial Taxes, Bhubaneswar-III Circle, Bhubaneswar, 2021 (I) OLR 828 and Jindal Stainless Ltd. Vrs. State of Odisha, (2012) 54 VST 1 (Ori). Said decision has also been subsequently followed and discussed in the case of State of Odisha Vrs. Chandrakanta Jayantilal, Cuttack, STREV No.69 of 2012, vide Order dated 05.07.2022. Discussion regarding question No. A: 6. From the pleadings and arguments advanced by respective parties, it transpires that the claim of exemption of penultimate sale in course of export is denied by the Assessing Authority which is affirmed by the First Appellate Authority as also the Odisha Sales Tax Tribunal on the ground of non-production of copy of agreement between the Indian Exporter and the Foreign Buyer. 6.1. The First Appellate Authority clearly outlined the dispute as follows: "*** At the Appeal hearing stage the dealer appellant appeared and furnished supporting documents like bill of lading, purchase orders towards claim of exemption of export sale amounting to Rs.2,98,93,489.50 but failed to pro....
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....bed form obtained from the prescribed authority." 6.5. The term "prescribed" has been defined under Section 2(e) of the CST Act to mean "prescribed by rules made under this Act". 6.6. Section 13(1) thereof empowers the Central Government to frame rules inter alia providing for: "(d) the form in which and the particulars to be contained in any declaration or certificate to be given under this Act, the State of origin of such form or certificate or declaration shall be produced or furnished." 6.7. Rule 12(10) of the CST (R&T) Rules prescribes as follows: "(10) (a) The declaration referred to in subsection (4) of Section 5 shall be in Form H and shall be furnished to the prescribed authority upto the time of assessment by the first assessing authority. (b) The provisions of the rules framed by the respective State Government under sub-sections (3), (4) and (5) of Section 13 relating to the authority from whom and the conditions subject to which any form of certificate in Form 'H' may be obtained, the manner in which such form shall be kept in custody and records relating thereto maintained and the manner in which any such forms may be used and any s....
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....of goods (1) Description of goods _____ (2) Quantity of goods ________ B. Details regarding export (3) Name of airport, seaport or land customs station through which the goods have been exported. ____ (4) Name of the airlines/ship/railway/goods vehicle or other means of transport through which the export has taken place. ________ (5) Number and date of air consignment note/bill of lading/railway receipt or goods vehicle record or postal receipt or any other document in proof of export of goods across the customs frontier of India (Certified copy of such air consignment note/bill of lading/railway receipt/goods vehicle record/postal receipt/other document to be enclosed) (6) Description, quantity/weight and value of the goods exported under the document referred to in item (5) above ________ VERIFICATION The above statements are true to the best of my knowledge and belief and nothing has been concealed therefrom. Signature with date. (Name of the person signing the certificate) (Status of the person signing the certificate in relation to the exporter). Note: To be furnished to....
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....the said case it has been observed as follows: "4. According to the learned counsel for the petitioner, though the petitioner has not produced the agreement with foreign buyers, the petitioner has filed Form-H and other documents in support of his claim and the order of the assessing authority without insisting those documents and by considering the production of agreement with foreign buyers, is unfair and arbitrary and is bad in law. This Court finds considerable force in such argument advanced on the side of the petitioner. What is required on the part of the petitioner is to prove the factum of the transaction and once he is able to do so with sufficient and satisfactory documents, the value of the same is exempted from tax liability and no rule lays it mandatory to produce the agreement with the foreign buyers. That being so, the failure on the part of the assessing authority to consider the documents already produced by the petitioner and to pass appropriate orders in the light of the same amounts to non-application of mind and the impugned order, which is the outcome of the same cannot be legally allowed to stand. The learned counsel for the petitioner has also in t....
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....disputed that the certification of the unit is in terms of the requirement of entry 26-A of the list of exempted goods. According to the department, if the goods have not been utilised for the purpose indicated in the declarations, deduction to the selling dealer is not to be allowed. In our view, the stand is fallacious. It is not for the selling dealer to go after the purchasing dealer to find out as to in what manner the latter utilises the goods which it has purchased on the strength of the declaration forms in order to be entitled to the deduction. Such a requirement would fasten an impossible burden on the selling dealer. The question, however, has rightly been posed by the learned counsel for the department that if there is misuse, on whom the department shall lay its hands. It is the purchasing dealer who is getting exemption on fulfilment of certain conditions. Therefore, if goods purchased on the basis of the declaration are put to a different use, the benefit of exemption is to be denied to it. The selling dealer cannot be faulted if there is any diversion or change of user. In this connection, the fifth proviso to sub-section (1) of section 5 of the Act is relevant, and....
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....r (STO). It was not incumbent on the selling dealer to enquire whether the saw mill manufacturer furnishing a declaration in Form IV was or was not entitled to avail of the concessional rate of sales tax. 10. *** As explained by this Court in Tilakraj Mediratta (supra) "It is not for the selling dealer to go after the purchasing dealer to find out as to in what manner the latter utilizes the goods which it has purchased on the strength of the declaration form in order to be entitled to deduction. Such requirement would place on an impossible burden on the selling dealer". To the same effect is the decision in M/s. Bharat Petroleum Corporation Ltd. (supra) [State of Odisha Vrs. M/s. Bharat Petroleum Corporation Ltd., 93 (2002) CLT 364]." 6.14. In yet another decision being Kalinga Timber, Jagatpur, Cuttack Vrs. State of Odisha represented by the Commissioner of Sales Tax, STREV No.63 of 2011, vide Judgment dated 05.07.2022, it has been stated as follows: "9. Applying the ratio of the above decision [Tilakraj Mediratta Vrs. State of Odisha, (1992) 86 STC 453 (Ori)] to the case on hand, it is seen that the declaration in Form IV does not disclose the intention of ....
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....hase (meaning the penultimate 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.' It is true that Parliament has not said 'the agreement or order for or in relation to such sale occasioning the export', but has used the phrase 'the agreement or order for or in relation to such export.' But in our view two aspects emerge very clearly on a close scrutiny of this phrase which by implication show that the 'agreement' spoken of there refers to the agreement with a foreign buyer and not an agreement with a local party containing a covenant to export. *** Applying this rule of construction [noscitur a sociis] it becomes clear that 'the agreement' occurring in the phrase must mean the agreement with a foreign buyer and not the agreement with a local party containing a covenant to export. Secondly and more importantly, the user of the definite article 'the' before the word 'agreement' is, in our view, very significant. Parliament has not said 'an agreement' or 'any agreement' for or in relation to such export and in the context the expression 'the agreement' would refer to that agreement ....
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....ds and (b) that the object of granting the exemption was to promote our exports in fiercely competitive international markets and, according to counsel, both these objectives would be frustrated if the narrow construction was placed on the expression 'the agreement as meaning the agreement with a foreign buyer and that the construction suggested by him would carry out the objectives. It is true that the benefit of the exemption was intended to be extended to small and medium scale manufacturers desirous of exporting their goods but the requirement of the new provision is not that they must procure or have with them a foreign buyer's contract but the requirement is that before they complete the sale of their goods to the canalising agency of the private export house there must be in existence a foreign buyer's contract to implement which they should have sold their goods to such agency or export house. In the nature of things such manufacturers who have no expertise of export trade are not expected to have a foreign buyer's contract with them and it would be sufficient compliance of the provision if the canalising agency or the export house has with it the foreign buyer's contract. ....
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....-Judge Constitution Bench of the Hon'ble Supreme Court of India in the case of State of Karnataka Vrs. Azad Coach Builders Pvt. Ltd. and Anr., (2010) 9 SCC 524 laid down the principles in respect of entitlement to claim exemption under Section 5(3) of the CST Act, which are as follows: "26. When we analyse all these decisions in the light of the Statement of Objects and Reasons of the amending Act 103 of 1976 and on the interpretation placed on Section 5(3) of the CST Act, the following principles emerge: i. To constitute a sale in the course of export there must be an intention on the part of both the buyer and the seller to export. ii. There must be obligation to export, and there must be an actual export. iii. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export. iv. To occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it, without which a transaction sale ca....
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.... above, this Court is of the considered opinion that the petitioner has discharged its burden in the instant case and the authorities could very well have ascertained from the details mentioned in the Certificate of Export in Form 'H' supported by bill of lading and purchase order whether the agreement/purchase order preceded the procurement of goods by the Indian Exporter from the petitioner-penultimate seller. There being no adverse finding of any sort in this regard, this Court is, therefore, comes to conclusion that mere non-production of agreement entered into between the Indian Exporter and the Foreign Buyer would not invalidate the claim of the petitioner-penultimate seller for exemption under Section 5(3) of the CST Act. Furthermore, the authorities have not complained that the petitioner has not complied with the terms of sub-section (4) of Section 5. The disallowance of claim of the petitioner under Section 5(3) of the CST Act has been made by the Assessing Authority and confirmed by the Appellate Authority and the Odisha Sales Tax Tribunal was on account of non-production of copy of agreement between the Indian Exporter and the Foreign Buyer. In view of discussions made ....
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....nits and Commercial Tax Website for information and necessary action: "Office of the Commissioner of Commercial Taxes: Odisha : Cuttack No. 42/III(I)38/09/CT dated, 20/04/2015 CIRCULAR Sub: Non-levy of mandatory penalty on audit assessment under Central Sales Tax Act Madam/Sir, It has come to my notice that in many case the assessing authorities are imposing penalty equal to twice the amount of tax assessed in the assessments due to non-submission of declaration forms as per Rule 12(3)(g) of the CST (O) Rules, 1957. As per Rule 12(3)(a), (e) and (f) of the CST(O) Rules, 1957, the tax audit, if results in detection of suppression of purchases or sales or both, erroneous claims of deduction, evasion of tax or contravention of any provision of the Act affecting the tax liability of the dealer, the Assessing Authority (AA) is required to do assessment of the dealer and impose penalty equal to twice the amount of tax assessed in such assessment as per Rule 12(3)(g) of the CST(O) Rules, 1957. In cases of non-production of 'C' Forms, it has been noticed that there is no uniformity and consistency in the approach by the departmental office....
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....he facts remains that the dealer has not concealed / suppressed any part of its turnover and has also been assessed appropriately on the turnover not supported with the declarations, for which the levy of penalty u/r 12(3)(g) of the CST (O) Rules by the learned STO is not justified and hence is liable to be deleted." Similarly in another judgment in the case of M/s Gajalaxmi Iron Works, Industrial Estate, Kalunga, Rourkela Vrs. State of Odisha in S.A. No. 53 of 2011-12 dated 18.12.2013, the Hon'ble Odisha Sales Tax Tribunal have given a clear finding along similar lines which reads as follows: [to quote] "On a careful reading of Rules 12(3)(g), I find that the imposition of penalty can be made in this provision only where there has been assessment under clause (e) or (f) of the said rules. On a reading of the aforesaid two rules I find that non-submission of "C" forms is not covered for assessment under the same rules. Therefore, considering submissions from both sides I come to a positive finding that the filing of "C" form is an optional condition to avail of concessional rate of tax and non-compliance of the same will only debar the dealer to get the e....
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....Similarly the Hon'ble High court of Karnataka in case of Fosroc Chemicals (India) Pvt. Ltd. Vrs, the State of Karnataka in STRP Nos. 130, 136-168 & 169-170 of 2014 is of opinion that on a representation made by the purchaser the dealer company has sold the goods claiming concessional rate of tax. When the purchaser is unable to produce the 'C' Forms for any reason whatsoever, then the liability is cast on the assessee to pay tax under the State VAT Act. The said tax ought to have been paid on the date of sale, if there is a delay in payment of the said tax then there is automatic and mandatory interest in terms of State VAT Law. On a plain reading it emerges that mere non-submission of declaration in Form 'C' against a bona fide transaction does not constitute an offence under rule 12(3)(a) of the CST(O) Rules so as to attract liability to imposition of penalty under Clause (g) of the said Rule. The filing of 'C' Form being optional and a mere condition to avail concessional rate, the lapse, if any, cannot be considered to operate as a penal clause. Being an optional benefit available to the dealer, the non-availing of the same or non-compliance with such provision, in any....