AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 560
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....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) by the Joint Commissioner of Sales Tax, Ganjam Range, Berhampur (be ....
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....dian 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 of tax." 3.3. Appeal being preferred under Section 9(2) of the CST Act read with Section 77 of the ....
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....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 of contract between the Foreign Buyer and the Indian Exporter, contending that, that is not the requirement under the statute, the pet....
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....nding 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 20th 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, disposed of vide Order dated 18th December, 2013 of the Odisha Sales Tax Tribunal instructed the field formation not to impose penalty in cas....
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...., 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 produce the agreement copies or sale contract or purchase order of the foreign buyer with the Indian Exporter for want of which the learned AO disallowed the claim....
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.... 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 such certificate may be furnished in so far as they apply to declaration in Form 'C' prescribed under these rules shall mutatis mutandis apply to certificate in Form 'H'." 6.8. The statutory Form 'H' as app....
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....) 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 the prescribed authority in accordance with the rules made by the State Government under Section 13." 6.9. Conjoint reading of aforesaid provisions makes it clear that exemption from payment of Central sales tax on the transactions falling under sub-section (3) is available to the selling dealer on compliance of terms of sub-section (4) of Section 5 of the CST Act read with Rule 12(10). In other words, in order to avail benef....
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....n 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 the course of hearing, produced the copy of the order passed by our High Court dated 30.08.2004 in W.P. No. 24354 of 2004 made in M/S. Rolls Appliances (P) Limited Vrs. The Commercial Tax Officer and order dated 05.04.2004 in W.A. No.4 of 2003 in M/s. South India Hosiery Manufacturers Association Vrs. The State of Tamil Nadu and others. The perusal of the orders reveal that identical issue was raised in both the matters before the Hon'ble ....
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....ds 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 has application. 7. Therefore, in our view the authorities were not correct in taxing the petitioner for any alleged change in user of the goods purchased by issue of Form IA by the purchasing dealer. It is open to the department to appropriately levy tax on opposite party No.7 if it is established that the goods purchased by it on the strength of Form IA was put to a different use or that there has been any contravention of the declaration." ....
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....o 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 the purchasing dealer to use the size goods purchased as 'packing materials'. Consequently, the selling dealer cannot be saddled with any liability of tax. If indeed, the Department finds that the purchasing dealer has used the purchased goods for the purpose other than that disclosed in the declaration form, it would be open to the Department to proceed against the purchasing dealer. It is, therefore, not justified on the part of the Department to pass on that liability to the selling d....
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....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 which is implicit in the sale occasioning the export. Between the two sales (the penultimate and the final) spoken of in the earlier part of the sub-section ordinarily it is the final sale that would be connected with the export, and, therefore, the expression 'the agreement' for export must refer to that agreement which is implicit in the sale that occasions the export. The user of the definite article 'the', therefore, clearly suggests that the agreement spoken of must be the agreement with a foreign buyer. As a matter of pure construc....
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....ion 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. It would, therefore, be incorrect to say that the benefit of the exemption depends upon the fortuitous circumstance of a foreign buyer's contract being available with such manufacturer when he sells his product to the agency or the export house. No hardship as is sought to be suggested is involved and we do not agree that by the construction which we are inclined to place on the expression 'the agreement' occurring in Section 5(3) the small or medium scale manufacturers would be deprived of the benefit of the exemption. In fact, the construction which we are inclin....
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.... 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 cannot be called a sale in the course of export of goods out of the territory of India. 27. The phrase "sale in the course of export" comprises in itself three essentials: (i) that there must be a sale; (ii) that goods must actually be exported; and (iii) that the sale must be a part and parcel of the export. The word "occasion" is used as a verb and means "to cause" or "to be the immediate cause of". Therefore, the words "occasioning the export" mean the factors, which were the immediate cause of export. The words "to comply with the agreement or order" mean all transactions which are inextr....
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....e 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 supra, there is no scope for this Court left but to overrule the view expressed by the authorities. Therefore, this Court is inclined to set aside the Order dated 18.05.2017 passed by the learned Odisha Sales Tax Tribunal in S.A. No.58(C) of 2015-16. Discussion regarding question No. B: 7. As regards question No.(b), it may be relevant to notice Rule 12(3)(g) of the CST (O) Rules. 7.1. Rule 12(3)(g) as it stood during the relevant point of time is reproduced hereunder: "Without prejudice to any interest or penalty that may have been levied or imposed under any of the provisions of the Act, an amount equal to twice the amount of tax assessed unde....
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....oth, 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 officers as to whether penalty is leviable for non-production of 'C' Forms or not. It is seen that assessing officers and appellate officers are interpreting the provisions of the relevant statutes in a varying manner. This is leading to unnecessary litigation which is affecting the dealers adversely and also not bringing any revenues to the department when orders are set aside in the OSTT and in the higher judicial forums. In order to obviate such dissimilar approach by the different assessing authorities, in cases of non-production of 'C' Forms, there is a need to issue this circular based on the decisions of the Odisha Sales Tax Tribunal and the judiciary. As the provision of the Central Sales Tax Act, ....
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....se (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 exemption of tax benefit. In the Judgment of Gujarat Ambuja Cement Ltd. and Another Vrs. Assessing Authority-cum-Assistant Excise and Taxation Commissioner and Others reported in (2000) 118 STC 315 (HP), it has been observed by the Hon'ble High Court of Himachal Pradesh that for the provisions of the CST Act and Rules made thereunder, the question of filing of Form 'C' is envisaged only in order to avail of concessional or reduced rate of taxation. Such Forms are permitted to be filed not only before the finalization of the assessment and even at the appellate and revisional stages in cases where the availing of concession is dependent upon filing of C Forms the non-filing of 'C' Forms or the filing of defective 'C' Forms may only render the assessee liable to pay at the full rate o....
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....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 event, cannot be held to be non-compliance with the provisions of the Act, Rules and notifications. It is not only that tax liability is affected but when tax liability is affected by contravention of any conditions mentioned in Rule 12(3)(a) of the CST(O) Rules, then only penalty can be imposed. On the other hand the submission of declaration forms is not strictly in the control of the assessee dealer, since it is to be obtained from the purchasing dealer and submit before the assessing authority to avail concessional rate of tax. Non-submission of Forms is not an incentive for the assessee as he has to pay higher rate of tax as prescribed under Section 8(2) of the CST Act. Hence, no intention can be attributed to the assessee for his failure to submit declaration in Form 'C'. In view of the above facts i....