A division bench has held that the CST exemption cannot be on ground of mere non-production of agreement between the Indian Exporter and the foreign buyer.
The petitioner, M/s General Traders challenged an order of the CST Tribunal confirming an order rejecting the claim of the petitioner-dealer for exemption from payment of Central Sales Tax under Section 5(3) of the Central Sales Tax Act, 1956 on account of inter-State sale in the course of export.
The petitioner submitted that Indian exporters having placed order on it to supply goods, such as niger seed, gingelly seed and turmeric, pursuant to contract entered into/purchase order being received from the Foreign Buyer(s), the petitioner at the material period sold those goods in the course of inter-State trade or commerce and in turn received Certificate of Export in Form ‘H’ prescribed under Rule 12(10) of the Central Sales Tax (Registration and Turnover) Rules, 1957. Accordingly, the goods being sold in the course of export, as penultimate seller it claimed exemption under sub-section (3) on compliance of requirement under sub-section (4) of Section 5 of the CST Act.
Chief Justice S. Muralidhar and Justice Murahari Sri Raman observed that Certificate of Export in Form ‘H’ as issued to the petitioner-penultimate seller is in order and free from defect.
“This indicates that the exporter has supplied information with regard to date of agreement with the foreign buyer or the date of purchase order placed by the foreign buyer. Said form also contains details of transport and bill of lading. It is recorded as a matter of fact by the authorities that the petitioner produced purchase order and bill of lading for verification of the authorities,” the Court said.
“In view of provisions of the statute and the decisions referred to 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.”
Quashing the order, the Court held that “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.”
Quashing the penalty, the division bench has held that “the Circular issued by the Commissioner of Commercial Taxes, instructing not to enforce penalty under Rule 12(3)(g) in the circumstance where there was non-filing of declaration forms in respect of bona fide transactions, particularly in absence of substantive provision for such imposition under Section 9(2) of the CST Act, this Court is of the considered opinion that the First Appellate Authority was justified in deleting penalty as imposed by the Assessing Authority while finalizing Audit Assessment.”
In the First Appellate stage, the petitioner had been granted relief with respect to penalty for non-submission of statutory forms. There was neither cross-appeal nor cross-objection by the Revenue. It deserves to be noted, therefore, that in the appeal of the petitioner-dealer, the Odisha Sales Tax Tribunal was not legally correct to grant relief to the opponent-State of Odisha by remanding the matter to the Assessing Authority to take action as deemed proper “as per requirement of statute” qua matter of imposition of penalty.
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