Allied Glasses Pvt. Ltd. vs The Commissioner,Commercial Taxes

Surya Prakash Kesarwani, J.—Heard Shubham Agrawal, learned counsel for the applicant and Sri. B.K. Pandey learned Standing Counsel for the respondent.

Admit on the following questions of law:-

Whether the Tribunal was justified in denying the benefit of exemption u/s 5(3) of the Central Sales Act to the applicant and rejecting Form-H having been filed by the applicant, only on the basis that the goods sold by the applicant to the purchaser/exporter have not been exported by it in the same form, which is contrary to the decision of the Hon''ble Apex Court in the case of State of Karnataka Vs. Azad Coach Builders Pvt. Ltd.?

Both the learned counsel for the parties submits that since the impugned order has been passed by the Tribunal without considering to the Constitution Bench judgment of Hon''ble Supreme Court in the case of State of Karnataka Vs. Azad Coach Builders Pvt. Ltd. and Another, and as such this revision may be finally heard. In the circumstances, with the consent of the parties, this revision being finally heard.

Briefly stated the facts of the present case are that during the A.Y. 2007-08, the applicant sold toughened glass of Rs. 8,36,730/- to one M/s. Titan Energy System Limited, Andhra Pradesh who has exported solar module, accessories and CIGS module. Toughened glass supplied by the petitioner were used by M/s. Titan Energy System Ltd. in the export of the aforesaid goods. The aforesaid sales were made against Form-H. The applicant, during the course of assessment proceeding; filed requisite Form-H and copies of shipping bill in respect of the aforesaid sales transaction in question. It claimed exemption u/s 5(3) of the Central Sales Tax Act, 1956. The Assessing Officer, vide assessment order dated 26.3.2010 held that the sale so made by the applicant to be interstate sale and accordingly levied central sales tax @16%. The First Appeal No. 608/2010 filed by the applicant was rejected by the Additional Commissioner Grade-II (Appeal) First, Commercial Tax, Meerut by an order dated 23.11.2013 denying the benefit of Section 5(3) of the Act on the ground that same goods have not been exported.

Aggrieved with the order of the first Appellate Authority, the applicant preferred an Appeal No. 04/2014 (A.Y. 2007-08) before the Member Commercial Tax Tribunal, Meerut, Bench-II, Meerut who rejected the appeal on the point of exemption u/s 5(3) of the Act on the ground that toughened glass has not been exported by the exporter in the same form in which it was purchased from the applicant.

Aggrieved with the aforesaid order of the Tribunal, the applicant has filed this revision.

Sri. Shubham Agrawal submits that the Tribunal and the authorities below have committed manifest error of law to reject the claim of the applicant for exemption u/s 5(3) of the Act in respect of transaction in question on the ground that the same goods have not been exported. He submits that the Constitution Bench of Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd. (supra), held that the test to be applied is, whether there is an in-severable link between the local sale or purchase and 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 u/s 5(3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application. He submits that on the finding recorded by the Tribunal, the exemption u/s 5(3) of the Act deserves to be allowed to the applicant in view of the law laid down by Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd. (supra). The Tribunal has not examined the matter in the light of law laid down by Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd.(supra). He, therefore, submits that the matter may be remanded to the Tribunal to pass an order afresh in accordance with law considering the law laid down by Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd.(supra).

I have carefully considered the submission of learned counsel for the parties.

It is undisputed that the applicant has sold toughened glass to M/s. Titan Energy System Ltd., Andhra Pradesh who used it in export of solar module, accessories and CIGS module. The applicant received Form-H and filed it before the authority concerned along with copies of shipping bills etc. The benefit u/s 5(3) of the Act has been denied to the applicant by the authorities including the Tribunal merely on the ground that the same goods have not been exported.

In the case of Azad Coach Builders Pvt. Ltd. (supra) the Constitution Bench of Hon''ble Supreme Court held as under:-

"24. 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 immediate course of export. The words `to comply with the agreement or order'' mean all transactions which are inextricably 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 u/s 5(3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application.

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 in the local market, but were specifically manufactured to suit the specifications and requirements of the foreign buyer. In the Purchase Order placed on the assessee by the exporter, it is specifically indicated that the bus bodies have to be manufactured in accordance with the specifications provided by the foreign buyer, failure to do so might result in cancellation of the export order. The assessee in this case has succeeded in showing that the sale of bus bodies have occasioned the export of goods. When the transaction between the assessee and the exporter and the transaction between the exporter and foreign buyer are inextricably connected with each other, in our view, the `same goods'' theory has no application."

The Tribunal as well as the authorities below have rejected the claim of the applicant without considering the law laid down by Hon''ble Supreme Court in the aforementioned judgment.

Section 5(3) of the Act clearly indicates that the phrase ''in the course of export'' comprises in itself three essentials, namely; (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 words ''occasioning the export'' mean the factors, which were immediate course of export. The words `to comply with the agreement or order'' mean all transactions which are inextricably 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. If there is in-severable link between the local sale or purchase and 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 the claim of exemption u/s 5(3) from State Sales Tax shall be liable to be allowed. Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd. (supra) has considered the claim of exemption on sales of bus bodies as penultimate sales in the course of export made to customers like Telco Bombay and others which was rejected by the Assessing Authority, treating the transactions as interstate sales, on the ground that `bus bodies'' and `buses'' are two different commodities and bus bodies as such were not exported, but complete buses were exported. For this reasoning the Assessing Authority held that the transactions could not amount to penultimate sale eligible for exemption under subsection (3) of Section 5 of CST Act. On these facts, Hon''ble Supreme Court intercepted the provision u/s 5(3) of the CST Act and held that 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 u/s 5(3) for exemption from State Sales Tax is justified, in which case, the same goods theory has no application.

In my view the judgment of Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd. (supra) needs to be considered by the Tribunal on the facts of the present case.

In result, revision succeeds and is hereby allowed. Impugned order of the Tribunal passed in Second Appeal No. 04/2014 (A.Y. 2007-08) is restored to its original number. The matter is remanded with a direction to the Tribunal to decide afresh the Second Appeal No. 04/2014 (A.Y. 2007-08) in accordance with law after considering the law laid down by Hon''ble Supreme Court in the case of Azad Coach Builders Pvt. Ltd.(supra)., as expeditiously as possible, preferably within a period of three months from the date of production of certified copy of this order.