M/s. Saraf Trading Corporation Etc. Etc. Vs. State of Kerala
EmailAppeal: Civil Appeal Nos. 474-481 of 2011
[Arising out of SLP (C) Nos. 189-196 of 2008]
[From the Judgement and Order dated 07.08.2007 of the High Court of Kerala at Ernakulam in TRC No. 519, 533, 534, 537 of 2001 and 25, 27, 30, 34 of 2002]
[Arising out of SLP (C) Nos. 189-196 of 2008]
[From the Judgement and Order dated 07.08.2007 of the High Court of Kerala at Ernakulam in TRC No. 519, 533, 534, 537 of 2001 and 25, 27, 30, 34 of 2002]
Petitioner: M/s. Saraf Trading Corporation Etc. Etc.
Respondent: State of Kerala
Apeal: Civil Appeal Nos. 474-481 of 2011
[Arising out of SLP (C) Nos. 189-196 of 2008]
[From the Judgement and Order dated 07.08.2007 of the High Court of Kerala at Ernakulam in TRC No. 519, 533, 534, 537 of 2001 and 25, 27, 30, 34 of 2002]
[Arising out of SLP (C) Nos. 189-196 of 2008]
[From the Judgement and Order dated 07.08.2007 of the High Court of Kerala at Ernakulam in TRC No. 519, 533, 534, 537 of 2001 and 25, 27, 30, 34 of 2002]
Judges: Dr. Mukundakam Sharma & Anil R. Dave, JJ.
Date of Judgment: Jan 13, 2011
Appearances:
Appearances
Mr. S. Ganesh, Senior Advocate, Mr. C.N. Sree Kumar, Mr. Anil D. Nair, Advocates, with him for the Appellant(s).
Mr. Yasobant Das, Senior Advocate, Mr. R. Sathish, Mr. S. Getha, Advocates, with him for the Respondent(s).
Mr. S. Ganesh, Senior Advocate, Mr. C.N. Sree Kumar, Mr. Anil D. Nair, Advocates, with him for the Appellant(s).
Mr. Yasobant Das, Senior Advocate, Mr. R. Sathish, Mr. S. Getha, Advocates, with him for the Respondent(s).
Head Note:
SALES TAX
Kerala General Sales Tax Act, 1963
Section 44 – Central Sales Tax Act, 1956, Section 5(3) – Refund of tax paid – Purchase of tea by exporter, directly from planters in open auction – Exported to foreign countries – Exemption under the Central Act allowed – Claim of refund rejected – Ground that tax was not by exporter to the Department, but was paid by sellers of tea and assessee was not a dealer – Such tax admittedly paid by exporter to sellers and plea that even excess tax was paid – If entitled to refund and exemption. Held that exemption was granted and same was affirmed. However, tax paid by exporter is not to department. It was paid by seller. Exporter being not a ‘dealer’ is not entitled to refund, even if it is paid in excess. Mafatlal Industries Ltd.’s case [JT 2010 (11) SC 201] held not applicable. Case of Modi Sugar Mills [AIR 1961 SC 1047] relied upon.
Kerala General Sales Tax Act, 1963
Section 44 – Central Sales Tax Act, 1956, Section 5(3) – Refund of tax paid – Purchase of tea by exporter, directly from planters in open auction – Exported to foreign countries – Exemption under the Central Act allowed – Claim of refund rejected – Ground that tax was not by exporter to the Department, but was paid by sellers of tea and assessee was not a dealer – Such tax admittedly paid by exporter to sellers and plea that even excess tax was paid – If entitled to refund and exemption. Held that exemption was granted and same was affirmed. However, tax paid by exporter is not to department. It was paid by seller. Exporter being not a ‘dealer’ is not entitled to refund, even if it is paid in excess. Mafatlal Industries Ltd.’s case [JT 2010 (11) SC 201] held not applicable. Case of Modi Sugar Mills [AIR 1961 SC 1047] relied upon.
Held:
In the case of State of Karnataka v. Azad Coach Builders Pvt. Ltd. & Anr., reported in [JT 2010 (11) SC 201], it was held by the Constitution Bench that there has to be an inextricable link between local sales or purchase and if it is clear that the local sales or purchase between the parties is inextricably linked with the export of goods, then only a claim under Section 5(3) for exemption under the Sales Tax Act would be justified. The principle which was laid down in the said decision is required to be applied to the facts of the present case in view of the submissions made by the counsel appearing for the respondent State and refuted by the counsel appearing for the appellant. (Para 16 & 17)
Tax was collected from the appellant at the time of purchase of tea in the occasion sale conducted by the tea planters since tea is a commodity which was liable to tax at the time of first sale in the State. The aforesaid tax which was collected from the appellant by the dealer has been remitted to the government by the dealer of tea. (Para 23)
Section 44 of the KGST Act is very clear and it stipulates that it is only the dealer of tea on whom the assessment has been made and it is only he who can claim for refund of tax. In view of the clear and unambiguous position, the appellant cannot claim for refund of tax collected from the seller of tea. (Para 24)
There is no possibility of taking a proactive stance although it is clear that the State cannot retain the tax which is overpaid, but at the same time such overpaid tax cannot be paid to the assessee/appellant here. (Para 25)
In the present case, there is no agreement available on record to indicate that the aforesaid purchase was made for the purpose of export. In the absence of the said document, it is not possible for us to specifically state as to whether it was clear that the sale or purchase between the parties i.e. the dealer and the purchaser was inextricably linked with the export of goods. It is only when a claim is established, the claim under Section 5(3) of the Central Sales Tax would be justified. (Para 18)
There is a clear finding recorded by the assessing authority himself that the export documents were verified by him with the accounts from which it is indicated that the entire exports were effected pursuant to the prior contract or prior orders of the foreign buyers and that the export sales are supported by bills of lading, export invoices and such other valid documents. (Para 18)
The assessing Authority clearly held that the claim for exemption was genuine and the same has to be allowed in full. (Para 19)
After the aforesaid findings of the assessing authority accepting the claim and allowing the exemption, the next two authorities namely the appellate authority and the Tribunal agree with the said findings and that there does not appear to be any serious challenge to the said findings before the said two authorities. (Para 20)
Cases Reffered:
1. State of Karnataka v. Azad Coach Builders Pvt. Ltd. & Anr. [JT 2010 (11) SC 201] (Para 16)
2. Mafatlal Industries Ltd. & Ors. v. Union of India & Ors. [JT 1997 (11) SC 283] (held not applicable) (Para 11)
3. Sales Tax Commissioner v. Modi Sugar Mills [AIR 1961 SC 1047] (relied upon) (Para 24.1.)
JUDGEMENT:
Dr. Mukundakam Sharma, J.
1. Leave granted.
2. The issue that falls for consideration in the present appeals is whether the appellant/assessee would be entitled for refund of the tax which was paid by him to the seller, in view of the provisions of Section 44 of the Kerala General Sales Tax Act, 1963 (for short ‘the KGST Act’) . One additional issue which was urged at the time of hearing of the appeals and requires consideration by this Court is as to whether the appellant would at all be entitled to claim exemption under Section 5(3) of the Central Sales Tax Act, 1956 (for short ‘the CST Act’), as at the time of sale, the appellant could not allegedly show any evidence that it was the penultimate sale.
3. The aforesaid two issues have arisen for consideration in the light of the submissions made on the basic facts of these appeals which are hereinafter being set out:
4. The appellants are exporters of tea. The appellants purchased tea from the tea planters directly in open auction and thereafter exported the same to foreign countries. The appellant being the exporter of the aforesaid consignment claimed for exemption on the ground that purchase was exempted under Section 5(3) of the CST Act. The said claim for exemption was found to be genuine by the Assessing Authority, and was allowed in full. The appellant also made a claim for refund of tax collected from them by the seller at the time of purchase of tea. The said claim was rejected by the Assessing authority and it was held that they cannot claim for refund under Section 44 of the KGST Act since they have not paid the tax to the Department but it was the sellers who have paid the tax and therefore under the provisions of Section 44 of the KGST Act, the refund that could be made is to the dealer only and the assessee being not a dealer no such refund could be made to the appellant/assessee.
5. Being aggrieved by the aforesaid order, the appellant filed an appeal before the Deputy Commissioner (Appeals) who considered the contentions of the appellant and upon going through the records found that there is an observation recorded by the assessing authority that the export sales is pursuant to the prior contract or prior order of the foreign buyers and also that export sales are supported by bill of lading, export invoices etc. The appellate authority also recorded the finding that the claim of exemption under Section 5(3) of the CST Act is envisaged for the penultimate sales or purchase preceding the sale or purchase occasioning the export. However with regard to the refund it was noted that the goods purchased are taxable at the sale point and hence the liability to pay tax is on the part of the seller. Accordingly, it was for the Seller to prove that the sales are effected to an exporter in pursuance of prior contract or prior orders of the foreign buyers.
6. It was held by the Appellate Authority that since, in the present case the aforesaid sellers namely the planters who sold tea to the appellant and on whom the burden lies to prove before the assessing authority that his sale is for fulfilling an agreement or order of the foreign buyer had not satisfied those conditions and had also not discharged his burden, therefore, there is no question of refund in the present case to the appellant as they are not entitled to any such refund under the provisions of Section 44 of the KGST Act.
7. The appeal was filed therefrom to the Kerala Sales Tax Appellate Tribunal, which after going through the records referred to the provisions of refund as contained in Section 44 of the KGST Act, which reads as follows:
’44. Refunds:- (1) When an assessing authority finds, at the time of final assessment, that the dealer has paid tax in excess of what is due from him, it shall refund the excess to the dealer.
(2) When the assessing authority receives an order from any appellate or revisional authority to make refund of tax or penalty paid by a dealer it shall effect the refund.
(3) Notwithstanding anything contained in sub-section (1) and (2), the assessing authority shall have power to adjust the amount due to be refunded under sub-section (1) or sub-section (2) towards the recovery of any amount due, on the date of adjustment, from the dealer.
(4) In case refund under sub-section (1) or sub-section (2) or adjustment under sub-section (3) is not made within ninety days of the date of final assessment or, as the case may be, within ninety days of the date of receipt of the order in appeal or revision or the date of expiry of the time for preferring appeal or revision, the dealer shall be entitled to claim interest at the rate of six percent per annum on the amount due to him from the date of expiry of the said period up to the date of payment or adjustment.’
8. After referring to the said provision, it was held by the Tribunal that in case the dealer has paid the tax in excess of what was due from him it could be refunded to the dealer, but here is a case where not the dealer but the appellant had claimed exemption under Section 5(1) read with Section 5 (3) of the CST Act. The assessing authority accepted the claim and allowed exemption. But so far as the question of refund of tax is concerned, the Tribunal held that there is no question of refund of tax in the case of the appellant since no tax had been demanded from the appellant for all the four years and therefore in those circumstances, there could be no question of refund under Section 44 of the KGST Act to the appellant.
9. In the light of the aforesaid findings, the appellate Tribunal dismissed the appeal as against which a Revision Petition was filed by the appellant before the Kerala High Court which was also dismissed under the impugned judgment and order as against which the present appeals were filed. We have heard the learned counsel appearing for the parties who had taken us through all the orders which gave rise to the aforesaid two issues which fall for our consideration in the present appeals.
10. Learned counsel appearing for the appellant submitted before us that appellant has admittedly paid the tax to the dealer at the time of occasion of sale made to it by the dealer namely the tea planters. It was also submitted by him that department has received the aforesaid tax paid in excess by the appellant and that there is a prohibition on the State to retain the excess tax in lieu of the provisions of Article 265 and 286 of the Constitution of India.
11. It was also submitted by him that in addition to the provisions of Section 44 of the KGST Act, a proactive view has to be taken by this Court in the facts and circumstances of the present case by referring to the decision of this Court in the case of Mafatlal Industries Ltd. & Ors. v. Union of India & Ors. reported in [JT 2010 (11) SC 201 : 1997 (5) SCC 536].
12. The learned counsel appearing for the State, however, not only refuted the aforesaid submissions but also stated that since there is a specific provision in the State Act for giving refund of the excess amount of tax, if any, paid only to the dealer and not to any other person, there cannot be a proactive consideration in the facts and circumstances of the present case as sought to be submitted by the learned counsel appearing for the appellant. He also submitted that aforesaid reference to the decision of Mafatlal (supra) is misplaced. The learned counsel for the State went a step further and submitted that the appellant is not entitled to claim any exemption under Section 5(3) of the CST Act in view of the fact that assessee could not produce any agreement at the time of purchase of the tea in the auction sale indicating that the purchase is made in relation to export.
13. In support of the aforesaid contentions, he referred to provision of Section 5(3) of the CST Act which is extracted hereinbefore:
Section 5 – When is a sale or purchase of goods said to take place in the course of import or export;
1. Leave granted.
2. The issue that falls for consideration in the present appeals is whether the appellant/assessee would be entitled for refund of the tax which was paid by him to the seller, in view of the provisions of Section 44 of the Kerala General Sales Tax Act, 1963 (for short ‘the KGST Act’) . One additional issue which was urged at the time of hearing of the appeals and requires consideration by this Court is as to whether the appellant would at all be entitled to claim exemption under Section 5(3) of the Central Sales Tax Act, 1956 (for short ‘the CST Act’), as at the time of sale, the appellant could not allegedly show any evidence that it was the penultimate sale.
3. The aforesaid two issues have arisen for consideration in the light of the submissions made on the basic facts of these appeals which are hereinafter being set out:
4. The appellants are exporters of tea. The appellants purchased tea from the tea planters directly in open auction and thereafter exported the same to foreign countries. The appellant being the exporter of the aforesaid consignment claimed for exemption on the ground that purchase was exempted under Section 5(3) of the CST Act. The said claim for exemption was found to be genuine by the Assessing Authority, and was allowed in full. The appellant also made a claim for refund of tax collected from them by the seller at the time of purchase of tea. The said claim was rejected by the Assessing authority and it was held that they cannot claim for refund under Section 44 of the KGST Act since they have not paid the tax to the Department but it was the sellers who have paid the tax and therefore under the provisions of Section 44 of the KGST Act, the refund that could be made is to the dealer only and the assessee being not a dealer no such refund could be made to the appellant/assessee.
5. Being aggrieved by the aforesaid order, the appellant filed an appeal before the Deputy Commissioner (Appeals) who considered the contentions of the appellant and upon going through the records found that there is an observation recorded by the assessing authority that the export sales is pursuant to the prior contract or prior order of the foreign buyers and also that export sales are supported by bill of lading, export invoices etc. The appellate authority also recorded the finding that the claim of exemption under Section 5(3) of the CST Act is envisaged for the penultimate sales or purchase preceding the sale or purchase occasioning the export. However with regard to the refund it was noted that the goods purchased are taxable at the sale point and hence the liability to pay tax is on the part of the seller. Accordingly, it was for the Seller to prove that the sales are effected to an exporter in pursuance of prior contract or prior orders of the foreign buyers.
6. It was held by the Appellate Authority that since, in the present case the aforesaid sellers namely the planters who sold tea to the appellant and on whom the burden lies to prove before the assessing authority that his sale is for fulfilling an agreement or order of the foreign buyer had not satisfied those conditions and had also not discharged his burden, therefore, there is no question of refund in the present case to the appellant as they are not entitled to any such refund under the provisions of Section 44 of the KGST Act.
7. The appeal was filed therefrom to the Kerala Sales Tax Appellate Tribunal, which after going through the records referred to the provisions of refund as contained in Section 44 of the KGST Act, which reads as follows:
’44. Refunds:- (1) When an assessing authority finds, at the time of final assessment, that the dealer has paid tax in excess of what is due from him, it shall refund the excess to the dealer.
(2) When the assessing authority receives an order from any appellate or revisional authority to make refund of tax or penalty paid by a dealer it shall effect the refund.
(3) Notwithstanding anything contained in sub-section (1) and (2), the assessing authority shall have power to adjust the amount due to be refunded under sub-section (1) or sub-section (2) towards the recovery of any amount due, on the date of adjustment, from the dealer.
(4) In case refund under sub-section (1) or sub-section (2) or adjustment under sub-section (3) is not made within ninety days of the date of final assessment or, as the case may be, within ninety days of the date of receipt of the order in appeal or revision or the date of expiry of the time for preferring appeal or revision, the dealer shall be entitled to claim interest at the rate of six percent per annum on the amount due to him from the date of expiry of the said period up to the date of payment or adjustment.’
8. After referring to the said provision, it was held by the Tribunal that in case the dealer has paid the tax in excess of what was due from him it could be refunded to the dealer, but here is a case where not the dealer but the appellant had claimed exemption under Section 5(1) read with Section 5 (3) of the CST Act. The assessing authority accepted the claim and allowed exemption. But so far as the question of refund of tax is concerned, the Tribunal held that there is no question of refund of tax in the case of the appellant since no tax had been demanded from the appellant for all the four years and therefore in those circumstances, there could be no question of refund under Section 44 of the KGST Act to the appellant.
9. In the light of the aforesaid findings, the appellate Tribunal dismissed the appeal as against which a Revision Petition was filed by the appellant before the Kerala High Court which was also dismissed under the impugned judgment and order as against which the present appeals were filed. We have heard the learned counsel appearing for the parties who had taken us through all the orders which gave rise to the aforesaid two issues which fall for our consideration in the present appeals.
10. Learned counsel appearing for the appellant submitted before us that appellant has admittedly paid the tax to the dealer at the time of occasion of sale made to it by the dealer namely the tea planters. It was also submitted by him that department has received the aforesaid tax paid in excess by the appellant and that there is a prohibition on the State to retain the excess tax in lieu of the provisions of Article 265 and 286 of the Constitution of India.
11. It was also submitted by him that in addition to the provisions of Section 44 of the KGST Act, a proactive view has to be taken by this Court in the facts and circumstances of the present case by referring to the decision of this Court in the case of Mafatlal Industries Ltd. & Ors. v. Union of India & Ors. reported in [JT 2010 (11) SC 201 : 1997 (5) SCC 536].
12. The learned counsel appearing for the State, however, not only refuted the aforesaid submissions but also stated that since there is a specific provision in the State Act for giving refund of the excess amount of tax, if any, paid only to the dealer and not to any other person, there cannot be a proactive consideration in the facts and circumstances of the present case as sought to be submitted by the learned counsel appearing for the appellant. He also submitted that aforesaid reference to the decision of Mafatlal (supra) is misplaced. The learned counsel for the State went a step further and submitted that the appellant is not entitled to claim any exemption under Section 5(3) of the CST Act in view of the fact that assessee could not produce any agreement at the time of purchase of the tea in the auction sale indicating that the purchase is made in relation to export.
13. In support of the aforesaid contentions, he referred to provision of Section 5(3) of the CST Act which is extracted hereinbefore:
Section 5 – When is a sale or purchase of goods said to take place in the course of import or export;
