Alagendran Exports Pvt.Ltd vs State Of Kerala

CIVIL APPEAL NO.4998 OF 2008 (Arising out of S.L.P.(C) No.10325/2007)

Alagendran Exports Pvt. Ltd. ...Appellant(s)

Versus

State of Kerala ...Respondent(s)

ORDER

Leave granted.

This Civil Appeal is directed against the judgment and order dated 29th

August, 2006 passed by the Kerala High Court in S.T.Rev.No.104/2004. By the

impugned order, the Revision filed by the appellant herein stood dismissed on the

ground that the issue is covered by the decision of this Court in the case of State of

Karnataka Vs. B.M. Ashraf & Co [(1997) 107 STC 571].

The appellant is a private limited Company incorporated under the

Companies Act, engaged in the business of export of cashew kernels. It has

purchasing depots in the State of Kerala for the purchase of cashew kernels for

exports.

During the Assessment Year 1998-1999, the appellant claims to have

purchased cashew kernels for the value of Rs.1,92,67,236/- from the registered

dealers within the State of Kerala for the purposes of export. According to the

appellant, the said purchases were covered by declarations in Form 18A. The

1 appellant claims that since the said purchases were covered by declarations in Form

18A, the transactions stood covered by Section 5(3) of the Central Sales Tax Act,

1956 (1956 Act, for short) and such purchases/sales were not liable to tax within the

State of Kerala.

In this case, the Department had issued a pre-assessment notice dated 5th

March, 2003 in which it was alleged that the appellant had failed to produce any

evidence indicating payment of tax on purchases made by it from the local dealer

and, consequently, the appellant was liable to pay tax under Section 5A of the Kerala

General Sales Tax Act, 1963 (1963 Act, for short). This allegation was denied by the

appellant in its reply to the notice dated 5th March, 2003. By order dated 20th March,

2003, the Assessing Officer (AO) held that since the goods were either stock

transferred or effected vide deemed export sales, the purchases were liable to tax

under Section 5A of the 1963 Act. The AO further held that the appellant had not

produced any evidence to show payment of tax on the cashewnut kernels purchased

by it locally. Consequently, the Returns filed by the appellant stood rejected.

Aggrieved by the Order passed by the AO, the appellant carried the matter

in S.T.A.Nos.380 & 381/03 before the Deputy Commissioner (Appeals). The Appeal

was dismissed. While dismissing the Appeal, the Deputy Commissioner (A) held that

the appellant was unable to prove that the purchases were from registered dealers

and, therefore, according to the Deputy Commissioner, the Assessing Authority was

right in assessing the turnover to tax under Section 5A of the 1963 Act. Accordingly,

the Deputy Commissioner (A) dismissed the Appeal filed by the appellant herein.

This order has been confirmed by the Tribunal in Second Appeal and finally by the

2 High Court. Hence, this Civil Appeal.

In this case, there is total confusion regarding the facts. The transactions

undertaken cover exports and deemed exports sale. In this Civil Appeal, we are

concerned only with the question as to whether the purchases of the value of

Rs.1,92,67,236/- made by the appellant were purchases in the course of export and, if

so, whether the said transactions stood covered by Section 5(3) of the Central Sales

Tax Act, 1956 and, consequently, not liable to tax under Section 5A of the 1963 Act.

It appears from the records that the authorities below rejected the claim of

the appellant on the ground that the appellant had purchased cashew kernels from

unregistered dealers in the State. This allegation has been denied by the appellant.

In our view, the most important aspect, which has not been decided by the AO, is

whether the purchases made by the appellant were in the course of export in terms of

Section 5(3) of the 1956 Act. It appears from the Memo of Appeal filed before the

Appellate Tribunal that the appellant had produced Trading Accounts and details of

purchases for the Assessment Year 1998-1999, list of domestic purchases supported

by sale bills issued by registered dealers within and outside the State against Form

18A, prior purchase orders of foreign buyers, copies of export invoices, bill of lading

and other records. In such matters, it is the duty of the AO to collate the facts and

ascertain whether the purchased cashew kernels worth Rs.1,92.67,236/- were effected

in the course of export. Applicability of B.M.Ashraf's case (supra) would depend on

the factual foundation. In this case, that factual foundation is missing.

Therefore, in our view, the matter needs to be remitted to the Deputy

Commissioner (Appeals)-I, Commercial Taxes, Ernakulam. We make it clear that

3 the Deputy Commissioner (A) will consider the averments in the Memo of Appeal

filed by the appellant herein and decide the matter after taking into consideration the

documents referred to herein-above and give a finding as to whether the purchases

worth Rs.1,92,67.236/- were effected in the course of exports or not. For that

purpose, the Deputy Commissioner (A) will have to ascertain the exact date of

purchase from the local market, the date on which the appellant received the export

orders from foreign buyer, copy of export invoices, bills of lading etc. Lastly, the

Deputy Commissioner (A) will also examine the question as to whether the appellant

itself effected exports or whether, in turn, the appellant sold the goods in question to

other exporters. All these questions are required to be decided only in the context of

purchases effected by the appellant worth Rs.1,92,67,236/-.

For the afore-stated reasons, Civil Appeal is allowed and the matter is

remitted to the Deputy Commissioner (A) to decide the afore-stated aspect once again

in accordance with law.

No order as to costs.

...................J. (S.H. KAPADIA)

...................J. (B. SUDERSHAN REDDY) New Delhi, August 12, 2008.

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