M/S. Saraf Trading
Corporation Etc. Vs State of Kerala
JUDGMENT
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 been titled 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 there after 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 44of 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 there from 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. 1. 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. 2. 3. 3. Notwithstanding anything
contained in sub-section (1) and (2), the assessing authority shall have power
to 7 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. 5. 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 underSection44 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 Article265 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. Vs. Union of India & Ors.
reported in (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 pro-active
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) ***** ****** ******
(2) ****** ****** ******
(3) Notwithstanding
anything contained in sub-section (1), the last sale or purchase of any goods
preceding the sale or purchase occasioning the export of those goods out of
the territory of India shall also be deemed to be in the course of such
export, if such last sale or purchase took place after, and was for the
purpose of complying with, the agreement or order for or in relation to such
export.
14.
We
have considered the aforesaid submissions of the learned counsel appearing for
the parties in the light of the records placed before us. Since, the
contentions of the learned counsel appearing for the respondent State are with
regard to the fact that the appellant cannot claim exemption in absence of
proof of an agreement in support of the claim for exemption under Section 5(3)
and the same goes to the very root of the claim ad e, we deem it proper to take
the aforesaid stand at the first stage.
15.
Sub-section
(3) of Section 5 has already been extracted hereinbefore. According to the said
provision, the last sale or purchase of any goods preceding the sale or
purchase occasioning the export of those goods out of the territory of India
shall also be deemed to be in the course of such export, if such last sale or
purchase took place after, and was for the purpose of complying with, the
agreement or order for or in relation to such export.
16.
In
the case of State of Karnataka Vs. Azad Coach Builders Pvt. Ltd. & Anr.,
reported in 2010(9) SCALE 364, the Constitution Bench of this Court took note
of the aforesaid sub-section (3) and after noticing the said provision laid
down the principles which emerged there from as follows:-
When we analyze all
these decisions in the light of the Statement of Objects and Reasons of the
Amending Act 103 of 1976 and on the interpretation placed on Section 5(3) of the
CST Act, the following principles emerge: - To constitute a sale in the course
of export there must be an intention on the part of both the buyer and the
seller to export; 14- There must be obligation to export, and there must be
an actual export.- The obligation may arise by reason of statute, contract between
the parties, or from mutual understanding oragreement between them, or even
from the nature of the transaction which links the sale to export.- 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.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.
17.
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.
18.
It
is true that 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. At the time of auction sale when the appellant
purchased the tea from the dealer, there is nothing on record to show that a
definite stand was taken by the purchaser that the aforesaid purchase of tea is
for the purpose of occasioning an export for which an agreement has been
entered into. Since, no such claim was made at that stage, so therefore sales
tax was realized which was paid to the government by the dealer. Despite the
said fact, 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 contractor
prior orders of the foreign buyers and that the export sales are supported by
bills of lading, export invoices and such other valid documents.
19.
In
the light of the said findings, the assessing Authority clearly held that the
claim for exemption was genuine and the same has to be allowed in full. But so
far as refund is concerned, the assessing Authority held that the claim for
refund cannot be allowed since the dealer has paid the tax and therefore,
refund cannot be granted to the assessee/appellant who is not the dealer. Referring
to the provisions of Section 44 of the KGST Act, the Deputy Commissioner
(Appeals) i.e. appellate authority also held that it is the seller (the dealer)
on whom the burden lies to prove before the assessing authority that the sale
is for fulfilling an agreement or order of the foreign buyer, since Section
5(3) means or refers to the foreign buyer and not any agreement with the local
party and in the present case seller was not in a position to discharge his burden
and therefore, he is not entitled for refund.
20.
It
is established from the records that 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. The High Court also does not
appear to have gone into the said issue at all. In that view of the matter, we
would not like to reopen the finding of fact which is recorded by the assessing
authority.
21.
We
now proceed to address the first issue which is in fact the main issue arising
for consideration in these appeals i.e. as to whether the appellants are
entitled for refund of tax collected from them at the time of purchase of tea
in view of the provisions relating to refund as contained in Section 44 of the
KGST Act.
22.
The
Assessing Authority, the Appellate Authority as also the Appellate Tribunal
have clearly recorded a finding that when a dealer has paid the tax in excess
of what is due from him, it has to be refunded. The said excess tax is only to
be refunded to the dealer in as much as dealer is entitled to receive a refund,
if tax is paid in excess of what was due from him. In view of the said position,
all the aforesaid authorities have held that a question of refund of tax would
not arise in the case of the appellant, since no tax had been demanded from the
appellant for the tea of all the four years.
23.
Considering
the facts and circumstances of the present case, we find that 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.
24.
It
further appears that the appellant claimed for refund of the said amount to be
paid to it, despite the fact that it is not a dealer in the eye of law. 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. It is clearly
provided in the principles of Interpretation of Statutes that when the meaning
and the language of a statute is clear and unambiguous, nothing could be added
to the language and the words of the statute. This Court in the case of Sales
Tax Commissioner Vs. Modi Sugar Mills reported in AIR 1961 SC 1047 observed as
follows:- In interpreting a taxing statute, equitable considerations are
entirely out of place. Nor can taxing statutes be interpreted on any
presumptions or assumptions'. The court must look squarely at the words of the
statute and interpret them. It must interpret a taxing statute in the light of
what is clearly expressed : it cannot imply anything which is not expressed it
cannot import provisions in the statutes so as to supply any assumed
deficiency.
25.
Therefore,
we cannot overlook the mandate of the provisions of the KGST Act which clearly
rules that it is only the dealer of tea on whom an assessment has been made,
can claim for refund of tax and no one else. 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.
26.
The
aforesaid findings which are recorded are clearly findings of fact and have
also been arrived at on the basis of the mandate of the provisions of the State
Act. Therefore, in our considered opinion, the decision does not call for any interference
at our end. The principles laid down in the decision in Mafatlal (supra) would
also not be applicable to the facts of the present case in view of the
provisions of Section 44 of the KGST Act, which clearly refers to claim for
refund. The said principle is not applicable in view of the fact that the
statute involved specifically states that such refund could be made only to a
dealer and not to any other person claiming for such refund. On the other hand,
the decision of Mafatlal (supra) was rendered in the context of Section11B of
the Central Excise and Salt Act, 1944 where the expression is" any
person". Therefore, ratio of the decision of Mafatlal (supra) would not be
applicable to the facts in hand. Considering the facts and circumstances of the
present case, we find no merit in these appeals which are dismissed but without
costs.
.
..........................................J [Dr. Mukundakam Sharma ]
............................................J
[ Anil R. Dave ]
New
Delhi,
January
13, 2011.
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