Case Note & Summary
The petitioner, a manufacturer of submarine navy batteries, challenged orders demanding sales tax under the Bombay Sales Tax Act, 1959 on the ground that its sale to M/s. Crown was exempt as a penultimate export sale under Section 5(3) of the Central Sales Tax Act, 1956. The dispute arose after M/s. Crown placed a purchase order on the petitioner on 05.03.2004 for batteries to be exported to the Algerian Navy. The Algerian Navy placed its order on M/s. Crown on 25.05.2004, and the actual supply by the petitioner occurred on 14.09.2004 with the goods being exported directly. Initially, the sale was treated as exempt in assessment for 2003-04. Subsequently, the Revenue issued a rectification notice under Section 62 of BST Act, contending that the domestic purchase order preceded the foreign order, disqualifying it under Section 5(3). The rectification order was set aside by the High Court in an earlier writ petition citing failure to consider binding precedent, and the matter was remanded. After remand, the revisional authority confirmed the tax demand, and the Maharashtra Sales Tax Tribunal dismissed the appeal. Hence, the present writ petition. At the hearing, a preliminary objection was raised regarding alternate remedy under Section 61 of BST Act, which the court rejected. The core legal question centered on interpreting Section 5(3) to determine whether the petitioner's sale, though the initial agreement with the exporter was entered before the foreign order, could still be considered as having taken place after and for complying with the export order, given the actual sale date. Arguments were based on Supreme Court precedents like Consolidated Coffee. The court was to decide the matter after detailed analysis. (The provided text ends before the court's final reasoning and decision.)
Headnote
A) Tax Law - Alternate Remedy - Maintainability of Writ Petition - Constitution of India, Article 226; Bombay Sales Tax Act, 1959, Section 61 - Preliminary objection raised that petitioner should have first filed reference application under Section 61 of BST Act; High Court rejected this argument, holding that the question being pure interpretation of law and in light of previous litigation, writ petition was maintainable (Para 2).
B) Central Sales Tax - Exemptions - Penultimate Sale Deemed Export - Central Sales Tax Act, 1956, Section 5(3) - The court was called upon to decide whether sale of submarine batteries by petitioner to M/s. Crown qualified as penultimate sale for export; Revenue argued that since purchase order from M/s. Crown to petitioner dated 05.03.2004 preceded the Algerian Navy order of 25.05.2004, conditions not met; Petitioner contended that actual sale on 14.09.2004 was after the export order and was to fulfil that order. The issue awaited full consideration and decision by the court (Paras 3-14).
Issue of Consideration
Interpretation of Section 5(3) of the Central Sales Tax Act, 1956 regarding conditions for penultimate sale to be deemed export, and maintainability of writ petition when reference remedy under Section 61 of BST Act is available.
Law Points
- Section 5(3) of CST Act deems penultimate sale as export if sale takes place after and for purpose of complying with export order
- foreign order need not precede domestic purchase agreement
- alternate remedy not bar if pure question of law
Case Details
2014 LawText (BOM) (08) 37
Writ Petition No. 12025 of 2012
S.C. Dharmadhikari, B.P. Colabawalla
V. Sridharan, Prakash Shah, Rahul Thakar, Gautam Ankhad
M/s. Exide Industries Ltd
The State of Maharashtra and Ors
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Nature of Litigation
Tax dispute regarding denial of exemption on sale claimed as penultimate export sale under CST Act
Remedy Sought
Petitioner sought quashing of revision order dated 25.05.2011 and demand notice demanding Rs.2,16,98,270/- and setting aside MSTT order confirming demand
Filing Reason
Revenue contended that sale did not qualify under Section 5(3) because domestic purchase order preceded foreign export order
Previous Decisions
Original assessment allowed exemption; rectification order disallowed exemption; earlier writ petition remanded matter; revision order and MSTT appeal confirmed demand
Issues
Whether the writ petition is maintainable despite availability of alternate remedy under Section 61 of BST Act?
Whether the sale of submarine batteries by petitioner to M/s. Crown falls within the scope of Section 5(3) of the CST Act as a penultimate sale deemed export?
Submissions/Arguments
Petitioner: Sale satisfied conditions of Section 5(3) as it occurred after the Algerian Navy order and was for purpose of complying with export; agreement dated 05.03.2004 was a framework and actual sale was on 14.09.2004; exemption should be granted based on Supreme Court rulings.
Revenue: Since purchase order from M/s. Crown to petitioner was dated 05.03.2004, before the Algerian Navy order of 25.05.2004, the sale did not take place after the export order; conditions of Section 5(3) not fulfilled; tax rightly demanded.
Judgment Excerpts
The short but very interesting question that has arisen for consideration before us is the interpretation of Section 5 of the Central Sales Tax Act, 1956 and in particular sub-section 3 thereof.
Since the Submarine Navy Batteries were exported directly from the Petitioner’s factory, the Petitioner prepared ARE -1 showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee.
In reply to the said notice, the Petitioner by their letter dated 26 th May 2008 objected to the notice for rectification and inter-alia contended that their case was covered by the judgment of the Supreme Court in the case of Consolidated Coffee v/s Coffee Board reported in (1980) 3 SCC 358.
This court, by its order dated 24 th September 2008 set aside the rectification order and remanded the matter back to the Assessing Authority for passing of a fresh order after giving a reasonable opportunity to the Petitioner of being heard in the matter.
Procedural History
Assessment order dated 31.05.2006 treated sale as exempt. Notice for rectification under Section 62 of BST Act issued. Rectification order dated 31.05.2008 levied tax of Rs.1,82,75,256/-. Writ Petition No.6136 of 2008 filed; High Court by order dated 24.09.2008 set aside rectification order and remanded matter. Respondent No.3 issued notice dated 14.09.2009. Revision order dated 25.05.2011 confirmed demand of Rs.2,16,98,270/-. Appeal No.224 of 2011 to MSTT dismissed. Present writ petition filed challenging revision and MSTT order.
Acts & Sections
- Central Sales Tax Act, 1956: 2(ab), 5(1), 5(3)
- Bombay Sales Tax Act, 1959: 61, 62
- Constitution of India: 226, 286
