Back
2014 Supreme(Bom) 1538
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. DHARMADHIKARI & B.P. COLABAWALLA, JJ.
M/s. Exide Industries Ltd - Petitioner
Vs.
The State of Maharashtra and Ors - Respondents
WRIT PETITION NO. 12025 OF 2012
Decided on: 4th August, 2014
Mr. V. Sridharan, Senior Advocate a/w Mr. Prakash Shah and Mr. Rahul
Thakar i/b PDS Legal, for the Petitioner.
Mr. Gautam Ankhad, AGP, for the Respondents.
Headnote:
CST ACT - SECTION 5(3) - INTERPRETATION - SALE IN COURSE OF EXPORT - INEXTRICABLE LINK - SALE BY PETITIONER TO M/S CROWN - HELD TO BE IN COURSE OF EXPORT - EXEMPT FROM TAX UNDER BST ACT.
Fact of the Case:
Petitioner, a company engaged in manufacturing Submarine Navy Batteries, sold batteries to M/s Crown under a purchase order dated 5th March 2004. M/s Crown placed a purchase order on the Petitioner for the supply of Submarine Navy Batteries. The said agreement inter-alia provided that M/s. Crown had signed a contract with MDN, Algeria for export of batteries as per the specifications mentioned therein and that M/s. Crown has informed the Petitioner that the batteries covered under the said agreement were ultimately to be supplied for use by the said MDN, Algeria. On 25th May 2004 the Algerian Navy placed a purchase order on M/s. Crown, for the supply of Submarine Navy Batteries. On 14th September 2004, the Petitioner sold and supplied Submarine Navy Batteries to M/s. Crown, who in turn exported the same to the Algerian Navy. The ARE -1 was prepared by the Petitioner on 14th September 2004 showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee. The Petitioner contends that the sale effected by them of Submarine Navy Batteries to M/s. Crown, is exempt from the levy of sales tax under the BST Act by virtue of the provisions of Section 5(3) of the CST Act.
Finding of the Court:
The court held that the sale of Submarine Navy Batteries by the Petitioner to M/s Crown was the “last sale preceding the sale occasioning the export” as contemplated under section 5(3) and the same took place after, and for the purpose of complying with the purchase order dated 25th May 2004, placed by the Algerian Navy on M/s Crown. In view thereof, the sale of Submarine Navy Batteries by the Petitioner to M/s Crown on 14th September 2004 were deemed to be in the course of export as contemplated under section 5(3) of the CST Act and therefore, could not be taxed as a local sale under the provisions of the BST Act.
Issues: Whether the sale of Submarine Navy Batteries by the Petitioner to M/s Crown was in the course of export and covered by the provisions of section 5(3) of the CST Act.
Ratio Decidendi: The court interpreted section 5(3) of the CST Act and held that the word “sale” appearing in section 5(3) cannot be construed to mean an “agreement to sell” and that the said word refers to a completed sale, meaning thereby a “sale” as defined in section 2(g) of the CST Act. The court also held that in the present case, there was an inextricable link between the contract of sale by the Petitioner to M/s Crown on the one hand and the actual export by M/s Crown to the Algerian Navy on the other.
Final Decision: The court allowed the Writ Petition and quashed the order of revision dated 25th May 2011 passed by Respondent No.3 as well as the order of the MSTT dated 22nd November 2012 passed in Appeal No.224 of 2011.
B. P. Colabawalla, J.
Rule. By consent of parties made returnable forthwith and heard finally.
1. The present Writ Petition has been filed under Article 226 of the Constitution of India challenging the order of revision dated 25th May 2011 passed by Respondent No.3 and the consequent demand notice of the same date, demanding an amount of Rs.2,16,98,270/- under the Bombay Sales Tax Act, 1959 (BST Act). The challenge has also been laid to the order of Maharashtra Sales Tax Tribunal (MSTT) in Appeal No.224 of 2011 confirming the aforesaid demand of sales tax.
2. At the outset, Mr. Ankhad, the learned AGP appearing on behalf of the Respondents raised a preliminary objection to the maintainability of the Writ Petition on the ground that the Petitioner had not exhausted the alternate remedies under the BST Act. He submitted that the alternate remedy available to the Petitioner was filing a Reference Application against the final order of the MSTT under section 61 of the BST Act. This remedy had admittedly not been exhausted by the Petitioner, and hence the Writ Petition deserved to be dismissed, is the submission of Mr. Ankhad. We have rejected this argument for the reasons set out later in this judgment.
3. 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 (CST Act) and in particular sub-section 3 thereof. Section 5(3) interalia provides that 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 in relation to such export. In the facts of the present case under a purchase order/agreement dated 5th March 2004 M/s. Crown Corporation Pvt Ltd (hereinafter referred to as “M/s. Crown”) required the Petitioner to supply Submarine Navy Batteries of the type and specifications more particularly set out therein. On 25th May 2004 the Algerian Navy placed a purchase order on M/s. Crown, for the supply of Submarine Navy Batteries. On 14th September 2004, the Petitioner sold and supplied Submarine Navy Batteries to M/s. Crown, who in turn exported the same to the Algerian Navy. The ARE -1 was prepared by the Petitioner on 14th September 2004 showing the Petitioner as the seller, M/s. Crown as the purchaser, and the Algerian Navy as the consignee. In these circumstances, the Petitioner contends that the sale effected by them of Submarine Navy Batteries to M/s. Crown, is exempt from the levy of sales tax under the BST Act by virtue of the provisions of Section 5(3) of the CST Act. On the other hand, the Respondents contend that since the purchase order placed by M/s. Crown on the Petitioner on 5th March, 2004 was before the date when the Algerian Navy placed the purchase order on M/s.Crown (i.e. on 22nd May, 2004), the sale by the Petitioners to M/s. Crown did not take place after, and for the purpose of complying with, the agreement or order of the Algerian Navy (i.e. on 22nd May, 2004). It was therefore not “for or in relation to such export” as contemplated under the provisions of section 5(3) of the CST Act. It is in this light that we are called upon to decide the interpretation of the said provision. After adverting to the facts, we will analyze the provisions of the CST Act in some depth, later in this judgement.
4. The brief and undisputed facts are that, the Petitioner is a company incorporated under the Companies Act 1956 and inter-alia engaged in the manufacturing of Submarine Navy Batteries. M/s. Crown placed a purchase order in the form of an agreement dated 5th March 2004 on the Petitioner for the supply of Submarine Navy Batteries. The said agreement inter-alia provided that M/s. Crown had signed a contract with MDN, Alg
