Sales transactions benefiting from import exemptions must demonstrate clear links in contractual agreements to sustain claims under relevant tax laws.

JUDGMENT :

Harisankar V. Menon, J.

The petitioner, an assessee under the provisions of the Kerala Value Added Tax Act , 2003 (for short “KVAT Act”) and the Central Sales Tax Act , 1956 (for short “CST Act”) is burdened with a penalty under the provisions of the Section 67 of the KVAT Act with respect to the assessment year 2016-17, by the order at Ext.P27, issued by the 1^st respondent. It is seeking to challenge the order imposing penalty as above, this writ petition has been instituted by the petitioner.

2. The short facts necessary for the disposal of the writ petition are as under:

The petitioner is stated to be a company having registration under the provisions of the Companies Act, 1956, with its registered office at Mumbai, with a branch in Kerala and other branches across the country. The petitioner is a manufacturer-cum-dealer of medical, electronic and electric equipments. It has also obtained registration under the KVAT Act and CST Act within the State of Kerala. The dispute in this writ petition essentially involves a transaction effected by the petitioner on the basis of certain purchase orders issued by the 4^th respondent. The 4^th respondent is a hospital at Changanacherry. The 4^th respondent placed purchase orders at Exts.P4, P5 and P6 on the petitioner. Ext.P4 was a purchase order for the supply of medical equipments. Ext.P5 was a purchase order for the supply of accessories in connection with the medical equipment. Ext.P6 was a separate purchase order for the installation of medical equipments covered by the purchase order at Ext.P4. The petitioner, on the basis of the aforementioned purchase orders, in turn placed a purchase order on the foreign supplier – situated in Germany – as evidenced by Ext.P7. A reference to the purchase order at Ext.P4 would show that there are certain clauses contained therein that would bind the petitioner and as per the first clause, the petitioner was expected to procure the equipment ordered by the 4^th respondent from “Siemens Germany”. The afore clause further states that the procurement as above has to be from Germany and from nowhere else. There is a separate clause which specifically says that under no circumstances the delivery can be affected by the petitioner of the equipment in question from any other source, including the stock-in-trade in India. On the basis of the afore purchase order, when the petitioner placed Ext.P7 purchase order on the German supplier, a reference was also made to the ultimate consumer – the 4^th respondent herein. In turn, when the foreign supplier issued a confirmation as evidenced by Ext.P8, a reference had also been made to the order placed by the 4^th respondent herein. On the basis of the afore, the foreign supplier issued Ext.P9 invoice with respect to the medical equipment in question. The equipment in question was consigned by sea as evidenced by Ext.P10 – Sea Way Bill. True, the petitioner filed the Bill of Entry for home consumption as evidenced by Ext.P11. Later, the goods in question have been sold by the petitioner to the 4^th respondent on the basis of separate invoices raised by it, and the afore invoice did not visualise any collection of tax under the provisions of the KVAT Act. In Ext.P18 return filed by the petitioner for the period of May, 2016, the petitioner has disclosed the afore transaction; however, claiming exemption with reference to Article 286 of the Constitution of India read with the provisions of Section 5(2) of the CST Act – as a case of “sale in the course of import”. It also requires to be noticed that as regards the supply of accessories, the petitioner has rai