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CASE NO.: Special Leave Petition (crl.)  20028 of 2006

PETITIONER: National Aluminium Co. Ltd

RESPONDENT: The State of A.P. & Ors

DATE OF JUDGMENT: 19/02/2008

BENCH: Dr. ARIJIT PASAYAT & P. SATHASIVAM

JUDGMENT: J U D G M E N T

CIVIL APPEAL No.                OF 2008 (Arising out of SLP (C) No. 20028 of 2006) with Civil Appeal No.                /2008 (Arising out of SLP (C) No. 20030 of 2006),  Civil Appeal No.               /2008  (Arising out of SLP(C) No.20031/2006,  Civil Appeal No.        /2008 (Arising out of SLP (C) No.  20032/2006)

Dr. ARIJIT PASAYAT, J

1.      Leave granted.

2.      Challenge in these appeals is to certain conclusions  recorded in the order passed by the Sales Tax Appellate  Tribunal, Andhra Pradesh, Hyderabad (in short the ’Tribunal’)  in TMP Nos.125 of 2005, 259/2005,260/2005 and 261/2005.

3.      Background facts in a nutshell are as follows:

       National Aluminium Co. Ltd. is a Government of India  enterprise under the administrative control of the Ministry of  Mines. The registered and corporate office of the appellant is  situated at Bhubaneswar in Orissa State, while it has  mercantile offices in a few cities including Visakhapatnam.  The substantial part of the commercial operations of the  appellant are carried out only in the State of Orissa. For the  purpose of causing export to foreign countries,  Visakhapatnam port is being used by the appellant. It is the  case of the appellant that there is no sale or purchase of goods  carried out by it in the State of Andhra Pradesh.        It is also the case of the appellant that they would earn  Credit Duty Entitlement Pass Book (DEPB) licence as  contemplated under Exim Policy as a result of their export.  For the period from 1.4.1997 to 31.3.2001, the Duty  Entitlement Pass Book scheme was there. The object of the  scheme was neutralization of incidence of customs duty on  the import content of the export product. Such neutralization  was provided by way of grant of duty credit against export  product. The export unit has also been conferred with the  right to utilize the said credit for its own purpose or to  transfer of the same to third parties for availment of the  benefit of the said credit.

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For the exports made by the appellant from  Visakhapatnam Port, the petitioner submits an application for  issue of DEPB to DGF‘I’, Cuttack, Orissa along with customs  endorsed copy of shipping bill. The customs authorities check  the details of exports mentioned in the DEPB with their  records, register the license and return the original license to  the appellant. It is also the case of the appellant that since the  exports of the appellant are effected at Visakhapatnam Port,  an account of DEPB licenses is maintained by the customs  authority at Visakhapatnam.           The appellant either uses DEPB licence for payment of  customs duty for their own import or sells the surplus DEPB  license by inviting advertisement. As per the terms, the DEPB  license entitles the holder of such license to import through  any port in the country. Accordingly, the appellant had been  exporting aluminium through Visakhapatnam Port in Andhra  Pradesh. Against these exports, the petitioner got some import  duty entitlement under the DEPB scheme. It held open  auctions of these entitlements from the Head Quarters at  Bhubaneswar in Orissa State. In those auctions the bidders  from West Bengal and Maharashtra emerged as the highest  bidders. Accordingly, the appellant sold the import duty  entitlement under the DEPB Licenses to the highest bidders  and treating the same as inter-state sale, collected and paid  CST to the Government of the exporting State i.e., Orissa.          The Assessing Authorities in Andhra Pradesh issued  show cause notice proposing to levy tax under the Andhra  Pradesh General Sales Tax Act, 1956 on the transactions  relating to transfer of the DEPB Licenses on the ground that  such licenses were registered with Visakhapatnam Port  through which the export took place.  The authorities  considered it to be local sales within Andhra Pradesh and  accordingly levied tax.

The appellant filed appeals before this Court. A three- judge judge Bench by order dated 1st February, 2005  in Civil  Appeal Nos. 1649-1654 of 2001 directed the matter to be  considered by the Tribunal for determining the issues  involved. That is how the Tribunal took up the matter for  consideration.  By the impugned common judgment, the  Tribunal decided the matter in favour of the appellant holding  that the sale did not take place within the State of Andhra  Pradesh. But held that it took place inside the State of Orissa  as per Section 4(2) of the Central Sales Tax Act, 1956 (in short  the ’CST Act’).  The ultimate conclusion which is the subject  matter of   challenge in these appeals reads as follows:

"In the light of the discussions, we hold that  the sales took place within the State of Orissa  and not within the State of Andhra Pradesh  and as such it should be treated as intra-state  sale within the State of Orissa and not intra- state sale within Andhra Pradesh."

4.      It is the stand of the appellant in these appeals that the  Tribunal could not have recorded a finding that there was an  intra-state sale within the State of Orissa. That was not the  subject matter of dispute before the Tribunal. Strictly speaking  there was no sale involved to attract levy of any sale tax. But  without any material to hold that there was any sale involved  and that too an intra state sale within the State of Orissa, the  Tribunal could not have come to the impugned conclusion.  It

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is contended that Central Sales tax has been deposited in the  State of Orissa in respect of the transaction, though legally no  tax was payable.     

5.      Learned counsel for the State of Andhra Pradesh  submitted that the Tribunal has decided the basic issues that  there was no sale within the State of Andhra Pradesh. But on  the facts came to a tentative conclusion about this intra-state  sale in the State of Orissa.       6.      Learned counsel for the State of Orissa submitted that  the Tribunal’s conclusions do not suffer from any infirmity.   According to him, there may be a typographical error i.e. intra- state sale in place of inter-state sale.

7.      It is clear that the scope of consideration before the  Tribunal was very limited as to whether any sale took place  within the State of Andhra Pradesh.  Having decided that  issue, Tribunal was not required to go into any other question  particularly when the relevant factors were not before it.  As  rightly contended by the appellants there was no material  whatsoever to show that the sales could be treated as intra  state sale within the State of Orissa. The assessing authorities  proceeded to levy tax on erroneous premises. In the ultimate  analysis the Tribunal held that the sales did not take place  within the State of Andhra Pradesh. The conclusions to the  effect that they are intra-state sales in Orissa are  unsustainable. It was rightly decided that there was no intra-  state sale within Andhra Pradesh.  But for further conclusion  that there was an intra state sale within the State of Orissa,  materials were required to be examined. That has not been  done. There was no material before the Tribunal to come to a  definite finding, as done, that the transaction should be  treated as intra state sale within the State of Orissa. The  observations, therefore, have no relevance and need to be set  aside, which we direct.

8.      The appeals are allowed to the aforesaid extent.