IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4998 OF 2008 (Arising out of S.L.P.(C) No.10325/2007)

Alagendran Exports Pvt. Ltd. ...Appellant(s)

Versus

State of Kerala ...Respondent(s)

O R D E R

Leave granted.

This  Civil  Appeal  is directed against the judgment and order dated 29th

August,  2006  passed  by  the  Kerala  High  Court  in  S.T.Rev.No.104/2004.   By  the

impugned order, the Revision filed by the appellant herein stood dismissed on the

ground that the issue is covered by the decision of this Court in the case of State of

Karnataka Vs. B.M. Ashraf & Co [(1997) 107 STC 571].

The  appellant  is  a  private  limited  Company  incorporated  under  the

Companies  Act,  engaged  in  the  business  of  export  of  cashew  kernels.   It  has

purchasing  depots  in  the State  of  Kerala  for  the  purchase  of  cashew kernels  for

exports.   

During  the  Assessment  Year  1998-1999,  the  appellant  claims  to  have

purchased  cashew  kernels  for  the  value  of  Rs.1,92,67,236/-  from  the  registered

dealers  within  the  State  of  Kerala for  the purposes  of  export.   According  to the

appellant,  the  said  purchases  were  covered  by  declarations  in  Form 18A.   The

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appellant claims that since the said purchases were covered by declarations in Form

18A, the transactions stood covered by Section 5(3) of the Central Sales Tax Act,

1956 (1956 Act, for short) and such purchases/sales were not liable to tax within the

State of Kerala.

In this case, the Department had issued a pre-assessment notice dated 5th

March, 2003 in which it was alleged that the appellant had failed to produce any

evidence indicating payment of tax on purchases made by it from the local dealer

and, consequently, the appellant was liable to pay tax under Section 5A of the Kerala

General Sales Tax Act, 1963 (1963 Act, for short).  This allegation was denied by the

appellant in its reply to the notice dated 5th March, 2003.  By order dated 20th March,

2003,  the  Assessing  Officer  (AO)  held  that  since  the  goods  were  either  stock

transferred or effected vide deemed export sales,  the purchases were liable to tax

under Section 5A of the 1963 Act.  The AO further held that the appellant had not

produced any evidence to show payment of tax on the cashewnut kernels purchased

by it locally.  Consequently, the Returns filed by the appellant stood rejected.

Aggrieved by the Order passed by the AO, the appellant carried the matter

in S.T.A.Nos.380 & 381/03 before the Deputy Commissioner (Appeals).  The Appeal

was dismissed.  While dismissing the Appeal, the Deputy Commissioner (A) held that

the appellant was unable to prove that the purchases were from registered dealers

and, therefore, according to the Deputy Commissioner, the Assessing Authority was

right in assessing the turnover to tax under Section 5A of the 1963 Act.  Accordingly,

the Deputy Commissioner (A) dismissed the Appeal filed by the appellant herein.

This order has been confirmed by the Tribunal in Second Appeal and finally by the

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High Court.  Hence, this Civil Appeal.

In this case, there is total confusion regarding the facts.  The transactions

undertaken cover exports and deemed exports  sale.  In this  Civil  Appeal,  we are

concerned  only  with  the  question  as  to  whether  the  purchases  of  the  value  of

Rs.1,92,67,236/- made by the appellant were purchases in the course of export and, if

so, whether the said transactions stood covered by Section 5(3) of the Central Sales

Tax Act, 1956 and, consequently, not liable to tax under Section 5A of the 1963 Act.

It appears from the records that the authorities below rejected the claim of

the appellant on the ground that the appellant had purchased cashew kernels from

unregistered dealers in the State.  This allegation has been denied by the appellant.

In our view, the most important aspect, which has not been decided by the AO, is

whether the purchases made by the appellant were in the course of export in terms of

Section 5(3) of the 1956 Act.  It appears from the Memo of Appeal filed before the

Appellate Tribunal that the appellant had produced Trading Accounts and details of

purchases for the Assessment Year 1998-1999, list of domestic purchases supported

by sale bills issued by registered dealers within and outside the State against Form

18A, prior purchase orders of foreign buyers, copies of export invoices, bill of lading

and other records.  In such matters, it is the duty of the AO to collate the facts and

ascertain whether the purchased cashew kernels worth Rs.1,92.67,236/- were effected

in the course of export.  Applicability of B.M.Ashraf's case (supra) would depend on

the factual foundation.  In this case, that factual foundation is missing.

Therefore,  in  our view,   the matter needs to be remitted to the  Deputy

Commissioner (Appeals)-I, Commercial Taxes, Ernakulam.  We make it clear that

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the Deputy Commissioner (A) will  consider the averments in the Memo of Appeal

filed by the appellant herein and decide the matter after taking into consideration the

documents referred to herein-above and give a finding as to whether the purchases

worth  Rs.1,92,67.236/-  were  effected  in  the  course  of  exports  or  not.   For  that

purpose,  the  Deputy  Commissioner  (A)  will  have  to  ascertain  the  exact  date  of

purchase from the local market, the date on which the appellant received the export

orders from foreign buyer, copy of export invoices, bills of lading etc.  Lastly, the

Deputy Commissioner (A) will also examine the question as to whether the appellant

itself effected exports or whether, in turn, the appellant sold the goods in question to

other exporters.  All these questions are required to be decided only in the context of

purchases effected by the appellant worth Rs.1,92,67,236/-.

For  the  afore-stated  reasons,  Civil  Appeal  is  allowed  and  the  matter  is

remitted to the Deputy Commissioner (A) to decide the afore-stated aspect once again

in accordance with law.

No order as to costs.

                         ...................J.               (S.H. KAPADIA)

                  ...................J.                                         (B. SUDERSHAN REDDY) New Delhi, August 12, 2008.

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