2012 (Vol. 49)-258 [MADRAS HIGH COURT- MADURAI BENCH] Hon ble R. Sudhakar, J. W.P.(MD)No.5358 of 2011 and W.P.(MD)No.5359 of 2011 and M.P(MD)Nos.1 and 1 of 2011 Emerald Stone Export vs. Assistant Commissioner (CT), FAC, Pudukkottai I Assessment Circle, Pudukkottai. Date of Decision : 12 th September, 2011 For the Petitioner : Mr. N. Inbarajan For the Respondent : Mr. TR. Janarthanam, Additional Govt. Pleader Input tax credit - Refund thereof Zero rated sale Sale in the course of Export - Tamil Nadu Value Added Tax Act, 2006 Section 18, Central Sales Tax Act, 1956 Section 5(3) - Petitioner is entitled to take ITC or refund of tax amount paid in a purchase of the goods specified in the First Schedule of Tamil Nadu Value Added Tax Act, 2006 treating it as a Zero rated sale made to EOU unit supported by Export Invoice, Bill of Lading, etc. as such a sale is a sale in the course of Export under Section 5(3) of the Central sales Tax Act, 1956 as has been provided under Section 18 of Tamil Nadu Value Added Tax Act, 2006 - Assessing Authority reversed the order of refund on the ground that the dealers in this case the sale made to 100% EOU holders could not be termed as "Zero Rated Sales" as they would not fall under the category of Zero Rated Sales as per Section 18(1) of the Tamil Nadu Value Added Tax Act, 2006 - High Court on Writ - The sales made to the 100% EOU will fall under the definition of Zero rated sales in terms of Section 18 of the Tamil Nadu Value Added Tax Act, 2006 - If the EOU has made the export and proof of export has already been brought on record, Section 18 of the Tamil Nadu Value Added Tax Act, 2006, has to automatically apply - Findings of the authority in the impugned orders are perverse and based on a misreading of the provisions of Section 18(i) of Tamil Nadu Value Added Tax Act, 2006 and Section 5(3) of the Central Sales Tax Act, 1956 - Impugned orders set aside and the writ petitions allowed as prayed for. (Hon ble R. Sudhakar, J.) JUDGMENT 1. W.P(MD)No.5358 of 2011 has been filed by the petitioner to issue a writ of Certiorari to call for the records on the file of the respondent herein in his TIN 33184103917/2006-2007, dated 08.04.2011 and quash the same. 2. W.P(MD)No.5359 of 2011 has been filed by the petitioner to issue a writ of Certiorari to call for the records on the file of the respondent herein in his TIN 33184103917/2007-2008, dated 08.04.2011 and quash the same. 3. Heard Mr. N. Inbarajan, learned Counsel for the petitioner and Mr. TR. Janarthanam, learned Additional Government Pleader appearing for the respondents. 4. By consent, the writ petition itself is taken up for final disposal.
5. The petitioner who is the Registered Dealer on the files of the respondent under the Tamil Nadu Value Added Tax Act, 2006 (hereinafter referred to as TNVAT Act, 2006), and is engaged in the business of buying and selling granites. 6. The issue relating to refund of input tax credit in both the writ petitions are relatable to the period 2006-2007 and 2007-2008. During this period, the petitioner purchased raw granite from the Registered Dealers in the State of Tamil Nadu and the same was sold to the Exporter namely M/s.Tab India Granite (P) Ltd., Hosur, an 100% Export Oriented Unit who in turn exported the goods. These facts are not in dispute. 7. The petitioner made an application for refund of the input tax credit for the year 2006-2007 and 2007-2008 and the reason for seeking refund of tax paid on purchase of goods was that the goods were sold to 100% Export Oriented Unit in a sale in the course of export and therefore, the sale would fall under Section 5(3) of the Central Sales Tax Act, 1956 (hereinafter referred to as CST Act, 1956) and the petitioner is entitled to the benefit of input tax credit or refund on the amount of tax paid on the purchase of goods specified in the First Schedule including the capital goods under the category of zero rate sale as defined in Section 18 of the TNVAT Act, 2006. 8. Section 18 of TNVAT Act, 2006, provides for the above stated benefits and it reads as follows: "Section 18. Zero-rating.- (1) The following shall be zero rate sale for the purpose of this Act, and shall be eligible for input tax credit or refund of the amount of the tax paid on the purchase of goods specified in the First Schedule including capital goods, by a registered dealer in the State, subject to such restrictions and conditions as may be prescribed:- Section.18(1)(i). A sale as specified under sub-section (1) or (3) of section 5 of the Central Sales Tax Act, 1956; (Central Act 74 of 1956)." 9. The claim of the petitioner for refund of tax was considered by the Assistant Commissioner (CT), Pudukkottai and in proceedings in TIN.33184103917/2006-2007 dated 10.09.2008, the refund application was considered in the light of the G.O.Ms.No.39/Commercial Taxes & Registration (A) Dept., dated 05.02.2007 and VAT Circular No.71/2006 dated 18.12.2006 and 18/2007 dated 06.09.2007 and the Commissioner of Commercial Taxes, Chennai, Ref. VAT Cell/37009/2007 (VCC No.1086) dated 21.08.2007. 10. Taking note of the Zero rate sale, the Refund Application in Form W filed claiming refund of tax paid on goods purchased which were exported through 100% EOU and treating it as sales in terms of sub-rule (2) of rule 11 read with Section 18 of the TNVAT Act, 2006, the competent authority granted the refund in both the cases. A similar order was passed on 05.11.2008 in TIN/33184103917/07-08 and the refund has been made. Thereafter, the Department issued a notice on 13.01.2011 in respect of both the assessment period stating as follows: TIN/33184103917/2006-07: "2) In this connection it is informed that you had effected sales of Rough Granite to Tvl.TAB INDIA GRANITE PVT. LTD., HOSUR a
100% E.O.U holders. The sales made to 100% E.O.U holders could not be termed as "Zero rated Sales" as they would not fall under the category of Zero rate sales as per Sec.18(1) of the TNVAT Act, 2006. Hence the entire refund of Rs.29,83,263/- claimed and made is not in order." TIN/33184103917/2007-08: "2) In this connection it is informed that you had effected sales of Rough Granite to Tvl.TAB INDIA GRANITE PVT. LTD., HOSUR a 100% E.O.U holders. The sales made to 100% E.O.U holders could not be termed as "Zero rated Sales" as they would not fall under the category of Zero rate sales as per Sec.18(1) of the TNVAT Act, 2006. Hence the entire refund of Rs.59,35,755/- claimed and made is not in order." 11. The notice was issued under Section 19(16) of the TNVAT Act, 2006. The petitioner submitted a detailed reply on 24.03.2011 refuting the claim of the Department inter alia contending that the sale to 100% E.O.U is covered by Section 5(3) of the CST Act, 1956 and it is Zero rate sale in terms of Section 18(1) of the TNVAT Act, 2006. The specific point raised by the petitioner in the reply is set out as hereunder: "It is a penultimate sale to an exporter which comes under Section 5(3) of the CST Act, 1956 by way of repetition we submit that we have effected a sale to an exporter who has exported the same and therefore our sales to the exporter is protected and coming under the provisions of Section 5(3) of the CST Act, 1956 which is protected under Article 286 of the Constitution of India. Already we have filed particulars relating to the export and we have also provided the export documents along with the purchase order etc. Therefore, according to us even though we have effected a sale to 100% EOU, it is covered under Section 5(3) of the CST Act, 1956 and such sales falls under Zero rate sales as per Section 18(1) of the VAT Act, 2006. This must be appreciated before proceeding further in the above matter." 12. The objections raised by the petitioners were referred to in the impugned proceedings. Though personal hearing was granted, the petitioner relied upon their legal submission already made and based on the objection filed, the final order has been passed. 13. The legal plea taken by the petitioner as above has been rejected stating as follows: "As already stated, the dealers in this case had effected sales of rough granite to Hosur dealers a 100% EOU holders. The sale made to 100% EOU holders could not be termed as "Zero Rated Sales" as they would not fall under the category of Zero Rated Sales as per Sec.18(1) of the TNVAT Act, 2006. Hence, the wrong ITC claimed and refunded for Rs.29,83,263/- is ordered to be reversed accordingly." 14. The short question that arises for consideration in this case is as to whether the sales made to the 100% EOU will fall under the definition of Zero rated sales in terms of Section 18 of the TNVAT Act, 2006. 15. The fact is that the petitioner is entitled to take input tax credit or refund of tax amount paid in a purchase of the goods specified in the First
Schedule treating it as a Zero rated sale if it is a sale specified under subsections (1) and (3) of Section 5 of the CSTs Act, 1956. Therefore, the primary issue that has to be considered, is whether Section 5(1) and (3) of the CST Act, 1956, is attracted to the facts of the present case. 16. Section 5(1) and (3) of the CST Act, 1956 reads as follows: "5. When is a sale or purchase of goods said to take place in the course of import or export.- (1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the Territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the Customs Frontiers of India. * * * * * (3) 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 for or in relation to such export." 17. The fact that sale of goods in this case was in the course of export of goods out of the Territory of India is amplified by the documents submitted by the petitioner in support of the refund application by referring to the Export Invoice, Bill of Lading, etc. 18. Section 5(3) of CST Act, 1956, starts with a non obstante clause and overrides Section 5(1) of the Act. Therefore, the sale preceding the export sale will be a sale in the course of export. Therefore, the sale to the 100% EOU is the last sale preceding the sale occasioning the export of the goods out of the Territory of India and consequently, it will be sale in the course of export attracting Section 5(3) of CST Act, 1956. The provision of Section 5(3) of CST Act, 1956 specifically covers a sale in this case. 19. In this case, the petitioner has sold the goods to Tab India Pvt. Ltd., a 100% EOU and the documents submitted by the petitioner to the competent Refund Authority clearly satisfied the requirements that the sale was for the purpose of export of goods outside the territory of India by the EOU and it is in the course of export. Section 18(1) of TNVAT Act, 2006 and Section 5(3) of CST Act, 1956, clearly apply to the facts of the petitioner's case. The sale in this case falls under Section 5(3) of CST Act, 1956, and then Section 18(1) of TNVAT Act, gets attracted. 20. In such view of the matter, by virtue of Section 18(i) of the TNVAT Act, 2006 the petitioner is entitled to Input Tax Credit or refund of tax if it is a sale specified under sub-section (1) and (3) of Section 5 of CST Act, 1956, by treating it as Zero rated sale. The petitioner will therefore be entitled to the refund in this case. The petitioner is justified in seeking refund of the tax treating the sale as Zero rated sale. 21. The impugned order accepts that the sale was effected to 100% EOU. No provision of law has been shown as to how the sale to 100% EOU cannot be termed as Zero rated sales. Since the petitioner has established that the sale was in the course of export supported by the Bill of Lading, Export Invoice, etc., (i.e) the documents in support of the export, the
Department cannot contend that Section 18 of the TNVAT Act, 2006, will not apply. 22. The term 100% EOU is self-explanatory and it has not been properly appreciated by the authority. All that Section 18 of the TNVAT Act, 2006, provides for is that sale should be in the course of export. If the EOU has made the export and proof of export has already been brought on record, Section 18 of the TNVAT Act, 2006, has to automatically apply. The impugned order does not even state as to how a sale to an 100% EOU which is meant for export promotion, does not fall under Section 18(i) of TNVAT Act, 2006. This is a total misconception and misreading of the provisions of the Act. 23. In the result, the findings of the authority in the impugned orders are perverse and based on a misreading of the provisions of Section 18(i) of TNVAT Act, 2006 and Section 5(3) of the CST Act, 1956. Accordingly, the impugned orders are set aside and the writ petitions are allowed as prayed for. Consequently, the connected Miscellaneous Petitions are closed. No costs..