Writ under article 226 maintainable, no foreign party is willing to wait for protracted litigation in India to be over to continue the business. Above all the impugned proceedings are an antithesis of the liberalised policies of the Government to promote international trade and commerce.

The petitioner had an agreement with a foreign dealer that, foreign dealer will :

1. Ship the chassis of vehicle in semi knocked down condition to India which will be cleared by the petitioner from customs on which no customs duty is payable as the goods are for export after body building.

2. The petitioner at his workshop in Kerala assembles the chassis, tests the same and then constructs bus body on it.

3. The bus after completion is exported by the petitioner to the foreign party at the destination instructed by the foreign party.

For these services, the petitioner will receive charges per vehicle. The respondent proposed to levy entry tax on the value of chassis imported by the petitioner, the petitioner raised objections stating that there is no purchase of vehicle chassis by the petitioner and in any case the import of vehicle chassis in SKD condition was neither ‘used’, ‘sold’ nor consumed in Kerla and, therefore, entry tax is not attracted.

However, the objection of the petitioner was overruled by the respondent, who raised the demand of entry tax on the value of chassis imported, by completing assessment proceedings. The respondent also proposed to impose penalty for evasion of entry tax.

The assessment order and notice proposing the penalty was challenged on various grounds, one of them was ‘the chasis imported in SKD condition’ is not for ‘consumption’, use or sale within any local area.

After referring to Sec 3(1) which dealt with levy of tax, the court came to the conclusion that entry tax is attracted only if the item imported is for ‘consumption, use or sale in local area’. The fact is that petitioner was not allowed to use the chassis nor could it be used for any purpose. The petitioner assembled the chassis from SKD Kit supplied, built the body and exported the full bus. The chassis belonged to the foreign dealer and there was no purchase or sale of chassis by the petitioner; therefore, whether there was ‘consumption’ of chassis by the petitioner to attract tax u/s 3(1) ? The court referred to dictionary meaning of the word ‘consumption’. The petitioner constructed bus body, that building bus body on the chassis does not involve any ‘consumption’ of chassis and so much so there cannot be any liability. According to respondent, once bus body is built, the chassis ceases to exist and, therefore, there is ‘consumption’ attracting liability under the charging section. Not agreeing with this submission, court referred to meaning of word ‘consumption’ as contained in the dictionary, because same is not defined in the Act. Court took note of facts that, in this case, petitioner was only building bus body on the chassis supplied by the foreign party and all through, the chassis belonged to the foreign party. By construction of bus body, chassis does not get itself transformed to anything else, but forms an integral part of the bus. Therefore, whatever be the meaning the word ‘consumption’ may admit in the context in which it is used in section 3(1) of the Act, it cannot be said that petitioner has ‘consumed’ the vehicle chassis belonging to the foreign party by building bus body on it in terms of work order. Moreover, entries 1(a), 22 and 23 of the Schedule to the Act when taken together would go to show that entry tax on these items is attracted for ‘use’ by the importer, that is the owner of the vechicle. Therefore, motor vehicle, its chassis or body apparently attracts tax when imported for ‘use’ or ‘sale’ as no ‘consumption’ of it is contemplated, nor is it capable of consumption.

With this observation, assessment order and notice proposing penalty were quashed.

In this petition the jurisdiction of assessing officer is challenged in light of decision of Kerala High Court in the case of Fr. William Fernandes vs. State of Kerala 115 STC 591, and decision of the Supreme Court in Whirlpool Corporation 8 SCC 1, warranting interference by High Court under article 226 overlooking the statutory remedies, observing that this is a fit case where the High Court should interfere because if the petitioner is directed to pursue the statutory remedies against the killer dose of tax and penalty, and wait for the result for continuation of business, the same will destroy the petitioner’s business as no foreign party is willing to wait for protracted litigation in India to be over to continue the business. Above all the impugned proceedings are an antithesis of the liberalised policies of the Government to promote international trade and commerce.

[Chakkiath Engineering works vs. Sales Tax officer (audit), Export and Import Dept of Commercial Taxes Ernakulam & another 11 VST 319 (Ker))]

Held : Yes.

The petitioner was assessed by the Commercial Tax Officer; the order resulted into certain demand. The assessing officer issued notice S. C. N. u/s. 69 of M. P. Commercial Tax Act 1994. The petitioner replied to the said SCN. Penalty was imposed computing the tax component by four times.

In revision petition filed by the assessee, revisional authority came to conclusion that, assessing officer imposed penalty u/s. 69 (3) and not u/s 69 (2).

Against this order, petitioner came before H.C. The order imposing penalty is quashed because court observed that the notice issued to the petitioner appears to be vague. The order passed by the assessing officer is also laconic. Though the petitioner has been heard, order has not been passed in an appropriate manner. An order is to be inferred by cogent and germane reasons keeping in view the spirit of the enactment. A penal provision has to be strictly constructed. The assessing officer has not dealt with the aspect relating to penalty but has a spacious observation that the penalty was imposed on the basis of the assessment. It may be considered that penalty was imposed on the basis of the assessment. In my considered view, the said order is vulnerable and affirmation thereof by the revisional authority is also susceptible and accordingly, the said orders are quashed.

[Shri Ram Marble vs. Assistant Commissioner, Commercial Tax Circle -1 Jabalpur and other 11 VST 411 (MP)]

Held : No.

The Commissioner of General Sales Tax, Madhya Pradesh came in revision petition before the High Court against the order of Tribunal wherein penalty u/s. 43(1) was set aside. Tribunal while setting aside penalty order categorically observed that the assessee of his own filed the returns disclosing turnover of sales and taxes. Returns filed by the assessee are accepted by the assessing officer. There was no occasion for invoking the penalty provision against the assessee; it was also found that there was no mens rea noticed on the part of the assessee for the purpose of attracting rigor of penalty.

On this judgment, court opined that power to impose penalty cannot be exercised authomatically and without there being any case made out for that purpose. A case to that effect is required to be made out as required under the penalty section. A categorical finding is required to be recorded on the facts by the assessing officer indicating any malice or any contumacious conduct on the part of the assessee in either concealing any material factor or any act indulged in avoiding payment of tax legally due.

With this observations revision petition is dismissed.

[Commissioner of Sales Tax M. P. vs. Daluram Mangilal 11 VST 351]

The petitioner in writ against the order of assessment challenged the legality and validity of order of assessment, contending that the assessment order and the resultant demand are illegal, without jurisdiction and violative of principles of natural justice, The petitioner preferred this writ only because if an appeal is preferred then petitioner is required to pay 20% by way of deposit before the appellate authority when there is no liability because the amounts have been paid. Court observed that this contention may appear to be very captivating but not convincing and it may appear very alluring but not acceptable. If the competent assessing authority once makes an assessment order and the party thereto is aggrieved, he has a right to appeal.

On these facts of the case, writ was rejected because the powers under article 226 of the Constitution of India, will be at loath when efficacious, alternative, statutory redressal is available to the assessee.

[Pradeep Pipe Stores vs. State of Bihar & Others 11 VST 336 (Patna)].

Rajesh Spices Co., a dealer in Kirana, Spices, Oil Seeds and Dry Fruits etc., claimed exemption from payment of tax on the sale of spices and haldi as Export to Nepal. This claim for the years 1986-87 and 1987-88 was rejected because the assessing authority noticed that goods sold were delivered in Varanasi. The buyer from Nepal, then carried the goods to Nepal. The sale was complete in Varanasi, whereafter the dealer had no control over the goods.

The claim of the assessee was approved by the first appellate authority and also by the Tribunal. ‘Not satisfied’ with this judgment, the Commissioner of Trade Tax came in revision before the High Court.

In support of their say both the appellant and respondent placed reliance on the decision of the Supreme Court in the case of Ben Gorm Nilgiri Plantation Co. vs. Sales Tax Officer (15 STC 753).

The expression ‘in the course of’ appearing in article 286(1) (b) came up for consideration in State of Travancore-Cochin vs. Bombay Co. Ltd. 3 STC 434 before the Supreme Court. In this case the Supreme Court held that whatever else may or may not fall within article 286(1) (b) of the constitution, Sales and Purchases which themselves occasion the export or import of the goods as the case may be out of or into the territory of India come within the exemption".

Reliance was also placed on the observation of the Allahabad High Court in the case of C.S.T. U.P. vs. Dhampur Sugar Mills 26 STC 65 wherein sale was allowed to be in the course of export although the delivery of goods was made to foreign buyers within Indian territory. Refrence was also made to the observation of S. C. in Union Of India vs. K. G. Khosla & Co. Ltd. 43 STC 457 that a sale which occasions movement of goods from one state to another is a sale in the course of inter-state trade, no matter in which state the property in the goods passes.

In C.S.T. vs. Ganeshi Lal & Sons 49 STC 253, the Allahabad Court following the ratio in the two aforesaid judgments held that from the language of section 5 of the Central Sales Tax Act,1956, it is clear that it is a sale in the course of export only, which is exempt, and not sale for export. When can a sale be said to be in the course of export or for export depends on a variety of circumstances. Export means taking out something out of the country across the customs barrier. The word ‘course’ means ‘sequence’, ‘process’ or ‘a pattern in which anything moves’. The sequence or movement should be preceded by sale and must result in crossing of goods outside the country and must run in a channel. They must be connected with each other and interlinked, only then can it be said to be in the course of export. In the present case before the court, delivery of the goods was effected at Varanasi and the Nepali buyer took delivery at Varanasi & carried the goods to Nepal. In view of these facts the sale is complete in all respects at Varanasi and purchaser was free to carry the goods to Nepal. The selling dealer retained no control over the goods. There is no link between the agreement to sale and export. They do not form part of the same transaction. There is no bond between the contract and sale and actual transportation. Sale by the assessee, therefore, cannot be considered to be in the course of export.

[Commissioner of Trade Tax, U. P. Lucknow vs. Rajesh Spices Company 11 VST 303(All)].