Nadeem Leatherware Exports vs The State of Tamil Nadu

Chitra Venkataraman, J.—Raising the following questions of law, the assessee is on revision as against the order passed by the Sales Tax

Appellate Tribunal in STA No. 313 of 2007 relating to the assessment year 2001-2002.

Whether the order of the Appellate Tribunal was correct in reversing the conclusions of the First Appellate Authority by restoring the turnover

(Rs. 19,83,463/-) relating to imported ""wet blue"", when findings of facts recorded by the First Appellate Authority were not disturbed?

Whether on the facts and circumstances of the case, in the light of the categorical findings given by the Appellate Tribunal, the conclusion arrived

by it that the petitioner is liable for sales tax on the differential turnover of Rs. 19,63,463/- (out of Rs. 52,33,463/-) solely based upon the

approximate value"" incorporated in Form XX, that accompanied the goods for the purpose of transportation within the State, when there was no

sale effected by it?

The assessee herein imported wet blue skins from Tvl. Samimpex (K) Ltd., Kenya. Admittedly, a portion of the wet blue skin was used by the

assessee for conversion into finished leather. Stating that the import in entirety was unfit for its use, the assessee is stated to have corresponded

with the foreign supplier and there afterwards, the same were handed over to M/s. Munasser Leather Private Limited as per the instructions from

the foreign supplier. The assessee stated that this was informed to the Reserve Bank of India, General Manager, Exchange Control, Chennai. The

bill of entry and bill of lading was transferred to M/s. Munasser Leather Private Ltd., In the return filed, the assessee stated that the purchasers

returned back to the foreign supplier the goods to the extent of Rs. 52,33,463/- and on the directions of the foreign supplier the same were handed

over to M/s. Munasser Leather Private Limited. For this, the assessee further submitted that it had not received any consideration from M/s.

Munasser Leather Private Limited, it not being the outright sale, it pleaded for exclusion of this turnover. The Assessing Officer, however, rejected

the assessee''s contention by pointing out that there was no written contract entered into in support of the claim of the assessee. There was no

proof of remittance to the Reserve Bank of India to establish the connectivity between the purchaser M/s. Munasser Leather Private Limited and

the foreign supplier. The letter dated 27.03.2001 in Annexure-D from the foreign supplier read as ""Kindly help me to sell out the stock lying at

your tannery"". Thus the Officer viewed that the import transaction had ended with the assessee itself and just to accommodate the foreign sellers,

the assessee had acted as a principal/agent and sold the goods to M/s. Munasser Leather Private Limited and the turnover was assessed under the

provisions of the Tamil Nadu General Sales Tax Act, 1959.

Aggrieved by this, the assessee went on appeal before the Appellate Assistant Commissioner, who accepted the case of the assessee and held

that the invoices revealed that the assessee was only a customer and the transactions went through by transfer of documents through the Bank.

None of the documents showed that the assessee acted as an agent of the foreign sellers. In the circumstances, the First Appellate Authority

agreed with the assessee and set aside the order of the Assessing Officer on this turnover. The First Appellate Authority further pointed out that

records like the letter addressed to the Exchange Control Department, Reserve Bank of India, the letter addressed by the purchaser of the

assessee to hand over the bill of entry and acceptance by them towards payment of clearing charges and to remit the money to the foreign seller.

Entries in the assessee''s books would establish the fact that the goods ultimately reached M/s. Munasser Leather Private Limited only and were

not disposed of by the assessee by way of sale. So holding, the Appellate Assistant Commissioner set aside the order of assessment.

The order of the First Appellate Authority was challenged in appeal by the State and the assessee also came on appeal by way of Cross

Objection on certain other turnover. The Sales Tax Appellate Tribunal went through the documents and ultimately held that the out of the turnover

of Rs. 52,33,463/-, the journal voucher mentioned the approximate value of Rs. 32,50,000/- The Sales Tax Appellate Tribunal pointed out that

the records of the assessee showed that the goods on being found unfit for their use were handed over to M/s. Munasser Leather Private Limited

as per the directions of the foreign supplier and this was also informed to the Statutory Authorities, apart from the endorsement in the bill of entry

and bill of lading and approval of the ultimate buyer. The Sales Tax Appellate Tribunal further affirmed the view of the Appellate Assistant

Commissioner that on instructions of the supplier, the assessee handed over the goods to M/s. Munasser Leather Private Limited and had not

received any consideration. Thus, even though the Sales Tax Appellate Tribunal accepted this, it further pointed out that the approximate value of

goods transferred to M/s. Munasser Leather Private Limited was to the tune of Rs. 32,50,000/-. In the circumstances, the Tribunal came to the

conclusion that the purchase return could be restricted only to the sum referred to above viz., Rs. 32,50,000/- and not what was claimed by the

assessee to the tune of Rs. 52,33,463/-. In this circumstances, the Sales Tax Appellate Tribunal set aside the order of the Appellate Assistant

Commissioner in granting exemption to the tune of Rs. 52,33,463/- and restricted the relief to the assessee to the extent of Rs. 32,50,000/- and

held that the remaining amount of Rs. 19,83,463/- would be taxed at 4%.

Aggrieved by this, the assessee has preferred the present revision.

Learned Counsel appearing for the assessee submitted that when the Sales Tax Appellate Tribunal had found that there was no sale

consideration received and an outright sale not having taken place between the assessee and M/s. Munasser Leather Private Limited, the question

of restricting the turnover to Rs. 32,50,000/- for the purpose of grant of relief was unsustainable and that it does not go with the finding given and

prayed for setting aside of the order of the Sales Tax Appellate Tribunal.

We do not agree with the said submission made by learned counsel for the assessee for the reason that the Sales Tax Appellate Tribunal found

that the journal voucher particulars of the assessee mentioned the amount of Rs. 52,33,463/- relating to the foreign supplier sale and it was not

reflected in the documents pertaining to the delivery of goods to M/s. Munasser Leather Private Limited and that Form XX reflected the value to

the extent of Rs. 32,50,000/- only. There being no further material that what was returned as purchase return was to the tune of Rs. 52,33,463/-,

we do not find any justifiable ground to accept the plea of the assessee that it is entitled to exemption on the entirety of Rs. 52,33,463/-. The

assessee, did not prove as a matter of fact that it had returned the entire imported item but on the other hand it stated that it used a portion of the

imported wet blue skin. In the background of this admitted fact and that there are no materials to support the contention of the assessee that the

turnover of Rs. 52,33,463/- in entirety was returned as purchase return, we have no hesitation in rejecting the case of the assessee. Accordingly,

the Tax Case (Revision) fails and the same is dismissed. No costs.