IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER MONDAY, THE 29TH SEPTEMBER 2008 / 7TH ASWINA 1930 ST.Rev..No. 331 of 2007 -------------------------------- TA.380/2004 of S.T.A.TRIBUNAL,ADDL.BENCH,KZD. .................... REVISION PETITIONER/APPELLANT IN T.A/ASSESSEE --------------------------------- COFFEE BOARD, NO.1, AMBEDKAR VEEDHI, BANGALORE - 1, REPRESENTED BY ITS SECRETARY, MR.JAYANARASIMHA RAJ. BY ADV. SRI.A.M.SHAFFIQUE (SR.) & SRI.ANIL D. NAIR RESPONDENT(S): RESPONDENT IN T.A/REVENUE. ------------------------ STATE OF KERALA, REPRESENTED BY THE SECRETARY TAXES DEPARTMENT, THIRUVANANTHAPURAM. BY GOVERNMENT PLEADER SRI. VINOD CHANDRAN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ALONGWITH STRV. 332/07 AND CONNECTED CASES ON 22/09/2008, THE COURT ON 29/09/2008 PASSED THE FOLLOWING: H.L. DATTU, C.J. & A.K. BASHEER, J. ------------------------------------- S.T.Rev. Nos.331, 332, 333, 339, 340, 345 of 2007, S.T.Rev. Nos.4, 5, and 12 of 2008 ------------------------------------ Dated this, the 29th day of September, 2008 ORDER H.L. DATTU, C.J. The common orders passed by the Sales Tax Appellate Tribunal in T.A. Nos.350, 382, 383, 384, 385, 386, 387, 388 and 290 of 2004 dated 30th December, 2006 is the subject matter of these revision petitions. 2. The relevant assessments years are 1984-85, 1985-86,1986-87, 1987-88, 1988-89, 1989-90, 1990-91, 1994-95, and 1995-96. The assessing authority has completed the assessment under the provisions of the Central Sales Tax Act. 3. The assessee/Coffee Board, is a statutory body constituted under the Coffee Act, 1942. It is a registered dealer both under the KGST and CST Act. The revision petitioner has made payments to the growers for their coffee in accordance with the quantity and quality of coffee pooled on the basis of realisations from disposal of the coffee. It is stated that since the appellant has no storage facility, the coffee procured by it is stored at the pooling agents warehouse after curing. The coffee is disposed of both in domestic and international market. Till 31.3.1984, coffee was taxed at the point of first sale in the State and from 1.4.1984, the point was shifted to point of first purchase. S.T.Rev.No.331/07 etc. - 2 - 4. The revision petitioner has treated the compulsory delivery of coffee by growers as purchase of coffee and paid purchase tax at the point of first purchase on the entire purchase value of coffee paid to growers. The petitioner claims that the entire coffee purchased by the revision petitioner from growers in Kerala had suffered tax, and therefore, it is not liable to pay any tax on the coffee which has already suffered tax in the State. 5. The case of the assessee is, that the entire coffee sold by the petitioner is purchased in Kerala by paying tax at the point of first purchase in the State The coffee purchased was sold locally to dealers for export as well as for local sales, though auction is conducted at Bangalore. The coffee so sold was delivered to the parties in the State itself by the pool agents. The petitioner has not moved the goods out of Kerala. Some quantity is exported by the petitioner directly and balance stock is transferred to petitioner's own branches outside Kerala. Since the entire coffee has suffered tax at the first purchase point in the State, there is no further liability for local sales of the coffee in Kerala. The further case of the assessee is that, it is not liable to prove exemption under Sec.5 (3) of the CST Act, since the local sales of the goods does not attract any sales tax in Kerala, the point of levy being the first purchase. It is contended that the only the exporters have to prove the exemption under Sec.5(1) or 5(3) of CST Act, as the case may be. The exemption under Sec.5(3) would arise only when the sale preceding the export sale is taxable under the KGST Act. The entire coffee sold is S.T.Rev.No.331/07 etc. - 3 - delivered to parties locally in Kerala and there is no inter-State sale of coffee. It is further stated, that even the check post authorities have not detained the goods as they were convinced that the petitioner had paid purchase tax on the said commodity. The stock transfer effected was covered by Form 26 delivery notes issued by the Department. It is stated that due to lapse of time, the petitioner was not in a position to produce the same, because the pooling agents of the petitioner have since closed down their business as agents of the petitioner and office of the petitioner in Kerala have also been closed down. 6. It is further contended that the assessing authority went wrong in demanding proof of export Form H and other details relevant for Sec.5(3) which is not applicable to petitioner's local sales in Kerala. The petitioner has furnished the available H Forms and relevant documents in respect of sales made to exporters locally for certain years before the assessing officer. 7. It is also contended, that, the assessing officer went wrong in assessing the coffee directly exported by the petitioner for want of proof though the said coffee has suffered tax. 8. It is also stated that the stock transfer effected from Kerala to its branches located outside the State had suffered tax at the hands of the petitioner. But, the claim of exemption on stock transfer was rejected on the ground that appellant did not produce F Forms. The petitioner had produced other circumstantial evidence to prove the stock transfer and that production of F form S.T.Rev.No.331/07 etc. - 4 - became mandatory only from 2002 onwards. 9. Since the assessee had not produced any evidence to substantiate the claim of exemption on direct export sale, sale to exporters and also stock transfer, the assessing authority has treated the above transactions as inter-State sales. The assessing authority has stated that the levy of tax under KGST Act on the purchase value of first purchaser is not a bar to levy tax under CST Act 10. Before the first appellate authority, it was contended that petitioner has not made any inter-State sale and the estimation of turnover without any proof is arbitrary. The first appellate authority found that petitioner was not successful in proving that there is no inter-State sale since the auction purchasers have taken delivery of the goods from Kerala and the sale is complete only when delivery is effected. It was also noticed that with regard to stock transfer, export sale etc. no documents were produced. Accordingly the assessment made by the assessing officer was confirmed. 10. In the second appeal filed, the Appellate Tribunal has found that the dealer who claims exemption on the goods moved out of the State otherwise than by sale has to file declaration obtained from the prescribed authority. The Tribunal has further concluded that the petitioner ought to have produced H form before the assessing authority which is mandatory under the Act and in the absence of H form, the order of authorities below regarding sale effected outside S.T.Rev.No.331/07 etc. - 5 - the State from stock claimed to have been received as stock transfer could not be interfered. 11. As regards the auction held outside the Kerala, the Tribunal noticed that price was fixed in the auction centre outside the State and moreover the mode of receipt of consideration and place of receipt was not seen disclosed by the petitioner and there is no doubt that goods were purchased by dealers outside the State and the goods moved out of State. In such circumstances, the assessment made by the authority below is found to be in order. 12. As regards the claim of exemption on sale of coffee to exporters, the petitioner has H form in support of this claim and has sought opportunity to prove the claim and in such circumstances, the Tribunal has given the petitioner opportunity to produce H form and documents in support of the said transactions before the assessing authority. 13. The petitioner being aggrieved by the reasoning and the conclusions reached by the Appellate Tribunal is before us in these tax revision cases. 14. The petitioner has raised the following questions of law for our consideration and decision. They are, “i). In the facts and circumstances of the case ought not the tribunal have held that the production of Form F was not mandatory to prove stock transfer? S.T.Rev.No.331/07 etc. - 6 - ii). In the facts and circumstances of the case ought not the tribunal have accepted the other circumstantial evidences to prove stock transfer and allow the claim of exemption? iii) In the facts and circumstances of the case ought not the tribunal have allowed the claim of exemption on sales through auction conducted outside the State and on direct exports?. 15. We have heard Sri.Anil D.Nair, learned counsel for the assessee and Sri.Vinod Chandran, learned Government Advocate for the Revenue. 16. Sri.Anil D. Nair, learned counsel for the assessee would contend, that the production of 'F' forms prescribed under CST Act and the rules framed thereunder, were made compulsory only with effect from 11.6.2002 by incorporating certain amendments in Section 6A of the Act and prior to this amendment the settled legal position was that the assessee could prove its claim of stock transfer by producing other circumstantial evidence such as correspondence, delivery notes, agreements entered with the agents, transport documents etc. and therefore insistence of production of 'F' forms declaration to prove inter-State movement of goods was not occasioned by any sale, by the assessing officer is contrary to settled legal position. 17. The learned counsel would further submit that, the auction sale of the coffee pooled was held in Bangalore and the purchase price were received in Bangalore and pursuant to the auction sale, the auction purchasers are issued delivery notes indicating the warehouses in Kerala maintained by the Coffee S.T.Rev.No.331/07 etc. - 7 - Board where delivery has to be taken and pursuant to the delivery notes so issued, the delivery of coffee is taken in the State of Kerala, and since the coffee has already suffered tax at the first point of purchase, the Tribunal was not justified in holding that the transaction in question is a inter-State sale and exigible to tax under CST Act. In aid of this submission, the learned counsel relies on the decision of the Apex Court in the case of A.V.Thomas and Co. vs. C.T.O., 14 STC 303. 18. The learned counsel would further submit that though these two legal issues were specifically argued, the Tribunal has not specifically answered these two issues. The learned counsel would also inform us that for the previous assessment years, the Tribunal in fact has remanded the matter to the assessing authority to verify the facts pleaded and pass fresh assessment orders in accordance with law. This assertion made by the learned counsel is not seriously disputed by Sri.Vinod Chandran, learned Government Advocate. 19. Section 6A(1) of the CST Act came to be amended by an amendment made by Section 151 of the Finance Act, 002 with effect from 11th May, 2002. The amendment that was carried out was “if the dealer fails to furnish such declaration, then the movement of such goods shall be deemed for the purpose of this Act to have been occasioned as a result of sale”. In view of this amendment, with effect from 11th May, 2002, in order to prove that the inter-State movement of the goods was not occasioned by any sale, the despatching dealer S.T.Rev.No.331/07 etc. - 8 - should obtain declaration in Form 'F' from the consignee, and furnish them to the assessing authority along with evidence of despatch of the goods and satisfy the assessing authority about the correctness of the particulars contained in the declarations. Failure to produce this declaration or otherwise satisfy the assessing authority about the nature of the transaction or about the correctness of the particulars given in the form, will result in the transaction being treated as a sale taxable under CST Act. 20. The assessment years in question in these revision petitions are earlier to amendment of Section 6A(1) of the Act. Various courts have held, including this Court in Vijaya Mohini Mills vs. State of Kerala, 75 STC 63, that the production of 'F' form is not mandatory, in view of the language employed in the Section and the transaction could be proved by producing other evidence to prove that the inter-State movement of the goods was not occasioned by sale, by adducing other satisfactory evidence before the assessing authority. This was the specific contention of the assessee both before the first appellate authority and the Appellate Tribunal. Though both these forums refers to this claim of the assessee, has not specifically answered this legal issue. In fact, the first appellate authority in its orders observes that, “to illustrate that the pooling agents of neighbouring States have opened their depots and have procured coffee in the said depot for which the appellant has paid purchase tax the appellant has in their custody RR 28 of one such agent namely M/s.Yeskay Coffee Curing Works, Mysore. On S.T.Rev.No.331/07 etc. - 9 - an analysis of the RR 28 and the purchase statement filed by the appellant, it could be demonstrated that the appellant has paid tax on the quantity of coffee pooled in these depots which were moved subsequently. It is submitted that this evidences could not be produced before the assessing officer. It is therefore prayed that an opportunity be given to the appellant to produce these documents and explain their claim”. However, while deciding this issue, the first appellate authority observes, that with regard to the stock transfer, export sales etc. no documents were produced either before the assessing authority or before him to prove that the movement was not as a result of inter-State sale. It is difficult for us to comprehend the diametrically opposite view of the first appellate authority. The first appellate authority notices the claim of the assessee that it has certain documents to prove that the goods were moved out of the State by way of branch transfer or consignment sales and if an opportunity is given to them, they would produce the same before the assessing authority to sustain the claim. However, while concluding on this issue, the first appellate authority observes that no documents were produced either before the assessing authority or before him to prove that the movement of the goods was not as a result of inter-State sales. After going through the findings of the first appellate authority, we can only say that they are certain observations which are contrary to the fact situation pleaded by the assessee. 21. The Appellate Tribunal in the second appeal filed by the S.T.Rev.No.331/07 etc. - 10 - assessee refers to provisions of Section 6A(1) of the Act in extenso, but does not answer whether the assessee can adduce any other evidence other than the production of declaration of 'F' forms obtained from the consignee that the inter-state movement of the goods was not occasioned by any sale. The stand of the assessee even before the Appellate Tribunal that, it has other material evidence to prove that the transaction in question is not an inter-State sale and an opportunity may be given to produce the same to sustain the claim. The Appellate Tribunal under the Act is empowered not only to decide the question of law but also give a finding on facts; but the Tribunal has refused to look into those documents and answer the issue in one way or the other. This Court, in exercise of its power of revision under Section 41 of the Act, can decide, if the Tribunal has failed to decide the question of law or erroneously decided the question of law. In our view, this is a case, where the Tribunal has failed to decide the question of law and not erroneously decided the question of law which was raised and argued. On the issue whether an assessee can produce for the assessments prior to 11th May, 2002, we have concluded that it is permissible for the petitioner to produce such other evidence to the satisfaction of the assessing authority in order to prove that the inter-state movement of the goods was not occasioned by any sale. However, these are factual aspects which require to be proved by the assessee before the assessing authority and that exercise cannot be done by us in a petition filed under Section 41 of the KGST Act. S.T.Rev.No.331/07 etc. - 11 - 22. The other issue that was strenuously argued by the learned counsel Sri.Anil D. Nair is, that, the Tribunal has failed to decide the claim of exemption on auction conducted outside the State and direct exports. In support of this assertion, it is stated that the Coffee Board conducts auction of coffee in Bangalore, the price of the coffee is received in Bangalore, and pursuant to the auction sale, the delivery notes are issued to the auction purchasers to take delivery of the coffee pooled and stored in the warehouses in Kerala. The argument of the learned counsel appears to be, since the coffee has already suffered tax at the point of first purchase and therefore, the transaction does not attract tax liability under the CST Act. The reliance was placed on the observations made by the Apex Court in the case of A.V.Thomas and Co. vs. C.T.O., 14 STC 343. 23. The Appellate Tribunal in its order refers to this issue but does not consider the same. In fact while answering this issue, it only says, “As this may be the position, the finding of t he authority below confirming the order of assessing authority in this regard is found strictly in accordance with law”. The finding of the Tribunal in this regard is as under:- “5. As in the above case, the appellant has claimed exemption on sales through auction conducted outside the State. According to the appellant transfer of goods were effected in Kerala as a result of direct sale in Kerala. The parties who purchased the goods through auction have taken delivery of the S.T.Rev.No.331/07 etc. - 12 - goods from Kerala at their own risk and expenses. Since the transfer was effected within the State and the appellant had paid purchase tax on the coffee pooled in Kerala, the sale can only be treated as sale under the KGST Act. So exemption has to be allowed under the KGST Act in respect of the above turnover treating the same as sales within the State sale. 6. It is an admitted fact that auction was conducted outside the State of Kerala. The price of the coffee is seen fixed in the auction centre outside the State. Moreover, the mode of receipted consideration and place of receipt was not seen disclosed by the appellant. There is no doubt that the goods were purchased by dealers outside the State and the goods were moved out of the State. As this be the position, the finding of the authority below confirming the order of the assessing authority in this regard is found strictly in accordance with law.” 24. The principle that the sale and movements of the goods must be integrated to constitute sale in the course of inter-state sale, implies that when the former did not occasion the latter or the latter was not caused by the former, the two activities are not inextricably linked. Thus when the goods are sold and delivered in the State of Kerala to the buyer, the question whether the transaction will be an inter-state sale will have to be decided by looking into the terms of sale, the mutual understanding between the parties, the nature of transaction and other relevant factors. This question is essentially a question of fact to be determined by the authorities under the Act, but it also involves the application of S.T.Rev.No.331/07 etc. - 13 - Section 3 and 6 of the Act to the facts established and hence it will be a mixed question of law and fact. The burden of providing the exact nature of transaction is on the authorities, however, they are entitled to demand the production of relevant documents from the assessee to determine the exact nature of the transaction. After going through the orders passed by the authorities, we are of the opinion that this exercise has not been done. Yet again, since similar issues for the previous assessment years are already before the assessing authority, we deem it proper not to express any opinion on the merits of this issue, while remanding the matter to the assessing authority to reconsider this issue also in accordance with law. 25. In view of the above discussion, we set aside the orders passed by the appellate tribunal on these two issues and remand the matter to the assessing authority to reconsider the aforesaid two issues in accordance with law after affording an opportunity of hearing to the assessee. No order as to costs. Ordered accordingly. Sd/- H.L.DATTU, CHIEF JUSTICE. Sd/- A.K. BASHEER, JUDGE DK.