CIVIL WRIT JURISDICTION CASE No. 13878 OF 2005 (Against the order dated 04.03.2005 passed by the Commercial Taxes Tribunal, Bihar, Patna in Revision Case no. PT-430/00 & PT-430A/00 (M/S Indian Oil Corporation versus the State of Bihar) M/S INDIAN OIL CORPORATION LTD, A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT G-9, ALI YAVAR JUNG MARG, BANDRA (EAST), MUMBAI-400051 AND ALSO HAVING STATE OFFICE AT 5TH FLOOR, JAI PRAKASH BHAWAN, FRASER ROAD, P.S. KOTWALI, TOWN & DISTRICT- PATNA, THROUGH ITS SR. LAW MANAGER & CONSTITUTED ATTORNEY, SANJEEVA KUMAR SINHA SON OF SHRI G.C. SINHA RESIDENT OF 34, VASANT VIHAR, BORING ROAD, P.S.- S.K. PURI, DISTRICT- PATNA --------------------------Petitioner Versus 1. THE STATE OF BIHAR THROUGH THE SECRETARY-CUM- COMMISSIONER OF COMMERCIAL TAXES, BIHAR, VIKASH BHAWAN, BAILEY ROAD, PATNA 2. THE COMMERCIAL TAXES TRIBUNAL, BIHAR, OLD SECRETARIAT BARRACK, PATNA THROUGH ITS SECRETARY 3. THE JOINT COMMISSIONER OF COMMERCIAL TAXES (APPEAL), CENTRAL DIVISION, PANT BHAWAN, BAILEY ROAD, PATNA. 4. THE DY. COMMISSIONER OF COMMERCIAL TAXES, SPECIAL CIRCLE, OFFICE OF THE JOINT COMMISSIONER OF COMMERCIAL TAXES (ADMN.), JUDGES COURT ROAD, PATNA. ------------------------Respondents For the petitioner : Dr.. Debi Prasad Pal (Sr. Advocate) Mr. S.D. Sanjay, Advocate Mr. Amit Kumar Sen, Advocate Mr. Abhijit Ganguly, Advocate Mr. Amar Nath Sen, Advocate. Mr. Gautam Kejriwal, Advocate. For the respondents : Mr. P.K. Shahi, Advocate General Mr. Vikas Kumar, Advocate. P R E S E N T THE HON'BLE MR. JUSTICE S.K.KATRIAR THE HON'BLE MR. JUSTICE KISHORE KUMAR MANDAL S.K.Katriar, J This writ petition under Article 226 of the Constitution of India is directed against the order dated 4.3.2005 (Annexure-3), 2 passed by the Commercial Taxes Tribunal, Bihar, Patna, in Revision Case no. PT-430/00 & PT-430A/00 (M/S Indian Oil corporation versus the State of Bihar), whereby the revision application preferred by the petitioner in terms of Section 46 of the Bihar Finance Act, 1981 (hereinafter referred to as “The Bihar Act”), has been dismissed and the assessment orders and the appellate order have been upheld. The primary question for consideration in this writ petition is whether or not the petitioner has really exported petroleum oil and lubricant products to Nepal. If yes, whether or not such a transaction is sale in the course of export to a foreign country. If so, then the question of quantification of the goods exported to Nepal arises for the purpose of exemption from taxation under the Bihar Act during the period in question, namely, 1995-1996. 2. A brief statement of facts essential for the disposal of this writ petition may be indicated. Nepal is a sovereign, independent land-locked country, and shares a long length of boundary with India. In order to arrange supply of the goods in question, the Government of Nepal entered into a treaty with the Government of India for export of the same from India to Nepal on the terms and conditions mentioned in the treaty (Annexure-6). The petitioner is a public sector undertaking of the Government of India, the entire shares of which are held by the President of India and the official nominees. It is an instrumentality of the Government of India and is engaged in the manufacture, production, storage and sale of the products in India. Its counter part body is Nepal Oil Corporation (hereinafter to 3 be referred as NOC), an instrumentality of the Government of Nepal. In view of terms of the treaty, the actual duty of export of the products from India to Nepal has been entrusted to IOC, and the duty of import in Nepal has been entrusted to NOC. The treaty was followed by an agreement between IOC and NOC executed on 27.6.1995 (Annexure-4), stating therein the detailed terms and conditions of export of the products from India to Nepal. In view of the provisions of the treaty and the agreement, regular flow of export of the materials in question took place from India to Nepal through Bihar. The petitioner has been assessed year after year under the provisions of the Bihar Act whereby it has earned the benefit of exemption from payment of tax because the entire flow of goods has been treated to sale in the course of export. The petitioner earned the benefit of exemption for the years 1990-91, 1993-94, 1994-95, 1997-98 and 1998-99 and 1999-2000. The authorities under the Act have, however, taken a different view for the years 1991-92, 1992- 93, and 1995-96. As stated hereinabove, the present writ petition is confined to the period 1995-1996, whereby the benefit of exemption from payment of tax under the Act has been denied to the petitioner on the ground that the primary evidence to support its case of export to Nepal has not been produced. We wish to make it clear that the impugned order deals with a number of issues and the present writ petition is confined to the said question. 3. The petitioner (IOC) submitted its returns for the period 1995-96. During the course of assessment proceedings, it produced 4 before the learned Assessing Officer the following documents: (i) the treaty (Annexure-6) (ii) the agreement between IOC and NOC (Annexure- 4) (iii) a certificate in support of import of petroleum products issued by NOC to the petitioner, and (iv) all Bhansar receipts issued by NOC which contain the details of export. On a consideration of these materials and the returns of the petitioner, the learned Assessing Officer came to the conclusion that the bills of export, which is the primary evidence to prove the factum of export as well as the quantity of the products exported has not been produced. The claim for exemption from payment of tax under the Bihar Act has, therefore, been rejected. The petitioner’s appeal has also been rejected which, in its turn, has been upheld by the impugned order. 4. While assailing the validity of the impugned order, learned counsel for the petitioner submits that the authorities under the Act have not doubted the nature of the transaction. They have, however, erred in insisting on production of the bills of export which is not mandatory in view of the relevant provisions of law discussed hereinafter. The special procedure prescribed for a transaction of the present nature has been completely over-looked. The materials placed on record by the petitioner is adequate to prove the factum of exports, as well as the quantification of it. He further submits that the 5 authorities have failed to realise that they have made a departure only for the three periods in question. He next submits that it is a transaction on nation-to-nation basis, the actual implementation has been entrusted to the two public sector undertakings, and the entire payments have been made by Account Payee Cheques. 5. Learned Advocate General submits that certain provisions of the Central Excise and Salt Act read with the Rules thereunder, the Customs Act, and the Bihar Act have to be read to ascertain the exact procedure applicable in the present case. He further submits that the State Government would not insist on a hyper-technical approach of production of bills of export or its substitute procedure, but it would not be right to completely give up scrutiny to obviate chances of misdeeds at the hands of unscrupulous elements. Other evidence of reliable nature must be considered. He submits that nature of the transaction in question, namely, the sale is in the course of export, is in the facts and circumstances of the present case, not in doubt. Quantification of the amount of the products exported to Nepal during the period in question has to be checked, to which none of the authorities below have applied their minds and have indeed erred in rejecting the petitioner’s claim outright on the ground of non-production of the bills of export. 6. We have perused the materials on record and considered the submissions of learned counsel for the parties. It is evident on a perusal of the treaty between the two countries 6 (Annexure-6), that the Government of India agreed to the export of the products in question to Nepal on the terms and conditions mentioned therein. The actual duty of export has been entrusted to IOC, and the duty of export has been entrusted to NOC. The two instrumentalities of the governments entered into an agreement (Annexure-4), stating therein the detailed procedure to be followed in such matters. Article 286 of the Constitution of India provides that no law of State shall impose, or authorise the imposition of a, tax on the sale or purchase of goods where such sale or purchase takes place in the course of import of the goods into, or export of goods out of, the country of India. Taking note of this constitutional provision, Section 7 of the Bihar Act has been enacted as follows: “7. Exemption.-(1) No tax shall be payable under this part on sales or purchases of goods which have taken place- (a) in the course of inter-State trade or commerce; (b) outside the State; (c) in the course of import of goods into, or export of the goods out of the territory of India. (2) The provisions of the Central Sales Tax Act 1956 (LXXIV of 1956) shall apply for determining when a sale or purchase of goods shall be deemed to have taken place in any of the ways mentioned in clauses (a), (b) or (c) of sub-section(1). (3) The State Government may, by notification and subject to such conditions or restrictions as it may impose, exempt from the sales tax or purchase tax- (a) sales of any goods or class or description of 7 goods; (b) sales of any goods or class or description of goods to or by any class of dealers (c) any sale or category or description of sales; and (d) purchase of goods by any class of dealers or any purchase or category or description of purchases of such goods. (4) Where exemption from the levy of tax under this part on any sale or purchase of goods is claimed by a dealer under the provisions of this section or section 21, the burden of proof shall lie on such dealer and the prescribed authority may require the dealer to substantiate the claim in the prescribed manner.” 7. The present case is covered by Section 7(1)(c) of the Act which provides that no tax shall be payable under this part on sales in the course of export of the goods out of the country of India. In the totality of the circumstances, we are convinced that the total exports of the products in question effected by IOC to NOC during the period in question is covered by the terms of the Article 286 of the Constitution of India read with Section 7 of the Bihar Act and, therefore, is exempted from payment of taxes under the Bihar Act. 8. This takes us on to the more vital aspects of the matter in the present case, namely, whether or not the bills of export or its substitute procedure formulated for export of the products in question from India to Nepal is imperative, and whether or not the evidence produced by IOC before the learned authorities under the Act is adequate to determine the quantity of the products exported during 8 the period in question. We are mindful of the position that IOC, a Public Section Undertaking, is an instrumentality of the Government of India, and its entire shares are held by the President of India and the official nominees. We are equally mindful of the position that the entire exports have been under a treaty between the two countries followed by a detailed agreement between IOC and NOC providing to effectuate the exports. We are further mindful of the position that the entire payments have been made by NOC to IOC by Account Payees Cheques on State Bank of India, once again a Public Sector Undertaking of the Government of India. We are also mindful of the position that institutional safeguards must be provided to ensure that the exact amount of goods exported to a different country is, for purpose of exemption has to be determined by the learned Assessing officer to his satisfaction to avoid any mischief. It is theoretically a possible situation that in order to earn the benefit of exemption, there may be pilferage of the stocks in Bihar, or while the goods are in transit from India to Nepal. Therefore, the learned authorities under the Act are free to satisfy themselves that the quantity of exports as per the returns of IOC really left the Indo-Nepal boarder, and were really received by NOC in Nepal, and were the result of genuine and bona fide transaction. 9. Rule 13 of the Central Excise Rules 1944, reads as follows:- “13(2):- The Central Government may from time to time by notification in the Official Gazette permit export of specified excisable goods in bond without 9 payment of duty from a factory or warehouse to Nepal or Bhutan subject to such conditions or limitations as regards the class of goods, destination, mode of transport and other matters as may be specified therein”. Section 2(5) of the Customs Act, 1962 defines “bill of export” to mean a bill of export referred to in Section 50 of the Act. Section 50 of The Customs Act, 1962 reads as follows: “50. Entry of goods for exportation.—(1) The exporter of any goods shall make entry thereof by presenting to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export in the prescribed form. (2) The exporter of any goods, while presenting a shipping bill or bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.” 9.1. In view of the terms of the agreement inter-parties (Annexure-4), read with Sub-Rule(2) of Rule 13, the procedure/system of bill of export has been substituted by the detailed procedure indicated in the agreement. It appears that six copies of the substitute bills of export have to be prepared, and have to pass through various authorities in India as well as in Nepal in proof of the transaction including the quantum of exports. Copies of the documents have to pass through the authorities in the following manner: DISTRIBUTION OF NEPAL INVOICE FIRST COPY SECOND COPY THIRD COPY 10 Presented before C. Ex Officer-in-Charge of Warehouse / Endorsed copy sent to Indian Land Customs Station officer thru exporter / After endorsement sent to Nepalese Customs Officer / Nepalese custom officer shall deal with the same as directed by his majesty Govt. of Nepal Presented before C. Ex Officer-in-Charge of Warehouse / Endorsed copy sent to Indian Land Customs Station officer in sealed cover thru exporter / After endorsement sent to Nepalese Customs Officer / Nepalese customs officer shall return the same after endorsement to customs officer Presented before C. Ex Officer-in-Charge of Warehouse / Endorsed copy sent to Indian Land Customs Station officer in sealed cover thru exporter / After endorsement sent to Nepalese Customs Officer / Nepalese customs officer shall deal with the same as directed by his majesty Govt. of Nepal Customs Officer will send the same to CE Officer-in charge of warehouse who will send it to CE Officer who has accepted the bond FOURTH COPY FIFTH COPY SIXTY COPY Presented before C. Ex Officer-in-Charge of Warehouse / Endorsed copy sent to Indian land custom station officer in sealed cover thru exporter / After endorsement the custom officer will return the same to the exporter / The exporter will submit the same to Central Excise Officer-in-charge of warehouse within 3 months from date of removal Presented before C. Ex Officer-in-Charge of Warehouse / Sent to Central Excise Officer who has accepted the bond. Presented before C. Ex Officer-in-Charge of Warehouse / Retained by Central Excise Officer in charge of warehouse. 9.2. The appropriate government has in terms of Sub- rule(2) of Rule 13 of the Central Excise Rules, 1944, prescribed the 11 procedure for export of petroleum oil and lubricant products to Nepal marked Annexure-7. It appears to us on a perusal of the same that the substitute bills of export after the same are submitted by IOC at the inception of the procedure, have to pass through Customs authorities, Excise authorities etc of the Indian Government, as well as of the Nepalese Government. It is, therefore, a possible situation that IOC may not have the occasion to retain a copy of the same or have photo copies done, because once the procedure commences, the documents pass out of the physical possession and control of IOC and throughout remain with the governmental authorities of India and Nepal. In that view of the matter, it does not appear to us to be just and reasonable for the learned authorities under the Bihar Act to insist on production of substitute bills of export. In that view of the matter, We feel that the learned authorities under the Bihar Act have misdirected themselves by putting needless and clearly avoidable emphasis on the substitute bills of export. The nature of the transaction, namely, it is sale in course of export, is not in doubt. We also notice from a perusal of the three orders in question that the learned authorities have not applied themselves to the merits of the materials produced by IOC, and have rejected the petitioner’s claim for exemption outright on the ground of non-production of the bills of export. We are, therefore, of the view that the impugned order is not sustainable in law. 11. In the result, we set aside the impugned order dated 4.3.2005 (Annexure-3), passed by the Commercial Taxes Tribunal, Bihar, Patna, in Revision Case no. PT-430/00 & PT-430A/00. The 12 matter goes back on remand to the learned Assessing Officer who shall apply himself to the merits of the claim of exemption raised by the petitioner in accordance with law, the observations made hereinabove, and without insisting on production of the substitute bills of export. It will be open to IOC to place further materials, if any, in their possession, in support of their claim, for example, the bank transactions and the documents marked Annexure-8 series and 9 series. They are obliged to examine the correctness of the figures returned by the IOC. (S.K. Katriar, J.) Kishore K. Mandal, J: I agree. Patna High Court, Dated 4th November, 2009 AFR/(pkj) ( Kishore K. Mandal, J. )