IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13-12-2007 CORAM THE HONOURABLE MR. JUSTICE P.K. MISRA AND THE HONOURABLE MR. JUSTICE K.K. SASIDHARAN WRIT APPEAL NO.1145 OF 2005 1. The State of Tamil Nadu, rep. by its Secretary to Government, Environment & Forest Department, Fort St. George, Chennai 9. 2. The District Forest Officer, Sathyamangalam Division, Sathyamangalam. .. Appellants Vs. M/s. Lavanya Enterprises, rep. by its Partner Krishna Kishore. .. Respondent Appeal filed under Clause 15 of the Letters Patent against the order passed by the learned single Judge in W.P.No.10971 of 2000 dated 19.4.2005. For Appellants : Mr. Rajasekar Government Advocate For Respondent : Mr. Natarajan for M/s. Anand Das Gupta & Sagar - - - J U D G M E N T
(Judgment of the Court was delivered by P.K. MISRA, J)
Heard Mr. Rajasekar, Government Advocate for the appellants and Mr. Natarajan for the Respondent.
2. The present appeal is filed by the State of Tamil Nadu and the District Forest Officer against the order dated 19.4.2005 passed by the learned single Judge of this Court in W.P.No.10971 of 2000. Such writ petition was filed by the present Respondent for issuing writ of Certiorarified Mandamus for quashing the order dated 27.1.2000 in Proceeding No.Proc.L.1049/99 and further directing the second respondent, the District Forest Officer to release the sandalwood purchased by the present respondent in the auction dated 18.12.1998 without demanding demurrage and penal interest and without insisting on payment on sales tax.
3. The present Appellant No.2 had issued notification dated 27.10.1998 notifying about the auction of various classes of sandalwood. The present Respondent who is an exporter of sandalwood products, participated in such auction held on 18.12.1998 and was the successful highest bidder for a total quantity of 7 MTs for a sum of Rs.34,27,600/-. A sum of Rs.1 lakh was deposited as Earnest Money Deposit and a further sum of Rs.7 lakhs, which was otherwise due from the Forest Department to the present respondent, was adjusted. The present respondent asserted in the writ petition that he had participated in the auction pursuant to ‘confirmed export order’ placed with him. On 2.2.1999, the present second appellant, while intimating about the confirmation of the bid, demanded that the present respondent is required to pay a sum of Rs.2,74,894/- towards the sales tax dues in addition to the amount payable towards the auction. Immediately thereafter, on 6.2.1999, the present respondent intimated to the Appellant No.2 that since the transaction was in course of export, the Department should not insist on payment of sales tax in view of Section 5(3) of the Central Sales Tax Act. Subsequently the respondent filed W.P.Nos.4574 & 4575 of 1999 for quashing the order dated 2.2.1999 so far as it related to the payment of sales tax and to direct the Department to accept Form-H after export is over without insisting on payment of sales tax and surcharge thereon. The petition for interim direction numbered as WPMP.No.6590 of 1999 in W.P.No.4575 of 1999 having been dismissed on 28.4.1999, the respondent filed W.A.No.1156 of 1999. Such appeal was disposed of on 2.8.1999 directing the present second appellant to release the sandalwood upon deposit of 25% of the sales tax demand and furnishing bank guarantee for the balance amount. Such order of the Division Bench was communicated by the respondent to the second appellant on 19.8.1999. Thereafter, on 31.8.1999, a communication was received from the second appellant wherein the present respondent was called upon to pay the entire sale amount, demurrage charges, penal interest besides sales tax amount. On 8.9.1999, the writ petition was dismissed by the learned single Judge by observing that the Department should consider all the materials placed before it and to consider the question of exemption under Section 5(3) of the Central Sales Tax Act. After several correspondence, particularly by the respondent indicating about the various orders as well as referring to the export orders, the Department communicated on 23.11.1999 that the present respondent was required to clear all dues including demurrage and penal interest. It was also indicated by the Department that a bank guarantee should be furnished if the sandalwood would be procured for export otherwise the full sales tax amount should be paid It was further indicated that if such direction was not complied within 15 days, action would be taken to forfeit the amount and resale the sandalwood. The Department by way of reply to the letter of the respondent dated 2.12.1999, stated that as per the judgment in W.P.No.11123 of 12999 dated 2.3.1999, sales tax at 8% was liable to be paid. Ultimately, on 29.1.2000, an order of forfeiture of the amount deposited by the present respondent was passed.
4.Thereafter, the respondent filed W.P.No.10971 of 2000. Such writ petition was allowed by the learned single Judge by issuing the following directions :-
“(i) The direction contained in the impugned order regarding forfeiture of the EMD and deposit is quashed.
(ii) The petitioner should keep alive the bank guarantee which was furnished already for a period of six months from today. If there is any difficulty in keeping the earlier bank guarantee as alive, the petitioner shall furnish a fresh bank guarantee for a period of six months from today.
(iii) The respondents are directed to release the goods immediately after compliance of clause (ii) above without claiming any demurrage or penalty as the petitioner is not responsible for the delay and they have been agitating their rights with regard to the payment of sales tax.
(iv) The petitioner is directed to establish before the concerned authorities that they are entitled to the benefits under Section 5(3) of the Central Sales Tax Act, 1956 with respect to the sandalwood purchased by them.
(v) If the petitioner is not able to establish within a period of five months as to their entitlement of the benefits as stated in Clause (iv) above, the respondents are directed to enforce the bank guarantee and realise the amount.
(vi) If the petitioner is able to establish their case within the said period of five months regarding the benefits under Section 5(3) of the said Act, they are entitled to get refund of the amount, if any, paid towards sales tax and also the respondents have to return the bank guarantee furnished by the petitioner.”
5. Learned counsel for the appellants has questioned the order of the learned single Judge by raising the following contentions :-
(1) As per the conditions of the auction notice, the purchasers were required to pay sales tax and, therefore, the present respondent need not have unnecessarily dragged on the proceedings raising such controversy;
(2) Since the respondent had failed to complete the transaction and take delivery of the sandalwood in question, the Department had rightly called upon the respondent to pay demurrage as well as penal interest; and
(3) The auction in question had been held long back in 1998 and the present price of the sandalwood having gone up, it would be inequitable to complete the transaction.
6. It is to be noticed that soonafter the order was passed by the learned single Judge, the present respondent tendered the entire balance amount and also the required bank guarantee. Subsequently, in W.M.P.No.20366 of 2005, the Division Bench had passed an interim direction relating to release of the materials in question subject to furnishing of bank guarantee. However, the State Government had taken the matter to the Supreme Court in SLP.No.20650 of 2005, but such Application was rejected on 2.5.2006 directing the present appellant to release the goods forthwith. Since there was further delay, contempt proceedings was initiated and the materials were delivered only thereafter on 21.7.2006.
7. Learned single Judge has relied upon the earlier Division Bench decision of this Court in W.A.Nos.94 to 96 of 2000 in coming to the conclusion that there was no justification for the Department to insist on payment of sales tax in view of the provisions contained in Section 5(3) of the Central Sales Tax Act. Learned single Judge, however, has given a direction to the present respondent to furnish bank guarantee, obviously with a view to ensure that in case it is ultimately found that Section 5(3) is not applicable, liability relating to payment of sales tax can be recovered. Learned singe Judge had also set aside the order of forfeiture on account of the conclusion that there was no justification for demanding payment of demurrage and penal interest inasmuch as the delay was not on account of the lapse on the part of the present respondent, but was on account of various unsustainable objections raised by the Department from time to time. For the aforesaid conclusions, the learned single Judge has relied upon the observation made in the aforesaid Division Bench decision. It is relevant to note at this stage that the decision of the Division Bench in W.A.Nos.94 to 96 of 2000, which was practically between the same parties though in respect of some other similar transactions, the State Government had filed appeal before the Supreme Court, which was dismissed by the Supreme Court by giving a reasoned order confirming the decision of the High Court.
8. As a matter of fact, almost under similar circumstances another Division Bench in a very recent decision in W.A.Nos.405, 412 to 414 of 2003 and 3513 of 2004 (THE PRINCIPAL CHIEF CONSERVATOR OF FORESTS, CHENNAI AND OTHERS v. M/s. GUPTA EXPORTS AND OTHERS) dated 25.10.2007 in respect of similar transactions either between the same parties or between other exporters and the State Government, has taken a similar view and repelled the contention of the State Government relating to sales tax dues, demurrage charges or penal interest.
9. Having regard to all these aspects, we do not find any justification to differ from the ultimate conclusion of the learned single Judge. The writ appeal is accordingly dismissed. No costs.
(P.K.M.,J) (K.K.S.,J)
13-12-2007
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dpk
P.K. MISRA, J
and
K.K. SASIDHARAN, J
JUDGMENT IN WA.1145/2005
13-12-2007