IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.01.2010 CORAM THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA W.P.No.1848 of 2008 M/s Access International represented by its Partner No.19, Vellaiyan Road Kotturpuram Chennai 600 085 .. Petitioner -Vs- 1. The Tamil Nadu Sales Tax Appellate Tribunal Main Bench represented by its Secretary City Civil Court Building, Chennai 2. The Appellate Assistant Commissioner (CT)-V Kancheepuram, Collectorate Campus Kancheepuram 3. The Deputy Commercial Tax Officer Adyar I Assessment Circle, Chennai .. Respondents Petition filed under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorarified Mandamus, to call for the records of the first respondent in T.A.No.91/2007 and quash the impugned order dated 6.12.2007 and further direct the third respondent to grant exemption on the sales turnover of hang tags and labels to various exporters under section 5(3) of the CST Act, 1956 and also as per the Government Order issued in GOP.291 dt. 20.3.1987 amended in notification No.II(1)/CTRE/43 (a-3)/98 dt.1.4.98. For Petitioner :: Mr.P.Rajkumar For Respondents :: Mr.Haja Naziruddin Special Government Pleader (T) ORDER
(Order of the Court was delivered by D.MURUGESAN, J.)
The petitioner is the manufacturer of printed labels and printed hang tags which are used in shirts. They sell these labels, hang tags etc., to the exporter of readymade garments for being stitched and attached to the shirts and that the above goods are exported as such. Hence, as against Form-H declaration and the certificate of export under Section 5(3) of the Central Sales Tax Act, 1956, they claimed exemption from tax for a total turnover of Rs.76,19,154/-. They lost their claim before the assessing officer, the appellate Assistant Commissioner as well as the Appellate Tribunal. Hence the present petition.
2. The only question to be decided is as to whether the petitioner would be entitled to claim exemption under Section 5(3) of the Central Sales Tax Act, 1956 in respect of the printed labels and printed hang tags that are sold to the exporter of readymade garments. Though two contentions were raised before the assessing officer and those two contentions were also carried before the appellate authority as well as the Tribunal, a perusal of all the three orders shows that the authorities had considered the claim of the petitioner for exemption on the certificate of export alone by giving reasons. That certificate of export and the claim of exemption is on the basis that the printed labels and printed hang tags are packing materials. In our considered view, the printed labels and printed hang tags cannot be considered to be packing materials and the claim for exemption had rightly been rejected by all the three authorities.
3. However, as far as the claim for exemption as against Form-H declaration is concerned, a perusal of the order of the assessing officer shows that the petitioner did file the declaration in Form-H. Item (6) of the Schedule of the said form relates to the description, quantity/weight and value of the goods exported under the document referred to in item (5). Item (5) relates to the number and date of air consignment note/bill of lading/railway receipt or goods vehicles record or postal receipt or any other document in proof of export of goods across the customs frontier of India. From the above declaration, it could be seen that the export orders should contain the size and the brand name of the shirts and without which the exporter cannot comply with the export obligation. In this context, the question to be considered is whether the goods sold by the petitioner to the exporter, when stitched or attached to the readymade garments, would lose their identity so as to deny the claim of exemption under Section 5(3)? The Apex Court in the judgment in State of Karnataka v. Azad Coach Builders Pvt. Ltd., (2006) 145 STC 176 has held that in case the goods lose their identity, then the claim for exemption under Section 5(3) is not available to the assessee. In paragraph-4 of the order, the Apex Court in fact observed that “if the goods sold by the assessee do not lose their separate identity at the time of export then the penultimate sale would be deemed to be in the course of export by virtue of section 5(3).” On the facts of the given case, it is not in dispute that the goods sold by the petitioner under the export obligation had not lost their identity merely because the printed labels are stitched or the printed hang tags are attached to the readymade garments. In that view of the matter, the petitioner would be entitled to rely upon Section 5(3) of the Central Sales Tax Act for the claim of exemption.
4. This takes us to the next question as to the extent of exemption to which the petitioner is entitled to as per the declaration made by the petitioner in Form-H. On perusal of all the orders right from the order of the assessing officer till the order of the Tribunal, we do not find any discussion on this aspect. Of course, the Tribunal has remitted the matter only on the claim of exemption relating to collar bands and not otherwise. In these circumstances, we are of the considered view that the claim of exemption under Section 5(3) should be considered with reference to the details furnished by the petitioner in Form-H and in the light of the observations made in this order, namely, that by the sale of printed labels and printed hang tags the export is made as such and the readymade garments do not lose their identity. Accordingly, the orders are set aside and the matter is remitted back to the assessing officer for reconsideration as to the claim of the assessee for exemption under Section 5(3) in respect of the printed labels and printed hang tags as per the details furnished by the assessee in Form-H declaration. As far as the challenge to the penalty is concerned, as we have set aside the orders of levying tax as such and remitting the matter, the imposition of penalty shall depend upon the orders that may be passed by the assessing officer. The writ petition is allowed. Consequently, M.P.No.1 of 2008 is closed. No costs.
Index : yes (D.M.,J.) (P.P.S.J.,J.) Internet : yes 21.01.2010 ss To 1. The Secretary Sales Tax Appellate Tribunal Main Bench City Civil Court Building, Chennai 2. The Appellate Assistant Commissioner (CT)-V Kancheepuram, Collectorate Campus Kancheepuram 3. The Deputy Commercial Tax Officer Adyar I Assessment Circle, Chennai D.MURUGESAN, J. and P.P.S.JANARTHANA RAJA, J. W.P.No.1848 of 2008 21.01.2010