1

REPORTABLE

lIN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.474-481 OF 2011

[Arising out of SLP(C) Nos. 189-196 of 2008]

M/S. SARAF TRADING CORPORATION ETC. ETC. ... Appellants

Versus

STATE

OF

KERALA

...

Respondent

lJUDGMENT

Dr. Mukundakam Sharma, J.

1.Leave granted.

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2.The issue that falls for consideration in the present appeals is

whether the appellant/assessee would be entitled for refund of the tax

which was paid by him to the seller, in view of the provisions of

Section 44 of the Kerala General Sales Tax Act, 1963 (for short “the

KGST Act”) . One additional issue which was urged at the time of

hearing of the appeals and requires consideration by this Court is as

to

whether

the

appellant

would at

all be

entitled to

claim

exemption under Section 5(3) of the Central Sales Tax Act, 1956 (for

short “the CST Act”), as at the time of sale, the appellant could not

allegedly show any evidence that it was the penultimate sale.

3.The aforesaid two issues have arisen for consideration in the light

of the submissions made on the basic facts of these appeals which are

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hereinafter being set out:-

4.The appellants are exporters of tea. The appellants purchased

tea from the tea planters directly in open auction and thereafter

exported the same to foreign countries. The appellant being the

exporter of the aforesaid consignment claimed for exemption on the

ground that purchase was exempted under Section 5(3) of the CST

Act. The

said claim

for

exemption was found to be genuine by the Assessing Authority, and

was allowed in full. The appellant also made a claim for refund of tax

collected from them by the seller at the time of purchase of tea. The

said claim was rejected by the Assessing authority and it was held that

they cannot claim for refund under Section 44 of the KGST Act since

they have not paid the tax to the Department but it was the sellers

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who have paid the tax and therefore under the provisions of Section 44

of the KGST Act, the refund that could be made is to the dealer only

and the assessee being not a dealer no such refund could be made to

the appellant/assessee.

5.Being aggrieved by the aforesaid order, the appellant filed an

appeal before the Deputy Commissioner (Appeals) who considered the

contentions of the appellant and upon going through the records

found that there is an observation recorded by the assessing authority

that the export sales is pursuant to the prior contract or prior order of

the foreign buyers and also that export sales are supported by bill of

lading, export invoices etc. The appellate authority also recorded the

finding that the claim of exemption under Section 5(3) of the CST Act

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is envisaged for the penultimate sales or purchase preceding the sale

or purchase occasioning the export. However with regard to the

refund it was noted that the goods purchased are taxable at the sale

point and hence the liability to pay tax is on the part of the seller.

Accordingly, it was for the Seller to prove that the sales are effected to

an exporter in pursuance of prior contract or prior orders of the

foreign

buyers.

6.It

was held

by the

Appellate

Authority

that

since, in the present case the aforesaid sellers namely the planters

who sold tea to the appellant and on whom the burden lies to prove

before the assessing authority that his sale is for fulfilling an

agreement or order of the foreign buyer had not satisfied those

conditions and had also not discharged his burden, therefore, there is

no question of refund in the present case to the appellant as they are

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not entitled to any such refund under the provisions of Section 44 of

the KGST Act.

7.The appeal was filed therefrom to the Kerala Sales Tax Appellate

Tribunal, which after going through the records referred to the

provisions of refund as contained in Section 44 of the KGST Act, which

reads as follows:-

“44. Refunds:- (1) When an assessing authority finds, at

the time of final assessment, that the dealer has paid tax in

excess of what is due from him, it shall refund the excess to

the dealer.

1.2. When the assessing authority receives an order from

any appellate or revisional authority to make refund of

tax or penalty paid by a dealer it shall effect the

refund.

2.

3.3. Notwithstanding anything contained in sub-section

(1) and (2), the assessing authority shall have power to

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adjust the amount due to be refunded under sub-

section (1) or sub-section (2) towards the recovery of

any amount due, on the date of adjustment, from the

dealer.

4.

5.4.In case refund under sub-section (1) or sub-section

(2) or adjustment under sub-section (3) is not made

within ninety days of the date of final assessment or,

as the case may be, within ninety days of the date of

receipt of the order in appeal or revision or the date of

expiry of the time for preferring appeal or revision, the

dealer shall be entitled to claim interest at the rate of

six percent per annum on the amount due to him from

the date of expiry of the said period up to the date of

payment or adjustment.”

8.After referring to the said provision, it was held by the Tribunal

that in case the dealer has paid the tax in excess of what was due from

him it could be refunded to the dealer, but here is a case where not

the dealer but the appellant had claimed exemption under Section 5(1)

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read with Section 5 (3) of the CST Act. The assessing authority

accepted the claim and allowed exemption. But so far as the question

of refund of tax is concerned, the Tribunal held that there is no

question of refund of tax in the case of the appellant since no tax had

been demanded from the appellant for all the four years and therefore

in those circumstances, there could be no question of refund under

Section

44 of the

KGST Act

to the

appellant.

9.In

the light

of the

aforesaid findings, the appellate Tribunal dismissed the appeal as

against which a Revision Petition was filed by the appellant before the

Kerala High Court which was also dismissed under the impugned

judgment and order as against which the present appeals were filed.

We have heard the learned counsel appearing for the parties who had

taken us through all the orders which gave rise to the aforesaid two

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issues which fall for our consideration in the present appeals.

10.Learned counsel appearing for the appellant submitted before us

that appellant has admittedly paid the tax to the dealer at the time of

occasion of sale made to it by the dealer namely the tea planters. It

was also submitted by him that department has received the aforesaid

tax paid in excess by the appellant and that there is a prohibition on

the State

to retain

the

excess tax

in lieu of

the

provisions

of Article

265 and 286 of the Constitution of India.

11.It was also submitted by him that in addition to the provisions of

Section 44 of the KGST Act, a proactive view has to be taken by this

Court in the facts and circumstances of the present case by referring

to the decision of this Court in the case of Mafatlal Industries Ltd. &

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Ors. Vs. Union of India & Ors. reported in (1997) 5 SCC 536.

12.The learned counsel appearing for the State, however, not only

refuted the aforesaid submissions but also stated that since there is a

specific provision in the State Act for giving refund of the excess

amount of tax, if any, paid only to the dealer and not to any other

person, there cannot be a pro-active consideration in the facts and

circumstances of the present case as sought to be submitted by the

learned counsel appearing for the appellant. He also submitted that

aforesaid reference to the decision of Mafatlal (supra) is misplaced.

The learned counsel for the State went a step further and submitted

that the appellant is not entitled to claim any exemption under Section

5(3) of the CST Act in view of the fact that assessee could not produce

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any agreement at the time of purchase of the tea in the auction sale

indicating that the purchase is made in relation to export.

13.In support of the aforesaid contentions, he referred to provision

of Section 5(3) of the CST Act which is extracted hereinbefore:-

Section 5 - When is a sale or purchase of goods said to take

place in the course of import or export ;

(1) *********** ******

(2) ************ ******

(3) Notwithstanding anything contained in sub-section (1), the

last sale or purchase of any goods preceding the sale or

purchase occasioning the export of those goods out of the

territory of India shall also be deemed to be in the course of

such export, if such last sale or purchase took place after,

and was for the purpose of complying with, the agreement or

order for or in relation to such export.

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14.We have considered the aforesaid submissions of the learned

counsel appearing for the parties in the light of the records placed

before us. Since, the contentions of the learned counsel appearing for

the respondent State are with regard to the fact that the appellant

cannot claim exemption in absence of proof of an agreement in

support of the claim for exemption under Section 5(3) and the same

goes to

the very

root of the

claim

made, we

deem it

proper to

take the

aforesaid stand at the first stage.

15.Sub-section (3) of Section 5 has already been extracted

hereinbefore. According to the said provision, the last sale or

purchase of any goods preceding the sale or purchase occasioning the

export of those goods out of the territory of India shall also be deemed

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to be in the course of such export, if such last sale or purchase took

place after, and was for the purpose of complying with, the agreement

or order for or in relation to such export.

16.In the case of State of Karnataka Vs. Azad Coach Builders Pvt.

Ltd. & Anr., reported in 2010(9) SCALE 364, the Constitution Bench

of this Court took note of the aforesaid sub-section (3) and after

noticing

the said

provision

laid down

the

principles

which

emerged

therefrom as follows:-

23. When we analyze all these decisions in the light of the

Statement of Objects and Reasons of the Amending Act 103

of 1976 and on the interpretation placed on Section 5(3) of

the CST Act, the following principles emerge:

- To constitute a sale in the course of export there must be

an intention on the part of both the buyer and the seller to

export;

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- There must be obligation to export, and there must be an

actual export.

- The obligation may arise by reason of statute, contract

between the parties, or from mutual understanding or

agreement between them, or even from the nature of the

transaction which links the sale to export.

- To occasion export there must exist such a bond between

the contract of sale and the actual exportation, that each

link is inextricably connected with the one immediately

preceding it, without which a transaction sale cannot be

called a sale in the course of export of goods out of the

territory of India.

24. The phrase 'sale in the course of export' comprises in

itself three essentials: (i) that there must be a sale: (ii) that

goods must actually be exported and (iii) that the sale must

be a part and parcel of the export. The word 'occasion' is

used as a verb and means 'to cause' or 'to be the immediate

cause of'. Therefore, the words 'occasioning the export' mean

the factors, which were immediate course of export. The

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words 'to comply with the agreement or order' mean all

transactions which are inextricably linked with the

agreement or order occasioning that export. The expression

'in relation to' are words of comprehensiveness, which might

both have a direct significance as well as an indirect

significance, depending on the context in which it is used

and they are not words of restrictive content and ought not

be so construed.

17.It was held by the Constitution Bench that there has to be an

inextricable link between local sales or purchase and if it is clear that

the local sales or purchase between the parties is inextricably linked

with the export of goods, then only a claim under Section 5(3) for

exemption under the Sales Tax Act would be justified. The principle

which was laid down in the said decision is required to be applied to

the facts of the present case in view of the submissions made by the

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counsel appearing for the respondent State and refuted by the

counsel appearing for the appellant.

18.It is true that in the present case, there is no agreement available

on record to indicate that the aforesaid purchase was made for the

purpose of export. In the absence of the said document, it is not

possible for us to specifically state as to whether it was clear that the

sale or

purchase

between

the

parties

i.e. the

dealer

and the

purchaser was inextricably linked with the export of goods. It is only

when a claim is established, the claim under Section 5(3) of the

Central Sales Tax would be justified. At the time of auction sale when

the appellant purchased the tea from the dealer, there is nothing on

record to show that a definite stand was taken by the purchaser that

the aforesaid purchase of tea is for the purpose of occasioning an

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export for which an agreement has been entered into. Since, no such

claim was made at that stage, so therefore sales tax was realised

which was paid to the government by the dealer. Despite the said

fact, there is a clear finding recorded by the assessing authority

himself that the export documents were verified by him with the

accounts from which it is indicated that the entire exports were

effected

pursuant

to the

prior

contract

or prior

orders of

the

foreign

buyers and that the export sales are supported by bills of lading,

export invoices and such other valid documents.

19.In the light of the said findings, the assessing Authority clearly

held that the claim for exemption was genuine and the same has to be

allowed in full. But so far as refund is concerned, the assessing

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Authority held that the claim for refund cannot be allowed since the

dealer has paid the tax and therefore, refund cannot be granted to the

assessee/appellant who is not the dealer. Referring to the provisions

of Section 44 of the KGST Act, the Deputy Commissioner (Appeals) i.e.

appellate authority also held that it is the seller (the dealer) on whom

the burden lies to prove before the assessing authority that the sale is

for

fulfilling

an

agreement or order of the foreign buyer, since Section 5(3) means or

refers to the foreign buyer and not any agreement with the local party

and in the present case seller was not in a position to discharge his

burden and therefore, he is not entitled for refund.

20.It is established from the records that after the aforesaid findings

of the assessing authority accepting the claim and allowing the

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exemption, the next two authorities namely the appellate authority

and the Tribunal agree with the said findings and that there does not

appear to be any serious challenge to the said findings before the said

two authorities. The High Court also does not appear to have gone

into the said issue at all. In that view of the matter, we would not like

to reopen the finding of fact which is recorded by the assessing

authority.

21.We

now

proceed

to

address

the first

issue

which is in fact the main issue arising for consideration in these

appeals i.e. as to whether the appellants are entitled for refund of tax

collected from them at the time of purchase of tea in view of the

provisions relating to refund as contained in Section 44 of the KGST

Act.

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22.The Assessing Authority, the Appellate Authority as also the

Appellate Tribunal have clearly recorded a finding that when a dealer

has paid the tax in excess of what is due from him, it has to be

refunded. The said excess tax is only to be refunded to the dealer

inasmuch as dealer is entitled to receive a refund, if tax is paid in

excess of what was due from him. In view of the said position, all the

aforesaid

authorities have held that a question of refund of tax would not arise

in the case of the appellant, since no tax had been demanded from the

appellant for the tea of all the four years.

23.Considering the facts and circumstances of the present case, we

find that tax was collected from the appellant at the time of purchase

of tea in the occasion sale conducted by the tea planters since tea is a

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commodity which was liable to tax at the time of first sale in the State.

The aforesaid tax which was collected from the appellant by the dealer

has been remitted to the government by the dealer of tea.

24.It further appears that the appellant claimed for refund of the

said amount to be paid to it, despite the fact that it is not a dealer in

the eye of law. Section 44 of the KGST Act is very clear and it

stipulates

that it is

only the

dealer of

tea on

whom the

assessment has been made and it is only he who can claim for refund

of tax. In view of the clear and unambiguous position, the appellant

cannot claim for refund of tax collected from the seller of tea. It is

clearly provided in the principles of Interpretation of Statutes that

when the meaning and the language of a statute is clear and

unambiguous, nothing could be added to the language and the words

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of the statute.

This Court in the case of Sales Tax Commissioner Vs. Modi Sugar

Mills reported in AIR 1961 SC 1047 observed as follows:-

10. …….In interpreting a taxing statute, equitable

considerations are entirely out of place. Nor can taxing

statutes be interpreted on any presumptions or assumptions'.

The court must look squarely at the words of the statute and

interpret them. It must interpret a taxing statute in the light

of what is clearly expressed : it cannot imply anything which

is not expressed it cannot import provisions in the statutes so

as to supply any assumed deficiency.

25.Therefore, we cannot overlook the mandate of the provisions of

the KGST Act which clearly rules that it is only the dealer of tea on

whom an assessment has been made, can claim for refund of tax and

no one else. There is no possibility of taking a proactive stance

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although it is clear that the State cannot retain the tax which is

overpaid, but at the same time such overpaid tax cannot be paid to the

assessee/appellant here.

26.The aforesaid findings which are recorded are clearly findings of

fact and have also been arrived at on the basis of the mandate of the

provisions of the State Act. Therefore, in our considered opinion, the

decision

does not

call for

any

interference at our end. The principles laid down in the decision in

Mafatlal (supra) would also not be applicable to the facts of the

present case in view of the provisions of Section 44 of the KGST Act,

which clearly refers to claim for refund. The said principle is not

applicable in view of the fact that the statute involved specifically

states that such refund could be made only to a dealer and not to any

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other person claiming for such refund. On the other hand, the

decision of Mafatlal (supra) was rendered in the context of Section

11B of the Central Excise and Salt Act, 1944 where the expression is

“any person”. Therefore, ratio of the decision of Mafatlal (supra)

would not be applicable to the facts in hand.

27.

Considering the facts and circumstances of the present case, we find

no merit in these appeals which are dismissed but without costs.

..........................................J

[Dr. Mukundakam Sharma ]

............................................J

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[ Anil R. Dave ]

New Delhi,

January 13, 2011.