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2006 DIGILAW 340 (PAT)

Indian Oil Corporation Limited v. State Of Bihar

2006-04-19

J.N.BHATT, S.N.HUSSAIN

body2006
Judgment J.N.Bhatt, J. 1. By this writ petition, by invocation of the provisions of Art. 226 of the Constitution of India, the petitioner, M/s Indian Oil Corporation (In short "IOC"), a company incorporated under the provisions of the Companies Act, 1956 , and as such, a Central Government undertaking, has knocked the doors of justice on account of alleged illegal imposition of tax by an assessment order, dated, 14.4.1999, which came to be confirmed by the appellate authority, by order dated 12.5.2000, as well as, by an order in a revision, dated 4.3.2005 (unsuccessful petitioner at three stages), raising the following points in focus: Whether the Commercial Taxes Tribunal, Patna, confirming the imposition of levy of sales tax on the export sale made by the petitioner to Nepal, is required to be intercepted or Injected by an interlocutory order, until disposal of the petition on full fledged hearing on merits being unauthoised, illegal and without sanction of law? 2. With a view to appreciate the sole controversy, at this juncture, whether the interlocutory relief staying the operation of the assessment order, confirmed by the appellate authority and later on, by Tribunal is justified or not can be evaluated in the light of factual profile and relevant legal settings applicable to such relief. 3. For that purpose, obviously, the Court has to address itself to three celebrated principles governing the grant or refusal of the interlocutory relief, namely, (a) Prima Facie case, (b) balance of convenience or comparative mischief, and (c) irreparable loss or injury. 4. We have been addressed, at marathon length, by the learned Senior Counsel for the petitioner, as well as, by the learned Advocate General for the respondent State. In course of their submissions, we have been taken through the entire relevant material documentary evidence from which following aspects and proposition have emerged, indisputably: (i) That the petitioner, Indian Oil Corporation (IOC), a Government of India undertaking dealing in petroleum product had entered into an agreement with Nepal Oil Corporation Limited, Kathmandu, Nepal (NOC); (ii) That an agreement was made on 27th June, 1995, between the petitioner IOC and NOC. (iii) That the agreement came into force by virtue of the terms of the agreement on 1.7.1995 which was to remain in force for a spell of five years. By virtue of this agreement the IOC agreed to sell petroleum products to NOC by export. 5. (iii) That the agreement came into force by virtue of the terms of the agreement on 1.7.1995 which was to remain in force for a spell of five years. By virtue of this agreement the IOC agreed to sell petroleum products to NOC by export. 5. In this context, let it be stated that in exercise of the powers conferred by Sub-rule (.2) of Rule 13 of the Central Excise Rules, 1944 , the Central Government permitted export of petroleum products to NOC in Bond formula without payment of duty of excise from stocks of IOC licensed as a warehouse in accordance with the provisions contained in Chapters VII and VIII of the Central Excise Rules, 1944. 6. Pursuant to the said agreement, the IOC sold petroleum products by export to the NOC. As such, there has been, also, a treaty between the two nations, Nepal and India. The IOC, pursuant to the notification for export of the petroleum oil and lubricant products to Nepal, continued to sell the petroleum products by export. In terms of the agreement, a procedure has been prescribed in the export - sale of oil products, for the year 1995-96. The Sales Tax Officer, placing reliance under the provisions of the Bihar Finance Act, 1981 made an assessment order levying sales tax on export sales of oil product by IOC to NOC which came to be confirmed by the appellate authority, as well as, the revisional authority, as stated hereinabove. 7. We have threadbare and dispassionately evaluated Prima Facie the impugned order of the Commercial Taxes Tribunal confirming the order of assessment, as well as, the order of the appellate authority. The content and colour, text and tenor, as well as, the grounds of the ultimate conclusion of imposition of levy of sales tax on export sale of oil products by IOC to NOC are also Prima Facie considered in accordance with the submissions before us. 8. The content and colour, text and tenor, as well as, the grounds of the ultimate conclusion of imposition of levy of sales tax on export sale of oil products by IOC to NOC are also Prima Facie considered in accordance with the submissions before us. 8. It appears that while for the first time, neither ten years prior nor ten years after the questioned assessment order of 1995-96, except for the years 1991-92 and 1992-93, no such assessment had ever been made, impugned orders are passed, mainly, on the ground that the bills of export are not placed on the record to substantiate the plea of petroleum product sold by the export, whereas, there is no dispute about the fact that there has been an agreement, stated above, between the two countries. As per said agreement the bill of Invoice in six copies, pursuant to the procedure prescribed in the agreement is required and same is also placed on record which is shown in a tabular form, here as under being relevant for the purpose. DISTRIBUTION OF NEPAL INVOICE First Copy Second Copy Third Copy / / / Presented before c Presented before c Presented before c Ex Officer-in-Charge Ex Officer- in-Charge Ex Officer-in-charge of Warehouse of Warehouse of warehouse / / / Endorsed copy sent Endorsed copy sent Endorsed copy sent to Indian Land to Indian Land to Indian Land Customs Station Custom Station custom station Officer thru officer in sealed officer in sealed exporter cover thru exporter cover thru exporter / / / After endorsement After endorsement After endorsement sent to Nepalese sent to Nepalese sent to Nepalese Customs Officer Customs Officer Customs Officer / / / Nepalese custom Nepalese customs Nepalese customs officer shall deal officer shall return officer shall deal with the same as the same after endor- with the same as directed by his sement to customs directed by his majesty Govt. of officer majesty Govt. of Nepal Nepal. of officer majesty Govt. of Nepal 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 Fifty Copy Sixth Copy Presented Before c Presented before c Presented before c Ex officer-in-charge Ex officer incharge Ex Officer incharge of warehouse of warehouse of warehouse / / / Endorsed copy sent sent to central Retained by to Indian land Excise officer who central Excise custom station has accepted the officer in officer in sealed bond charge of cover thru exporter warehouse / 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. 9. The payment has been made by an account payee Bank transaction by NOC to IOC. Prima Facie, there is nothing indicated or shown or even remotely spelt out to suggest that the sale was not by export. It is a transaction of export sale. It is in this context there is a strong Prima Facie case, and fairly arguable issue. Again, we have found from the report that in case of any local-sale of petroleum product, the petitioner IOC has been paying sales tax and there is no dispute. 10. Apart from there being Prima Facie strong material evidence in terms of the agreement, which is reinforced by virtue of the notification, issued by the Central Excise Authority in pursuance of the power conferred by Sub-rule (2) Rule 13 of the Central Excise Rules, 1944 , it is quite Prima Facie evident that the petitioner is permitted to export petroleum oil and lubricant products to Nepal through the agency of Nepal Oil Corporation in bond without payment of duty of excise from calibrated stocks of M/s Indian Oil Corporation. Therefore, there is strong Prima Facie case for the interlocutory relief in favour of the petitioner. 11. Next, it would bring into consideration as to whether balance of convenience is in favour of the petitioner or not? So far as the peculiar facts and special circumstances obtainable in the present case are concerned, let it be recorded that the interlocutory relief like the one sought is protective, as well as, preventive. 12. 11. Next, it would bring into consideration as to whether balance of convenience is in favour of the petitioner or not? So far as the peculiar facts and special circumstances obtainable in the present case are concerned, let it be recorded that the interlocutory relief like the one sought is protective, as well as, preventive. 12. When the Court is satisfied that there is likelihood of petitioners success and the right of the petitioner is jeopardized which needs to be protected during the course of the proceeding till the writ petition is heard on merits, balance of convenience, obviously, will tilt in favour of the petitioner. The object of interlocutory relief is at least to protect the legal rights and help the party from being further illegally hurt in view of the PrimaFacie case. It is in these context, it may be noted that preservation of right or prevention from further legal injury in view of the Prima Facie-case is one of the pointers for balance of convenience, so far as, the case of the petitioner is concerned. 13. This will take us to the consideration as to whether irretrievable loss or on the basis of the comparative mischief, whether the petitioner has a better case. In the facts profile and the purpose, design and desideratum of the agreement, pursuant to the notification for export of petroleum oil and lubricant products to Nepal, if interim relief is not granted, there will be further perpetuation of injury to the legal right of the petitioner and again, the petitioner is a Government of India undertaking. When Prima Facie there appears to be a transaction of export-sale only and not a local sale, as revenue perceived, it is incumbent upon us to prevent further injury to the legal right of the petitioner. Of course, these are our observations for the purpose of determining the merits of the interlocutory relief at the interim stage. 14. Learned Counsels is appearing for the parties have, also, relied upon the host of judicial pronouncements of the Hon ble Apex Court in support of their rival versions to which appropriately reference will be made. 15. Our attention was also, pointedly, invited by the learned Senior Counsel for the petitioner, Mr. 14. Learned Counsels is appearing for the parties have, also, relied upon the host of judicial pronouncements of the Hon ble Apex Court in support of their rival versions to which appropriately reference will be made. 15. Our attention was also, pointedly, invited by the learned Senior Counsel for the petitioner, Mr. Pal, to the following observations with regard to what would constitute a sale in the course of export of goods out of the territory of India, placing reliance on a decision of the Hon ble Apex Court in the case of Ben Gorm Nilgiri_ Plantation Co. Coonoor V/s. The Sales Tax Officer, special Circle, Ernakulam reported in (1964) 15 STC 753 which at reads hereunder: To constitute a sale in the course of export of goods out of the territory of India, common intention of the parties to the transaction to export the goods followed by actual export of the goods to a foreign destination is necessary. But intention to export and actual exportation are not sufficient to constitute a sale in the course of export for a sale by export "involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction": State of Travancore- Cochin and Ors. V/s. The Bombay Company Ltd. A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said that there must be an intention on the part of both the buyer and the seller to export, there must be an 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. 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. A transaction of sale which is a preliminary to export of the commodity sold may be regarded as a sale for export, but is not necessarily to be regarded as one in the course of export, unless the sale occasions export. 16. It could very well be seen from the aforesaid observations with regard to the nature of sale in course of export of the goods out of the territory of India. In the present case also, pursuant to the agreement, the oil products including the lubricants are to be supplied by the IOC to NOC by way of export sale. Probably, in our view the Assessing authority has not been able to appreciate the special provisions providing special procedure to be followed in terms of the notification issued by the competent authority under Sub-sec. (2) of sec. 13 of the Central Excise Rules, 1944 , as the Assessing authority has only insisted upon and relied on only factum of non-production of bill of export manifested in the assessment order, which came to be confirmed in appeal, as well as, in revision. 17. We would like to quote the observation made by the Tribunal in its impugned judgment, dated 4.3.2005, in the penultimate paragraph, which reads hereunder: ... The contention of the petitioners counsel that the claim for exemption from tax on export sale was allowed to the petitioner by the assessing officers in the years 90-91, 93-94, 94-95, 97-98, 98-99 and 99-2000 without bills of exports and hence it should be allowed for the year 1995-96 is not acceptable to us as any such assessment orders passed by the assessing officers can not influence the finding of Tribunal as already held on this point. It will not be out of place to observe that allowance of export claims by the assessing officers in above years without bills of exports does not appear convincing. Considering all the facts of the case and also following the judgment of this Tribunal on this point as discussed in previous paras, we dont find any merit on the point of tax exemption on export-sales in the instant case hence this claim is disallowed. 18. Considering all the facts of the case and also following the judgment of this Tribunal on this point as discussed in previous paras, we dont find any merit on the point of tax exemption on export-sales in the instant case hence this claim is disallowed. 18. There is no dispute about the fact that the exemption from payment of sales tax on export sale came to be allowed to the petitioner IOC by the Assessing Officer for the years 1990-91, 1993-94, 1994-95, 1997-98, 1998-99 and 1999-2000 without bills of export. However this factum and resultant contention before the authorities, though raised, was not allowed for the year 1995-96. It is, therefore, clear that the Tribunal did not accept such a contention. For several years prior to the questioned assessment year of 1995-96 such a levy of Sale Tax was not raised, In other words, the exemption granted to the petitioner for the very purpose for export-sale without bills of export was, abruptly, not considered convincing without any reason or assigning any ground. 19. Apart from that, the Tribunal ought to have appreciated that in view of the above notification and terms, the procedure for export of the oil products and lubricants to NOC by IOC is in place of general practice of bills of export, as such, the export invoice procedure, as per the notification, is admittedly followed by the petitioner which we have noted. How six copies of export invoices are required to be dealt with and placed before different authorities is, also, shown in the foregoing paragraphs in tabular form. 20. Though, in ordinary transaction of sale, bills of export may be necessary. How six copies of export invoices are required to be dealt with and placed before different authorities is, also, shown in the foregoing paragraphs in tabular form. 20. Though, in ordinary transaction of sale, bills of export may be necessary. However, when general and regular practice of reliance for exemption on the strength of bills of export in a case of export sale is substituted by special procedure of six copies of export invoices, it cannot be brushed aside by the Assessing authority only on the ground that the bills of export are not produced, for the simple reason that a general requirement or practice of production of bills of export for commercial exemption from the payment of sales tax is substituted by special method strengthening by providing special procedure and there is no dispute about the fact that special procedure is provided in the notification, dated 27.4.1995, issued in terms of the provisions of Sub-rule (2) of Rule 13 of the Central Excise Rules, 1944 . 21. In the incident of taxability in transaction, or sale in the present case, when exemption is claimed by the party in a special situation where special procedure is prescribed and authorised and after complying it, the petitioner or any concerned party cannot be denied such exemption, merely on the dogmatic approach of the Assessing authority that regular procedure of bills of export has not been complied with. In our opinion, this view, Prima Facie, cannot be sustained. 22. Learned Advocate General, appearing for the respondent State has strongly raised the preliminary objection against the maintainability of the petition, placing reliance on the provisions of reference provided u/s. 48 of the Bihar Finance Act, 1981. 23. We have considered the provisions of sec. 48 of the Bihar Finance Act, 1981. It is true that it provides a remedy for making a reference to the High Court after passing of the order by the Tribunal. In these context, let it be mentioned that ordinarily in case of alternative and efficacious remedy being available to the party, by prudence, the Court may not in certain cases, directly prefer to interfere in writ jurisdiction. In these context, let it be mentioned that ordinarily in case of alternative and efficacious remedy being available to the party, by prudence, the Court may not in certain cases, directly prefer to interfere in writ jurisdiction. Nonetheless, let it be also stated that availability or existence of alternative and efficacious remedy, "ip so facto" does not in any way constitute a bar or ban on the constitutional writ jurisdiction of the High Court under Art. 226 of the Constitution. 24. Firstly, despite availability of alternative remedy, when the Court finds that the impugned order recorded by one authority is Prima Facie in excess, or for want of jurisdiction, the Court may interfere and entertain the writ petition. Even in case of infraction of violation of any fundamental rights, the plea of alternative remedy cannot be pressed into service against the exercise of the writ jurisdiction by the Court under Art. 226 of the Constitution. There are also contingencies that if the impugned order suffers from non-observation of the principles of natural justice, the Court can interfere even in case where an alternative remedy is available. 25. The proposition of law on this count has been extensively explored and well propounded in catena of judicial pronouncements. However, the following decisions may be referred which, clearly, reinforce the opinion which we are taking in this matter. 26. The Hon ble Apex Court in the following four decisions have lucidly explored this proposition: (i) State of U.P. V/s. Mohammad Nooh AIR 1958 SC 86 (Paragraphs 10 and 11 of the report contain the clear observations). (ii) Ram and Shyam Company V/s. State of Haryana and Ors. -. (The relevant observations are made in paragraph 9 of the report). (iii) Whirlpool Comporation V/s. Registrar of Trade Marks, Mumbai and Ors. - (material observations in this regard are in paragraphs 20 and 21 of the report) (iv) State of Himachal Pradesh V/s. Gujrat Ambuj Cement (2005) 6 SCC 499 (Paragraph 23 is relevant). 27. Let it be again recorded that the provisions in levying the sales tax and the authorities incharge of assessment of sale tax ought to be anxious to make search as to whether there is local-sale or export-sale.? In case of any local sale, obviously, the liability for payment of sales tax will arise and an assessment of the liability has to be made. 28. In case of any local sale, obviously, the liability for payment of sales tax will arise and an assessment of the liability has to be made. 28. However, when there is only export-sale, authorities, cannot be permitted to impose sales tax merely on the hypothesis that the usual bills of export have not been produced, in a case where special provisions by virtue of a notification and resultant agreement between the two countries have been prescribed and, admittedly, followed. It is not a case of the department, even Prima-Facie that local-sale has taken place of oil products or lubricants on account of an agreement in question between the two countries. Adherence or unwarranted insistence of the production of the bills of export, being indifferent or unmindful of the factum of having prescribed special procedure substituting the bills of export by the invoices supported by a notification of the competent authority in terms of the provisions of Sub-rule (2) of Rule 13 of the Central Excise Rules, 1944 , and the terms and conditions including the procedure incorporated in the agreement between the two countries is not permissible and Prima Facie in absence of any evidence worth the candle to show that there has been a local-sale and not the export-sale, the authority cannot impose sales tax. 29. Let it be, also, clearly and heralded that a sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily separated and interrupted without a breach of the contract or the compulsion arising from the nature of the transaction. It is in these context, let it be mentioned that 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, and there must be an obligation to export and, there must be an actual export. This 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. 30. This 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. 30. While viewed from the light of this perception and view taken from the entire fact profile highlighted hereinabove, which is, as such, not in controversy does lead, only and only, to one conclusion Prima Facie that there is, only, export sale and no local sale. It is in this context when there is no local sale, the authority has no jurisdiction to levy sales tax. Since it is, only, a transaction of export-sale and any levy of tax or any imposition of tax liability in such a situation, without jurisdiction Prima Facie has to be considered sufficient for invocation of the powers under Art. 226 of the Constitution of India, and until disposal of the entire writ petition on full fledge hearing, interference on merits and, as a necessary corollary, stay must follow against the impugned assessment of sales tax made by the Assessing authority confirmed by the appellate authority and, later on, confirmed by the Tribunal. 31. We may point it out that, ordinarily, when such three statutory functionaries take a view consistently, the writ court is reluctant to even grant relief in favour of the petitioner but as we pointed out earlier, there are special reasons and peculiar circumstances, and since we have Prima Facie found that action and imposition of sales tax and saddling of liability with IOC, a Government of India undertaking, though there is export-sale in terms of the agreement between the two countries and in purported exercise of notification issued under Sub-sec. (2) of sec. 13 of the Central Excise Rules, 1944, is not in accordance with law and without jurisdiction Prima-Facie. Merely imposition of sales tax is on hyper technical perception of non-production of the bills of export, a procedure which requirement is done away with in view of the special-procedure prescribed in the notification, as well as, the agreement, we, therefore, find that petitioner is entitled to interim relief against the impugned assessment order of the Assessing Authority, dated 14.4.1999 (Annexure-1), confirmed in the appeal by order dated 12.5.2000 (Annexure 2) and subsequently confirmed in the judgment of the Tribunal, dated 4.3.2005 (Annexure 3), in relation to export-sale. Impugned orders, therefore, shall stand stayed til disposal of the writ petition on merits. 32. The I.A.No.1193 of 2006 shall stand disposed of accordingly.