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.

2

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

3 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

4 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

5 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

6 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

7 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)

8 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

9 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. &

10 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

11 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.

12

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

13 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;

14 - 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

15 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

16 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

17 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

18 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

19 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.

20 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

21 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

22 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

23 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

24 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

25               [ Anil R. Dave ]

New Delhi, January 13, 2011.