HCL TECHNOLOGIES LIMITED Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) The three writ petitions are filed by information and technology software companies which export the software. They are aggrieved by the assessment orders for 2008-2009 passed by the Commercial Tax Officer, Madhapur Circle, under the Central Sales Tax Act, 1956 ("the CST Act"). We will take the facts from W.P. No. 16662 of 2012, as the factual background in the other two matters is the same. The petitioner, M/s. HCL Technologies Limited, is an incorporated entity in the business of development and export of IT software. They are dealers under the Andhra Pradesh Value Added Tax Act, 2005, and the CST Act, on the rolls of the Commercial Tax Officer (CTO). For the assessment year 2008-2009, the petitioner filed returns under the CST Act disclosing the total direct export sales of Rs. 1,03,36,66,486. They claimed exemption on the export sales and concessional rate of tax at two per cent/three percent on the inter-State sales. The CTO, however, did not accept the returns and issued a show-cause notice proposing to levy CST on the total turnover which included direct export sales as well. According to the CTO, the petitioner failed to produce proof of exports/exemption. It appears, the CTO was under the impression that the petitioner should produce H forms as per rule 12(10) of the Central Sales Tax (Registration and Turnover) Rules, 1957 (''the Rules"). The petitioner contends that the show-cause notice was not issued, and therefore, they could not file objections. Be that as it is, by impugned order dated March 31, 2012, the CTO subjected the entire turnover to four percent CST and demanded Rs. 4,13,46,659. This order is assailed in the writ petition.

(2.) The learned senior counsel appearing for the petitioner in W.P. No. 18092 of 2012, Sri C. Kodandaram, submits that the export sale of goods is not exigible to CST; the question of a dealer producing H forms would arise only when the sale is effected in the course of export of goods under section 5(3) of the CST Act, and that the CTO committed jurisdictional error in subjecting direct export sales turnover to CST ignoring section 5(1) of the CST Act. These contentions are refuted by the Special Counsel for Commercial Taxes. He would submit that at the time of assessments it is always competent to the CTO to ask for proof of export sales.

(3.) As a first step, before noticing the charging section in the CST Act and how it is subjected to section 5, we may briefly indicate the position of taxes on exports and imports as contemplated under the Constitution. Exports and imports are taxable under the law made by the Parliament under article 246(1) of the Constitution read with entry 83 and all applicable entries of Union List (List I) in the Seventh Schedule to the Constitution. The State Legislature has no power to levy duties or taxes on exports and imports, although the State has power to impose taxes on sale or purchase of goods under entry 54 of the State List. But, article 286 restricts the State's power to impose tax on inter-State trade or commerce. This power is with the Union List. Under article 286(2), the Parliament is empowered to formulate principles for determining when a sale or purchase can be said to have taken place during inter-State trade or commerce and/or in the course of import or export of goods out of territory of India.