Monday, July 7, 2014
Export Of Goods Out Side The Territory Of India ( Tax dodging activities)
Sub-clause (b) of clause (1) of Article 286 of the Constitution of India ( Constitution) laid down that no law of a State shall impose or authorize imposition of, a tax on the Sale or purchase of goods, where such sale or purchase takes place-in the course of ** export of goods out of, the territory of India. Clause (2) of the said Article, on the other hand, provided that Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). Parliament, in fact, formulated such principle in Section 5 of the Central Sales Tax Act, 1956 (Central Act), which reads, as below :
Sub-section (1)- ‘A sale or purchase of goods shall be deemed to take place in the course of export of goods out of the territory of India only if the sale or purchase either occasions such export or is effected by transfer of documents of the title to the goods before the goods have crossed the customs frontiers of India’.
Sub-section (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.’
Direct export and also the sales to the exporter have thus been categorized in the category of export of goods outside the territory of India. No declaration form has been prescribed to substantiate the claim of export out of the territory of India, while it has been made obligatory to furnish declarations in the course of sales made to the exporter inside or out side the State, as the case may be. The Bills of Lading or other export documents are to be endorsed by the customs authorities of both the territories at the international border point and such endorsed documents are to be submitted to the taxing authorities to get of the benefit of exemption of tax.
In Assam, a substantial quantity of the goods including coal is being exported to Bhutan under the banner of export and the exporters are enjoying the benefits of exemption of tax by way of production of documents with endorsements, as aforesaid. In fact, such endorsement ought to have been obtained from the customs’ authorities at the incoming and the out-going countries in the territorial border, but fantastically in many cases endorsements are obtained from the incoming custom authorities of Bhutan only. Such one sided endorsement sometimes transpires to be fraudulent one in as much as, this simply reflects a paper work without the physical movement of the goods to the destined territory.
Article VII of the Agreement on trade, commerce and transit made between the Government of the Republican of India and the Royal Government of Bhutan, on the other hand, contains that the trade between India and Bhutan will continue to be transacted in Indian Rupees and Bhutanese Ngultrums’. The payments of the sale value of such goods by cheques or Bank drafts have not been incorporated therein.
It is in the air that a large section of unscrupulous tax dodgers, are claiming exemption of tax by producing such one sided endorsement in the custom frontier, some of which are fake, and that too, without any physical movement of goods across the customs frontier of India. The relaxation provided to make payment by cash help them in such fraudulent exercise. The claim of exemption of tax and entertainment thereof is farce are learnt to be regular phenomenon. The leakage of tax revenue in the name export has thus been obvious.
Of late, the State taxing authorities are said to have adopted some pick and choose practice and those persons, who failed oblige such taxing authorities in a meaningful way, are pushed behind the bars without taking up any scrutiny and assessment proceedings under the sales tax law , operating in the State. The State taxing authorities ought to have adopted a rational and judicious way to apprehend all such unscrupulous traders and to realize taxes instead of such premature action without determining the tax liabilities first. Any crack in the process may have far reaching till consequence resulting in loss of revenue.
The Budget Session of Parliament is knocking at the door. It is high time that the Government of India will examine the shortfall and consider to in corporate such rigid conditions and restrictions in the Central Act on such movement of goods by way of export so that any leakage of revenue is averted.
The State taxing authorities may as well apply proper scrutiny, enquiry and verification in all such cases at least for the permissible limit of last eight years instead of adopting any pick and choose process, as at present.