1. Common issue involved in these two appeals of the revenue is relating to deduction under Section 80HHC. Assessing Officer had not included the counter sales made by the assessee against foreign exchange in India as the export turnover in respect of which deduction under Section 80HHC was permissible. CIT(A) passed a consolidated order for assessment years 1987-88 and 1988-89 directing the Assessing Officer to treat the local counter sales made against foreign exchange as export sales for the purposes of computation of deduction under Section 80HHC.2. It has been brought to our notice that Section 80HHC has been amended by the Finance (No. 2) Act of 1991 retrospectively by virtue of which counter sales are not to be regarded to be exports out of India which do not involve clearance at any custom station as defined in the Customs Act of 1962. In this connection, reliance has been placed on the decision of the Tribunal in the case of Assessing Officer v. Gem Arts [IT Appeal No. 323 (Delhi) of 1990, dated 21-2-1994].
3. The learned counsel for the assessee has conceded before us that Section 80HHC has been amended retrospectively but has prayed that the matter may be remitted back to the Assessing Officer in order to examine as to whether the sale of goods made by the assessee involve clearance at the custom station as defined in the Customs Act, 1962. In this connection, reference has been made to the following two decisions of the Tribunal: 1. Dy. Commissioner v. Ganeshi Lal & Sons [IT Appeal No. 3421 (Delhi) of 1990, dated 4-8-1994].
2. ITO v. Jewel House [IT Appeal No. 721 (Delhi) of 1992, dated 29-4-1994].
4. The learned D. R. contended that in view of the decision of the Tribunal in the case of M/s Gem Arts, Agra, it is not necessary to remit the matter to the file of the Assessing Officer as the Tribunal has recorded a categorical finding that the customs clearance referred to in Section 80HHC is applicable in respect of clearance sought by the exporter.
5. We have given our careful consideration to the rival contentions.
There was divergence of opinion earlier as to whether the counter sales made in India against foreign exchange could be treated as export out of India. However, the controversy has been resolved by the retrospective insertion of Explanation (aa) to Section 80HHC which reads as under: Export out of India shall not include any transaction by way of sale or otherwise in shop, emporium or any other establishment situate in India not involving clearance at any custom station as defined in the Customs Act, 1962 (52 of 1962).
The expression 'not involving clearance at any custom station' as denned in the Customs Act of 1962 has been considered by 'B' Bench of the Tribunal in the case of Gem Arts (supra) where it has been held that the said expression refers to the clearance sought by the exporter as it is he in whose case the exemption under Section 80HHC is allowable. It has been further held that in the case of counter sales, there is no requirement of seeking customs clearance by the exporter as per the provisions of Section 80HHC.6. We have gone through the decisions of the Tribunal cited before us by the rival parties. In fact, there is no conflict between the decisions cited by the assessee's counsel with the decision cited by the learned D. R. The Tribunal has in the cases cited by the assessee, namely, Ganeshi Lal & Sons (supra) and Jewel House (supra) remitted the matter to the file of the Assessing Officer without expressing any opinion about the interpretation of export out of India' as defined under Explanation (aa) of Section 80HHC. In the case of Gem Arts (supra), the decision cited by the D. R., the Tribunal has gone into the meaning of words "export out of India" as defined under Section 80HHC Explanation (aa). Whereas we agree with the view expressed by the 'B' Bench of the Tribunal in the case of Gem Arts (supra) in regard to Explanation (aa)to Section 80HHC, we would like to elaborate.
7. Under Section 80HHC, assessee who is engaged in the business of export out of India of any goods or merchandise to which Section 80HHC applies subject to fulfilment of certain conditions specified thereunder. Finance (No. 2) Act, 1991 inserted Explanation (aa) to Section 80HHC which reads as under: 'Export out of India' shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance at any custom station as defined in the Customs Act, 1962 (52 of 1962).
The Explanation referred to above excludes from the definition of 'export out of India' such goods which have been sold by the assessee in a shop, emporium or any other establishment situate in India but for those goods which involve clearance at any custom station as defined in the Customs Act, 1962 (52 of 1962). The traders selling goods to the foreigners against foreign exchange generally take an undertaking from the buyers that such goods are meant to be taken outside India. Such certificates are required for the purposes of getting exemption under the provisions of the Sales-tax Act. The question before us is as to whether the goods taken by the foreigners against the payment of foreign exchange involve clearance at any custom station, within the meaning of Explanation (aa) to Section 80HHC. We will have, therefore, to refer to the Customs Act of 1962. Under Section 2(13) of the said Act Custom Station has been defined to mean any custom port, customs airport or in land custom station. Sections 50 and 51 of the Customs Act, 1962 deal with the clearance of export goods. These sections are reproduced hereunder: 50. Entry of goods for exportation. -(1) The exporter of any goods shall make entry thereof by presenting to the proper officer in the case of goods to be exported in a vessel or aircraft, a shipping bill, and in the case of goods to be exported by land, a bill of export in the prescribed form.
(2) The exporter of any goods, while presenting a shipping bill of bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.
51. Clearance of goods for exportation. -Where the proper officer is satisfied that any goods entered for export are not prohibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permitting clearance and loading of the goods for exportation.
As is evident from sections 50 and 51 quoted above, clearance is to be obtained by the exporter of the goods. Under Section 81 of the Customs Act, 1962, the Board has been authorised to make regulations providing in the manner of declaring the contents of any baggage, providing for the custody, examination, assessment of duty and clearance of baggage and providing for the transit or transhipment of baggage from one custom station to another or to a place outside India. Apart from that special provisions have been made under Chapter XI of the Customs Act, 1962 for dealing with the baggage accompanied or unaccompanied. The relevant sections are sections 77 to 84. Sections 82 to 84 deal with the goods exported by post. For the persons, who have nothing to do with import or export of goods, the customs has meaning only in the context of assessment of duty of the goods, their taking abroad as luggage. Special provisions have been made under the Customs Act laying down the procedure for declaration of baggage and determination of duty thereon. As regards the goods which are taken by the passengers no bill of export is to be filed nor is a clearance required. Only a passenger is required to make a declaration regarding the description and the value of goods, the passenger is carrying. This declaration is known as baggage declaration form. At present oral declaration by the passengers is accepted by the custom authorities. Examination of the goods is undertaken by the Preventive Officers posted in the custom station. In case they have any doubt regarding the correctness and description of the goods, the physical examination of the goods is conducted. On the basis of the declaration and examination, the duty is assessed. The baggage may consist of accompanied or unaccompanied baggage. For unaccompanied baggage, separate declaration has to be made by the passenger.
8. It is, therefore, clear from the provisions of the Customs Act, referred to above, that in the case of foreigners purchasing goods in India on payment of the consideration in foreign exchange and taking the goods along with them to be taken outside India, the customs clearance is not required as defined under the Customs Act, 1962. In such cases only a declaration has to be made which cannot be equated to the customs clearance as is required in the case of exporters.
9. Moreover, Section 2 of the Customs Act defines 'exporter' and it includes any owner at the time when the goods are exported. The relevant section is Section 2(2) of the Customs Act of 1962. As has been mentioned elsewhere in this order the owner of the goods has to make a declaration while taking the goods out of India in the form of their baggage. The assessee having sold the goods to the foreigners and having received the consideration ceases to be exporter of such goods as there could not be two persons exporting the same goods, one the assessee and another the owner of such goods, being the customer carrying the goods as his luggage.
10. We are, therefore, of the considered view that when goods are sold to the foreigners in respect of which consideration is received by the assessee in foreign exchange and the exporter takes the delivery of such goods, the custom clearance is not required within the meaning of Customs Act of 1962. Such sale would not form part of the export turnover of the assessee for the purposes of Section 80HHC.11. There would, however, be some instances where the buyers would come to India, select the goods and even make the payment in advance in respect of such goods and nevertheless the terms of the contract may provide that the seller of the goods has to deliver the same in the foreign country. In such cases, assessee shall have to establish that as an exporter of such goods they had to seek custom clearance of such goods before its export. Such goods are not intended to be excluded from the term 'export out of India' and such turnover would form part of the export turnover for the purposes of Section 80HHC.12. The assessee in this case desires an opportunity to establish that custom clearance as defined in the Customs Act of 1962 was involved as referred to above. Though Departmental Representative insisted that it is unnecessary to send the matter back to the Assessing Officer, in our view, heavens would not fall if an opportunity is given to the assessee as they never got any so far in this regard. We accordingly remit this issue to the file of the Assessing Officer to be decided afresh in the light of evidence, if any, that might be produced by the assessee and in the light of our findings as above.