[Cites 11, Cited by 0]
Kerala High Court
M/S. Siemens Limited vs The State Tax Officer(Ib) on 15 January, 2026
2026:KER:3305
W.P. (C) No.34538 of 2018
1
"C.R."
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE HARISANKAR V. MENON
THURSDAY, THE 15TH DAY OF JANUARY 2026 / 25TH POUSHA, 1947
WP(C) NO. 34538 OF 2018
PETITIONER:
M/S. SIEMENS LIMITED, 33/2317 5TH FLOOR JOMER
SYMPHONY CHALIKKAVATTOM, PONNURUNNI NORTH,
VYTTILA COCHIN-682 019
REPRESENTED BY G.VASANTHI MANAGER-INDIRECT
TAXATION.
BY ADVS.
SHRI.JOSE JOSEPH
SHRI.AJAY BEN JOSE
SMT.ALEENA MARIA JOSE
RESPONDENTS:
1 THE STATE TAX OFFICER(IB), STATE GOODS AND
SERVICE TAX DEPARTMENT, KOTTAYAM - 686 002.
2 THE COMMISSIONER OF STATE TAXES,
TAXTOWER, KILLIPALAM, KARAMANA P.O.,
THIRUVANANTHAPURAM-695 002.
3 THE STATE OF KERALA, REPRESENTED BY SECRETARY TO
GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT
SECRETARIAT, THIRUVANANTHAPURAM-695 001.
4 ST.THOMAS HOSPITAL, CHETHIPUZHA, KUSUMAGIRI
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W.P. (C) No.34538 of 2018
2
P.O., CHANGANACHERRY-686 104, REPRESENTED BY ITS
DIRECTOR.
BY ADV GOVERNMENT PLEADER
SRI. ALAN PRIYADARSHI DEV ,GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 15.01.2026, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
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W.P. (C) No.34538 of 2018
3
JUDGMENT
The petitioner, an assessee under the provisions of
the Kerala Value Added Tax Act, 2003 (for short "KVAT Act")
and the Central Sales Tax Act, 1956 (for short "CST Act") is
burdened with a penalty under the provisions of the Section 67
of the KVAT Act with respect to the assessment year 2016-17,
by the order at Ext.P27, issued by the 1 st respondent. It is
seeking to challenge the order imposing penalty as above,
this writ petition has been instituted by the petitioner.
2. The short facts necessary for the disposal of
the writ petition are as under:
The petitioner is stated to be a company having
registration under the provisions of the Companies Act, 1956,
with its registered office at Mumbai, with a branch in Kerala
and other branches across the country. The petitioner is a
manufacturer-cum-dealer of medical, electronic and electric
equipments. It has also obtained registration under the KVAT
Act and CST Act within the State of Kerala. The dispute in this
writ petition essentially involves a transaction effected by the
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petitioner on the basis of certain purchase orders issued by the
4th respondent. The 4th respondent is a hospital at
Changanacherry. The 4th respondent placed purchase orders
at Exts.P4, P5 and P6 on the petitioner. Ext.P4 was a
purchase order for the supply of medical equipments. Ext.P5
was a purchase order for the supply of accessories in
connection with the medical equipment. Ext.P6 was a
separate purchase order for the installation of medical
equipments covered by the purchase order at Ext.P4. The
petitioner, on the basis of the aforementioned purchase
orders, in turn placed a purchase order on the foreign supplier
- situated in Germany - as evidenced by Ext.P7. A reference
to the purchase order at Ext.P4 would show that there are
certain clauses contained therein that would bind the petitioner
and as per the first clause, the petitioner was expected to
procure the equipment ordered by the 4 th respondent from
"Siemens Germany". The afore clause further states that the
procurement as above has to be from Germany and from
nowhere else. There is a separate clause which specifically
says that under no circumstances the delivery can be affected
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by the petitioner of the equipment in question from any other
source, including the stock-in-trade in India. On the basis of
the afore purchase order, when the petitioner placed Ext.P7
purchase order on the German supplier, a reference was also
made to the ultimate consumer - the 4 th respondent herein.
In turn, when the foreign supplier issued a confirmation as
evidenced by Ext.P8, a reference had also been made to the
order placed by the 4th respondent herein. On the basis of the
afore, the foreign supplier issued Ext.P9 invoice with respect to
the medical equipment in question. The equipment in question
was consigned by sea as evidenced by Ext.P10 - Sea Way Bill.
True, the petitioner filed the Bill of Entry for home
consumption as evidenced by Ext.P11. Later, the goods in
question have been sold by the petitioner to the 4th respondent
on the basis of separate invoices raised by it, and the afore
invoice did not visualise any collection of tax under the
provisions of the KVAT Act. In Ext.P18 return filed by the
petitioner for the period of May, 2016, the petitioner has
disclosed the afore transaction; however, claiming exemption
with reference to Article 286 of the Constitution of India read
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with the provisions of Section 5(2) of the CST Act - as a case
of "sale in the course of import". It also requires to be noticed
that as regards the supply of accessories, the petitioner has
raised Exts.P19 to P21 invoices; however, charging tax
payable under the provisions of the KVAT Act. For the
installation portion, a separate invoice has also been raised, as
evidenced by Ext.P21. In the light of the afore, though it was
the case of the petitioner that there were no taxable sale with
reference to provisions of the KVAT Act, the 1st respondent
sought to issue a show cause notice proposing imposition of a
penalty. The petitioner objected to the afore proposal, also
seeking to place reliance on the order issued by the Appellate
Tribunal at Ext.P23 with reference to the assessment for
2005-06 and 2006-07, stated to be on the basis of the same
set of facts, accepting the claim of exemption as above.
However, in the impugned order at Ext.P27, the objection filed
has been brushed aside, and the penalty imposed as proposed,
amounting to Rs.87,87,000/-.
3. Heard Sri.Jose Joseph, the learned counsel
for the petitioner, as well as Sri.Alan Priyadeshi Dev, the
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learned Government Pleader.
4. Sri.Jose Joseph, the learned counsel for the
petitioner, would contend with reference to the factual
situation noticed as above that the transaction in question
does not attract any liability under the KVAT Act insofar as the
sale was a sale in the course of import as provided under the
provisions of Section 5(2) of the CST Act. He would also seek
to rely on the order of the Appellate Tribunal at Ext.P23, as
well as the Judgment in the assessee's own case, rendered by
a Division Bench of this Court in State of Kerala v. Seimens
Ltd. [(2017) 102 VST 157 (Ker)]. He would also add that
the assessment for the year in question has since been
completed by the assessing authority [Deputy Commissioner
(Assessment) Special Circle - II, Ernakulam] dated
15.03.2021 with specific reference to the order of penalty
impugned in this writ petition, accepting the case of the
assessee that the transaction in question is an exempted one.
Therefore, it is his submission that the penalty imposed by
Ext.P27, requires to be set aside.
5. Per contra, Sri.Alan Priyadeshi Dev, the
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learned Government Pleader, would contend that the fact that
the petitioner has cleared the goods, as evidenced by the Bill
of Entry is a pointer to the effect that there is a break in the
transaction, and therefore, the benefit of the provisions under
Section 5(2) of the CST Act would not be available to the
petitioner. He would also seek to rely on the Judgment of the
Apex Court in M/s. Binani Bros. (P) Ltd. v. Union of India
and Others [(1974) 1 SCC 459] to contend that there was
no privity of contract between the 4th respondent and the
supplier in Germany and therefore, the petitioner could not
claim any exemption.
6. I have considered the rival submissions as
well as the connected records.
7. It is the sustainability or otherwise of the
imposition of penalty pursuant to Ext.P27 order that arises for
consideration in this writ petition. The facts, noticed above,
are not in dispute. On a perusal of the purchase order issued
by the 4th respondent, it is clear that the petitioner was
interdicted from making any supply of the item ordered by the
4th respondent from its stock-in-trade in India. The purchase
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order specifically provided that the petitioner is to obtain the
item in question from its counterpart in Germany and none
else. It is on that basis, the petitioner placed the purchase
order on the foreign supplier, as evidenced by Ext.P7. In the
confirmation issued by the foreign supplier also, as noticed
earlier, the order placed by the customer in India is specifically
referred to. From this, in my opinion, there is an inextricable
link between the purchase order placed by the 4 th respondent
herein and the ultimate importation effected by the petitioner,
which has ultimately resulted in the sale being effected by the
petitioner to the 4th respondent. The only contention taken by
Sri. Sri.Alan Priyadeshi Dev, the learned Government Pleader,
as noticed earlier, is to the effect that insofar as the petitioner
has cleared the goods from the customs by filing a Bill of
Entry, there is a break in the chain, and therefore, the
petitioner would not be entitled to the benefit.
8. However, this Court notices that almost on
the very same set of facts, a Division Bench of this Court in
Seimens Ltd. (supra) has considered the claim with reference
to the provisions of the CST Act in the case of the petitioner
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itself. There also, the petitioner was required to obtain the
goods specifically from Germany, and in the confirmation
issued by the foreign supplier at Germany, it was specifically
shown that the purchase order issued by the customer in
Kerala is the reason for the importation into India. On that
basis, this Court has found as under:
"14. The documents produced before the appellate authority,
copies of which were also made available to us, show that in
the pro forma invoice issued by the respondent-company to
the managing director of MMDC contained various terms and
conditions, among which, one is that the imported equipment
is manufactured by Siemens concerns in Germany/China/USA
and that the company shall be importing the equipment in
order to fulfil the obligation specifically in the event purchase
order is placed on Siemens Ltd. It is also stated that since the
equipment is being imported to comply with the purchaser's
requirement, the supplier proposes to sell the same during the
course of import as envisaged under section 5(2) of the CST
Act.
15. The purchase order issued by MMDC also contained
various terms among which it is stated that the respondent
had procured the equipment from Siemens, Germany and
none else and that they shall import the equipment for the
purpose of delivery thereof to MMDC at the address specified
in the purchase order. It is also provided that the respondent
shall not deliver the equipment of the above type from any
other source or from their stock in India or otherwise and that
it was specifically and mutually understood that the above
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equipment is imported from abroad into India solely and
specifically for the purpose of the present contract. There is a
specific provision that the equipment imported shall be
delivered to MMDC and shall not be diverted for any other
purpose.
16. The purchase order issued by the respondent to
M/S.Siemens, Germany also contained a term requiring the
foreign company to put a foot note on the order confirmation
and invoice that the equipment is despatched against order
from the respondent client whose details are also given in the
purchase order. The order confirmation issued by Siemens,
Germany, the supplier, shows that it is in compliance with the
purchase order placed on them. The purchase order to MMDC
also states that the sales tax charged is nil as the transaction
is sale in the course of import covered by section 5(2) of the
CST Act.
17. The genuineness of the aforesaid documents are
undisputed. Once the genuineness of these documents are
accepted, it could definitely be concluded that in the import of
the goods by the respondent, there exists a bond between the
contract of sale and the actual importation and each link
thereof is inextricable connected with one immediately
preceding it. This, therefore, shows that in the transaction in
question leading to import and the sale of the equipment to
MMDC, all the requirements that are laid down by the apex
court and this court in the judgments referred to above are
satisfied. Therefore, the order of the Tribunal concluding that
section 5(2) of the CST Act is attracted to the case in hand is
perfectly legal and does not merit any interference."
9. On a perusal of the principles laid down by
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this Court as above, the only question to be noticed is as to
whether there is an inextricable link between the transactions.
As noticed earlier, there is a link between the purchase order
placed by the 4th respondent, import effected by the petitioner,
and the ultimate sale effected by it. This Court also notices
the Judgment of another Division Bench of this Court in BPL
Telecom Ltd. v. State of Kerala [(2009) 23 VST 264
(Ker)], wherein also an almost similar circumstance has been
considered and the claim of exemption under Section 5(2) of
the CST Act extended, even in a situation where the importer
had filed the Bill of Entry with the customs.
10. With reference to the Judgment of the Apex
Court in M/S. Binani Bros. (P) Ltd. (supra) relied on by
Sri.Alan, this Court notices that in paragraph 14, the Apex
Court categorically found that there was no privity of contract
between the ultimate customer in India and the foreign
supplier. It is on that basis the Apex Court found that the
benefit of the provisions of the CST Act could not extended.
But in the case at hand, as already been noticed, there is a
privity of contract. This Court also notices that the Judgment
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of the Apex Court has also been referred to by the Division
Bench of this Court while rendering the judgment in the
petitioner's case reported in Seimens Ltd. (supra).
11. Furthermore, as rightly pointed out by the
learned counsel for the petitioner, the assessment of the
petitioner has already been completed by the order dated
15.03.2021 extending the benefit of exemption, even on the
face of the penalty order impugned in this writ petition. True,
the afore order has not been placed on record. However, a
copy of this order has been circulated, on the basis of which
this Court notices that the contention raised has been accepted
with reference to the Division Bench Judgment in Seimens
Ltd. (supra).
12. This Court is also of the opinion that the
penalty under Section 67 of the KVAT Act cannot be imposed
for an additional reason. Admittedly, as noticed earlier, in the
return filed at Ext.P18, the transaction has been declared;
however, an exemption is claimed. In other words, there was
no suppression whatsoever from the side of the petitioner. It
is on the bona fide belief that it was entitled to exemption that
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such a return was filed. When that be so, with reference to
the principles laid down by a Division Bench of this Court in
M/S.U.K. Monu Timbers v. State of Kerala [2012 (3) KHC
111 (DB)], the imposition of penalty cannot be sustained.
In the light of the afore, I am of the opinion that
Ext.P27 order requires to be set aside. Resultantly, this writ
petition would stand allowed, setting aside Ext.P27 order
passed by the 1st respondent.
Sd/-
HARISANKAR V. MENON
JUDGE
PR
2026:KER:3305
APPENDIX OF WP(C) NO. 34538 OF 2018
PETITIONER EXHIBITS
EXHIBIT P1 TRUE COPY OF PETITIONER'S LETTER WITH
PROFORMA INVOICE FOR THE MEDICAL
EQUIPMENT.
EXHIBIT P2 TRUE COPY OF PETITIONER'S LETTER WITH
PROFORMA INVOICE FOR ACCESSORIES.
EXHIBIT P3 TRUE COPY OF PETITIONER'S LETTER WITH
PROFORMA INVOICE FOR INSTALLATION.
EXHIBIT P4 TRUE COPY OF PURCHASE ORDER PLACED BY
4TH RESPONDENT FOR SUPPLY OF MEDICAL
EQUIPMENT.
EXHIBIT P5 TRUE COPY OF PURCHASE ORDER PLACED BY
4TH RESPONDENT FOR SUPPLY OF
ACCESSORIES.
EXHIBIT P6 TRUE COPY OF PURCHASE ORDER PLACED BY
4TH RESPONDENT FOR INSTALLATION OF
MEDICAL EQUIPMENT.
EXHIBIT P7 TRUE COPY OF PURCHASE ORDER PLACED BY
PETITIONER ON FOREIGN SUPPLIER.
EXHIBIT P8 TRUE COPY OF ORDER CONFIRMATION BY THE
FOREIGN SUPPLIER.
EXHIBIT P9 TRUE COPY OF THE INVOICE OF THE
FOREIGN SUPPLIER.
EXHIBIT P10 TRUE COPY OF THE COMBINED TRANSPORT
SEA WAY BILL.
EXHIBIT P11 TRUE COPY OF THE BILL OF ENTRY FOR
HOME CONSUMPTION.
EXHIBIT P12 TRUE COPY OF INVOICE OF THE
PETITIONER.
EXHIBIT P13 TRUE COPY OF THE INVOICE SENT TO
CHENNAI OFFICE.
EXHIBIT P14 TRUE COPY OF THE GOODS CONSIGNMENT
NOTE NO.901 ISSUED BY THE CARRIER.
EXHIBIT P15 TRUE COPY OF THE GOODS CONSIGNMENT
NOTE NO.902 ISSUED BY THE CARRIER.
EXHIBIT P16 TRUE COPY OF THE PROVISIONAL INVOICE
IN RESPECT OF ACCESSORIES.
EXHIBIT P17 TRUE COPY OF TAX INVOICE ISSUED IN THE
SYSTEM FOR THE SALE OF THE MEDICAL
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EQUIPMENT.
EXHIBIT P18 TRUE COPY OF THE RETURN FOR THE MONTH
OF MAY, 2016.
EXHIBIT P19 TRUE COPY OF TAX INVOICE NO.9431600116
FOR PART SUPPLY OF ACCESSORIES.
EXHIBIT P20 TRUE COPY OF TAX INVOICE NO.9431600117
FOR PART SUPPLY OF ACCESSORIES.
EXHIBIT P21 TRUE COPY OF TAX INVOICE NO.9431600133
FOR PART SUPPLY OF ACCESSORIES.
EXHIBIT P22 TRUE COPY OF TAX INVOICE FOR
INSTALLATION CHARGES.
EXHIBIT P23 TRUE COPY OF THE ORDER OF THE KVAT
APPELLATE TRIBUNAL IN TA(VAT) NOS.439
& 440/2013.
EXHIBIT P24 TRUE COPY OF THE NOTICE UNDER SECTION
67(1) OF THE KVAT ACT.
EXHIBIT P25 TRUE COPY OF PETITIONER'S OBJECTION TO
ET.P24 NOTICE.
EXHIBIT P26 TRUE COPY OF PETITIONER'S LETTER.
EXHIBIT P27 TRUE COPY OF THE ORDER OF THE FIRST
RESPONDENT UNDER SECTION 67(1) OF THE
KVAT ACT.
