1991 (7) TMI 296 - HC - VAT and Sales Tax

Newsprint was imported by the respondent-dealer on behalf of actual user licensees holding actual user licenses issued by the Chief Controller of Imports and Exports on the basis of letter of authority issued to the latter. The letter of authority contained a condition that the dealer was to act only as an agent and the goods were to be imported for the licensee and it was the licence-holder who was to have the title tin the goods both at the time of clearance through the customs and subsequent thereto. Newsprint was also imported and supplied by the respondent-dealer to licensees through the State Trading Corporation, the canalising agent. On the basis of licenses issued by the Chief Controller, orders were placed with the State Trading Corporation. Held that - in the case of import under actual user licences, the ownership of the goods was transferred by the foreign seller to the licensees. There was no principal to principal contract of sale between dealer and the licensees. As the goods belonged to the licensees, there could obviously be no question of the dealer selling those very goods to the licensees.

Summary

Issues:
1. Whether the dealer acted as an agent of the actual user licensees while importing newsprint.
2. Whether the dealer was liable for sales tax on newsprint imported through the State Trading Corporation.
3. Whether the dealer was exigible to sales tax for the entire import and disposal transactions of newsprint.

Analysis:
The case involved a dealer engaged in the business of newsprint and other papers, claiming exemption for sales in the year 1973-74 based on imports under local and Central Acts. The Sales Tax Officer rejected the claim, stating that the transactions were subjected to sales tax. The Additional Commissioner of Sales Tax upheld this decision. The dealer then appealed to the Tribunal, which found that the dealer acted as an agent of the licensees and was not liable for sales tax.

Regarding the imports worth Rs. 10,88,141, the Tribunal found that the dealer imported goods on behalf of actual user licensees, as per the terms of the import licence and the letter of authority. The conditions of the letter of authority specified that the dealer would act purely as an agent, and the goods imported were never owned by the dealer but by the licensees. Therefore, the dealer only acted as an agent, and the Tribunal's conclusion was deemed correct.

In the second category of transactions where the State Trading Corporation acted as the canalising agent, the Tribunal found that the dealer was not liable for sales tax. The State Trading Corporation imported goods for actual users, and the dealer only played the role of an agent. The Tribunal concluded that since the dealer never owned the goods and the sales were made by the State Trading Corporation to the licensees, no sales tax was applicable to the dealer.

The judgment referenced decisions from the Bombay High Court supporting the view that in similar cases, the dealers acted as agents and not as sellers. The Court agreed with these decisions and held that the dealer in this case also acted as an agent. The Court found that the dealer did not have ownership of the goods and only played the role of an agent in both categories of transactions. Therefore, the Court answered all three questions in favor of the dealer, stating that no sales tax was exigible on the dealer for the transactions in question.

In conclusion, the Court ruled in favor of the dealer, affirming that the dealer acted as an agent of the licensees in importing newsprint and was not liable for sales tax in both categories of transactions.