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1990 (7) TMI 314 - AT - VAT and Sales TaxTAXABLE TURNOVER DEDUCTIONS SALES IN THE COURSE OF IMPORT COMPONENTS IMPORTED UNDER IMPORT LICENCE IN DEALER S NAME COMPONENTS ASSEMBLED AND SOLD SALE WAS NOT IN COURSE OF IMPORT PRODUCT SOLD DIFFERENT COMMODITY ASSEMBLING AMOUNTED TO MANUFACTURE GOODS IMPORTED THROUGH STC ON BASIS OF LETTER OF AUTHORITY SALE OF IMPORTED GOODS TO RAILWAYS.
Issues Involved:
1. Whether the assembly of imported components into headgear sets and lightning discharger tubes amounts to "manufacture" under the relevant tax laws. 2. Whether the sales of headgear sets and lightning discharger tubes qualify as sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956, and Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941. Detailed Analysis: Issue 1: Assembly as Manufacture Facts and Arguments: - The applicant imported components for headgear sets and lightning discharger tubes and assembled them before selling the final products to government departments. - The applicant argued that assembling components does not constitute "manufacture" as it does not create a commercially new commodity. Judgment: - The tribunal held that the assembly of components into headgear sets and lightning discharger tubes does amount to "manufacture." It relied on the definition of "manufacture" in Section 2(dd) of the 1941 Act, which implies a change resulting in a new and different article having a distinct name, character, or use. - Citing the Supreme Court's decision in Narne Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise [1989] 73 STC 81 (SC), the tribunal concluded that the assembly of components to create a final product constitutes manufacturing. The end-products, headgear sets, and lightning discharger tubes, were distinct from their individual components. Issue 2: Sales in the Course of Import Facts and Arguments: - The applicant claimed that the sales of headgear sets and lightning discharger tubes were in the course of import and should be exempt from tax under Section 5(2) of the Central Sales Tax Act, 1956, and Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941. - The applicant argued that the import of components was a necessary incidence of the contract and thus the sales occasioned the import. Judgment: - The tribunal found that the sales did not qualify as sales in the course of import. - For the lightning discharger tubes (item 6), the tribunal noted that the import license was in the applicant's name, and the goods supplied to the railways were different from the imported goods due to the manufacturing process. Citing Binani Bros. (P) Ltd. v. Union of India [1974] 33 STC 254 (SC), the tribunal held that the sales to the railways did not occasion the import, as the import was made on the applicant's own license. - For the headgear sets (item 1), the tribunal noted that the components were imported under STC's license, and the applicant acted as an agent. However, the tribunal held that the sales to DGPT did not occasion the import, as the imported components were assembled into a new product, which was then sold. This process did not meet the criteria for sales in the course of import as defined in Section 5(2) of the Central Sales Tax Act, 1956. Conclusion: - The tribunal dismissed the application, confirming that the activities of the applicant amounted to manufacture and that the sales did not qualify as sales in the course of import. The interim orders were vacated, and the security deposit was ordered to be adjusted against sales tax dues or refunded if no dues existed.
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