1972 (6) TMI 55 - HC - VAT and Sales Tax

The assessee, a manufacturer of linotype machines, was a company incorporated in England and having its works in England. The assessee had an office at Calcutta and it was a registered dealer under the Central Sales Tax Act, 1956. The Government of India placed two orders upon the assessee for sale and supply of linotype machines of certain specifications to the Manager, Government of India Press, New Delhi. Similarly, the Controller of Stores, Punjab, placed an order with the assessee for sale and supply of linotype machines of certain specifications to the Controller of Printing and Stationery, Chandigarh. The contract of sale, inter alia, provided that the prices quoted were provisions and that the buyer would be invoiced at the packed price prevailing at the time of shipment plus all expenses for sea freight, insurance, customs duty, clearing, railway freight and a small charge for erection. - Held, (1) that the assessment imported the machines from England as part of the agreement of sale and in order to fulfil its obligation to sell the machines to the purchasers. Therefore, the sales of the machines took place in the course of import of the goods into the territory of India as the sales had occasioned the imports and those transactions were exempt from payment of sales;

Issues Involved:
1. Jurisdiction of the Commercial Tax Officer under the Central Sales Tax Act, 1956.
2. Exemption under Section 5(2) of the Central Sales Tax Act, 1956.
3. Validity of the assessment orders and certificate proceedings.

Detailed Analysis:

1. Jurisdiction of the Commercial Tax Officer under the Central Sales Tax Act, 1956:
The petitioner, a company incorporated in England, contested the jurisdiction of the Commercial Tax Officer, Sealdah Charge, who assessed sales tax on the sale of linotype machines to the Government of India and the Government of Punjab. The petitioner argued that the Commercial Tax Officer committed an error by disregarding Section 5(2) of the Central Sales Tax Act, 1956, which exempts sales occasioning imports from sales tax. The court found that the Commercial Tax Officer acted without jurisdiction in imposing sales tax on these transactions, as the sales indeed occasioned imports.

2. Exemption under Section 5(2) of the Central Sales Tax Act, 1956:
The petitioner claimed exemption from sales tax under Section 5(2) of the Central Sales Tax Act, 1956, arguing that the sales of linotype machines to the Government of India and the Government of Punjab occasioned imports from England. The court referenced the Supreme Court decision in K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras Division, Madras, which held that sales occasioning imports are exempt from sales tax. The court found that the sales in question were in the course of import as the goods were manufactured in England, shipped to India, and delivered to the respective governments. Therefore, these transactions were exempt from sales tax.

3. Validity of the assessment orders and certificate proceedings:
The Commercial Tax Officer assessed sales tax for the periods from 1st July, 1957, to 24th July, 1957, and from 25th July, 1957, to 30th June, 1958, rejecting the petitioner's claim for exemption. The court found that the assessment orders were invalid as they imposed sales tax on transactions that were exempt under Section 5(2) of the Central Sales Tax Act, 1956. Consequently, the court quashed the assessment orders and the certificate proceedings initiated for the recovery of the assessed taxes. The court also noted that the delay in challenging the assessment orders was justified due to the ongoing correspondence between the petitioner and the governments regarding the tax liability.

Conclusion:
The court ruled in favor of the petitioner, holding that the sales of linotype machines to the Government of India and the Government of Punjab occasioned imports and were, therefore, exempt from sales tax under Section 5(2) of the Central Sales Tax Act, 1956. The impugned assessment orders and certificate proceedings were quashed, and the respondents were restrained from proceeding with the recovery of the purported taxes. The rule was made absolute, with no order as to costs.

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