1991 (8) TMI 289 - HC - VAT and Sales Tax

IMPORT SALE DEALER IMPORTING GOODS PRODUCED BY SPECIFIC MANUFACTURER IN U.K. IMPORT LICENCE TAKEN ON BASIS OF RECOMMENDATION CERTIFICATE ISSUED BY DGS & D GOODS SOLD TO ALL INDIA RADIO NO PRIVITY OF CONTRACT BETWEEN PURCHASER AND FOREIGN EXPORTER.

Summary

Issues:
1. Whether the sale to All India Radio by the assessee in response to a tender notice issued by the Directorate General of Supplies and Disposals is exempt from sales tax.
2. Whether the sales of goods imported by M/s. Gramophone Co. of India from Middlesex, England, and sold to All India Radio constitute one or two distinct sales.
3. Whether the sales of goods by M/s. Gramophone Co. qualify as a sale in the course of import and are exempt from sales tax.

Analysis:

Issue 1:
The Sales Tax Tribunal held that the sale to All India Radio was not subject to sales tax as it was part of the import process. The Tribunal emphasized that the import of goods was directly linked to the acceptance of the tender, and the sales were made in accordance with the tender terms. The Tribunal relied on Section 5(2) of the Central Sales Tax Act, stating that sales not resulting in import are not liable for sales tax. The Tribunal distinguished previous cases cited by the department and allowed the appeal, following the Supreme Court decision in KG. Khosla and Co. [1966] 17 STC 473.

Issue 2:
The High Court disagreed with the Tribunal's interpretation, noting that the Tribunal did not fully understand the KG. Khosla and Co. case. The High Court highlighted that in cases like Binani Bros. [1974] 33 STC 254, there must be a privity of contract between the foreign party and the Indian importer for a sale to be considered in the course of import. The High Court found that in the present case, there were two separate sales: one from the foreign seller to the assessee and another from the assessee to the DGS & D. The sale by the foreign exporter occasioned the movement of goods, not the subsequent sale by the assessee.

Issue 3:
The High Court concluded that the sales by the assessee did not qualify as sales in the course of import under Section 5(2) of the Central Sales Tax Act. Despite the import license and stipulations in the tender, the High Court determined that two independent sales transactions occurred. The sale by the foreign exporter to the assessee was the one that occasioned the movement of goods, not the subsequent sale to DGS & D. Therefore, the High Court answered all three questions in the negative, favoring the Commissioner.

In summary, the High Court overturned the Tribunal's decision, emphasizing the need for privity of contract between the foreign party and the Indian importer for a sale to be considered in the course of import. The High Court's analysis focused on distinguishing between the sales that occasioned the import of goods and subsequent domestic sales, ultimately ruling in favor of the Commissioner and against the assessee.